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2 ³Cost accounting is the branch of

accounting dealing with the
classification, recording, allocation,
summarization and reporting of current
and prospective costs.´
2 -Kohler
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2 Costing: technique and process of ascertaining
costs.
2 Cost Accounting: process of accounting for costs
from the point at which they are incurred.
2 Cost Accountancy: a wide term which includes the
above and also others such as cost control,
budgetary control and cost audit. Also includes
presentation of information derived there from fro
the purposes of managerial decision making.
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2 urpose
2 Total vs. segments
2 Sources of economies & losses
2 Control aspect
2 Analysis of costs
2 Use of standards
2 GAA vs. flexibility
2 General purpose vs. special reports
2 Report frequency
2 Legal requirements
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2 èistorical vs. predetermined costs

2 Decision making vs. cost control
2 Use of financial accounting
2 Wider scope
 


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2 Cost ascertainment
2 Cost analysis-reveal source of
economies, comparative cost data,
operating level profitability
2 Cost control-identify inefficiencies,
unprofitable activities, managerial
decision making
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2 

2 Sales price & volume
2 roduct profitability
2 urchasing commitments
2 Capital expenditures
2 Expansion & contraction feasibility
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2 Cost reduction by comparing with budgeted costs
2 Increasing production
2 Developing sales & pricing strategies
2 Competition between organizational units
2 Establishing quality standards
2 Assessing profitability at various levels of
production
2 Eliminating wasteful methods
2 Reconciliation between cost & financial accounts
2 Analysis of overhead costs
2 Basis of budgetary control
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2 Cost is the benefit given up to acquire

goods & services.
2 ³The amount of expenditure ( actual or
notional ) incurred on or attributable to
a specific thing or activity.´
2 - CIMA
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2 Behavioral Classification
2 Functional Classification
2 Responsibility Classification
2 Traceability Classification
2 Accounting eriod Classification
2 Decision making relevance
Classification
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2 Fixed ±time based, no relation to volume of activity,

committed (depreciation, rent, tax) or discretionary
(research, consultancy fees, training costs)

2 Variable ± linked to volume of production (material,

labor)

2 Semi- Variable- mixed costs (telephone, electricity)

2 Step Fixed Costs- on scaling up operations

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2 Effective cost control

2 Marginal costing & break even analysis
2 Formulation of budget
2 Managerial decision making
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2 Manufacturing Costs
2 Administrative Costs
2 Selling & Distribution Costs
2 Financing Costs
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2 Controllable Costs
2 Uncontrollable costs
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2 Direct costs
2 Indirect Costs
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2 roduct costs- inventoried and

matched against revenue for the period
in which the products are sold
2 eriod costs ± not inventoried; non
operating expenses
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2 Relevant Costs
2 Differential costs- incremental or
decremental
2 Opportunity Costs
2 Out of pocket costs
2 Irrelevant Costs
2 Sunk costs
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2 Shut down cost

2 Research cost
2 Development cost
2 Joint cost
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2 ³Location, person or item of equipment for
which costs may be ascertained and used for
the purpose of control.´ ± CIMA
2 ersonal cost centre
2 Impersonal cost centre
2 Operation cost centre
2 rocess cost centre
2 roduction cost centre
2 Service cost centre
2 roduction cum service cost centre
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2 ³Unit of quantity of product or service

or time or a combination of these in
relation to which costs may be
ascertained or expressed.´
2 Sugar ± tons/ kgs
2 Automobile ± numbers
2 Interior decoration ± per job
2 Electricity - kilo watt hour
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2 Organization of factory
2 Condition of incidence of cost
2 Availability of information
2 Costing requirements
2 Management of costing
2 Managerial decision making policy
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2 Materials - direct & indirect

2 Labour - direct & indirect
2 Expenses - direct & indirect
2 All indirect items are also known as
overheads.
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2 rime cost
2 Works cost
2 Cost of production
2 Total cost