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MARATHA MANDIRS BABASAHEB GAWDE INSTITUTE OF MANAGEMENT STUDIES MMS-I DIV-A SEMESTER-2 SUBJECT: COST & MANAGEMENT ACCOUNTING SUBMITTED TO: Prof. M.A.GANACHARI SUBMITTED BY: NAME BHARAT GAIKWAD SHANKAR GAJARE AARTI GAJUL SAGAR GARDAS TUSHAR GAWALI ROLL NO. 16 17 18 19 20
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Historical Cost:Historical Cost sheet is prepared on the basis of actual cost incurred. A statement of cost prepared after incurring the actual cost is called Historical Cost Sheet. Estimated Cost:Estimated cost sheet is prepared on the basis of estimated cost. The statement prepared before the commencement of production is called estimated cost sheet. Such cost sheet is useful in quoting the tender price of a job or a contract. BGIMS Page 2
Importance of Cost Sheet:The importance of cost sheet is as follows: 1. Cost ascertainment:The main objective of the cost sheet is to ascertain the cost of a product. Cost sheet helps in ascertainment of cost for the purpose of determining cost after they are incurred. It also helps to ascertain the actual cost or estimated cost of a Job. 2. Fixation of selling price:To fix the selling price of a product or service, it is essential to prepare the cost sheet. It helps in fixing selling price of a product or service by providing detailed information of the cost. 3. Help in cost control:For controlling the cost of a product it is necessary for every manufacturing unit to prepare a cost sheet. Estimated cost sheet helps in the control of material cost, labor cost and overheads cost at every point of production. 4. Facilitates managerial decisions:It helps in taking important decisions by the management such as: whether to produce or buy a component, what prices of goods are to be quoted in the tender, whether to retain or replace an existing machine etc.
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Labor
Overhead (Variable/Fixed)
Production or works overheads Administration overheads Selling overheads Distribution overheads Maintenance & Repair Supplies Utilities Other Variable Expenses Salaries Occupancy (Rent) Depreciation Other Fixed Expenses
System of calculating the cost is called costing. This cost may be actual or estimated. We know that we go to different steps of production when we produce any product. At every stage of production, we need to calculate the cost of raw material, labor cost and direct and indirect cost. We allocate the different expenses under a system and this system is called costing.
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It discloses the total cost and the cost per unit of the units produced during the given period.
It enables a manufacture to keep a close watch and control over the cost of production. By providing a comparative study of the various elements of current cost with the past results and standard costs, it is possible to find out causes of variation in costs and to eliminate the adverse factors and conditions which go to increase the total cost.
It acts as guide to the manufacturer and helps him in formulating a definite useful production policy.
It helps in fixing up the selling price more accurately. It helps the businessman to minimize the cost of production when there is a cut throat competition.
It helps the businessman to submit quotations with reasonable degree of accuracy against tenders for the supply of goods.
Dividend & Interest received, Rent received. Cash discount allowed, Interest debentures, Commission received, Interest on capital, Profit /loss on sale of fixed assets.
Cost account records both historical and estimated costs data. So it can give idea what will be effect of this in profit and loss account.
To provide cost information to management so management take some decision and reduce wastages.
A business that is responsible for all activities involved in the production and sale of products or service. It is responsible for the maximization of profit.
Direct wages and salaries shall include house rent allowance, overtime and incentive payments made to employees directly engaged in the manufacturing activities.
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