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    werf

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    © All Rights Reserved
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    1 views16 pages

    Costing

    Uploaded by

    srimant
    werf

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
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    of 16
    22.2. DEFINITIONS 22.2.1 Cost Accounting or Costing ~~ 1K may be defined in a number of ways as follows (1) Cost Accounting is frequently looked upon as the process of calculating the cox of anicle (for sales) as a basis to fx its selling price (2) Cost Accounting may be defined as 2 specialized branch of accounting whic de classification, recording, allocation and control of costs. (3) Cost Accounting may also be defined as a systematic procedure for recording accu head of expendivure incurted on the production/manufacture of a product by dite fof any: manufacturing, concer, ‘Expenditure incurred on material, labour (both direct and indiret) are accurately recorded si ‘up to determine the manufacture or factory cost of @ produit ‘Thus by means of costing the manufacturer determines the cost of eath item be makes ani the selling price of the item in order to eam a definite profit. 22.2.2 Cost Estimation | —~ Ti may be defined as the process of determining the probable cost of the product efor ‘manufacture stars. ‘Cont estimation takes into consideration all expenditure involved in the design and wns slong, with all related servic facilities such as machines sting; tool making as well =» Sales marketing and administrative expenses or costs. “Thus cost estimation simply involves a gst seSOUNTNG, MECHAMCAL ESTHATION AND COST ESTIMATION 2 So OBJECTIVES OF COST ACCOUNTING —pjecines of costing may be listed as follows in often the actual cost of the manufactured product in order to fix the sales price allowin rable margin of profit. a) Provides basis for comparison of actual cost with the estimated cost. Ifthe actual cost rnons may be looked into and steps shou be taken 40 minimize the same: cg Provides data for planning budgeting and cost cont (3 Cowing beips in marketing regarding filling quotations and tenders ating suggest changes in prot design so” as 10 optimize con {Gta acenain efficiency of production onthe basis of actual cost figures it incurs for produetion- Higher expenditure may be duc t: (i Over employment i Silage, waste and serap formation in excess Ui) Slow working rate (i) Non implementation of standard procedures for executing work (0) Poorly tained workers (0) Use of non standard tools and materials (0) Frequent break doin 1) Costing can help make and buy decisions {s) To determine the continuation of unit self (8) Manufacturer may compare the cost of manufacture of an article by different processes and thus arrive a the most efitent proces. (00) Cost ccounting provides colateral check on financial reams, 22.5 OBJECTIVES OF COST ESTIMATING ‘Ds iain objectives of Cost Estimating are listed as follows (1) Cost estimating enables the manufactrer to fx the selling pice of a product well in advance of ‘actu production. 12) Comt estimating indicates to the manufacturer whether the contemplated programme of production ‘ant distribution will be economical oF 90% the product and its parts can be manufactured economically in the plant ‘rom out sie. 550 IousTRIAL ENGINEERING AND ORGANIZATION Uangee, 22.6.1 Job Order Costing _ : “This mneod fe oped in Job cover induszing IoYehips DaMengL Soran SNM Gi ee ay ro rately on the basis of actual cost i SPR 0 ee ad chad oe tS si al ett Se as to TAH enw cay cops nara 22.6.2 Batch Costing ae Bach coving iva Tom of job coning with the ciference that isa of eOsing cach np ae ee er dni commons taken together and tested aj. The uit oa. STS Slide te loa! Smt of component in de Buch BY Bamber of wis pods torch 22.6.3 Volt Oparstinn Costing ‘This method of costing is generally adopted by enterprizes engaged in production of a singe po and the complete process of manufacture comprisesof a sequence of separate and well defined eis ‘unit operations. The cost of each of these operations is then determined separately. Theo Complete product may then be found by adding the costs of individual units of operations. Ths 1 is specially valuable fo the manufacturer since it enables him to Keep a close watch on the fii teach unit of operation and thus obtain an over all et tion. ‘operat geese 22.6.4 Process ‘This method is employed when Astin oe performed in a definite sequence and where processes carried ‘of the folon features: s nn. bate of one process forms the raw mar ao work etc. It is concemed with determining at same stage in production ‘products, one or more process and hence it is possible de" ‘suited to the followine in?" shes and distemper’ © 45 having 10° qe SOSQUNTING, MECHANUCAL. SBTIMATION AND COBT asrmunon _664 ELEMENTS OF COST \ " the cow of preiicts manufactured is calculated so a8 40 make the exact {ote it which cane cared. Fr the purse of aeciate andy eaelation the omen 1 Material Cost ~~ i supplied to the undertaking required for manufacturing ofthe product. I is of ‘py Direct Material Cost Spr indict Materia Cost 22714 Direct Material Cost hopament part of the product, These ae also ealled Productive Marrias, The cost of dirt materials insls the purchase price as well as expenses sth as ffeight, insurance, loading, and unloading pen ayen ea {212 tat Mater Coot, ee Ee = mc ee Se tae ee a oe noe eaea vert aas os el ore ra epee ap ct ans re ated ate ten it not worth to identify and charge them as direct materials e.g. very small quantities of nails, ‘sews, adhesives and paints used in certain products. Under such conditions these are generally charged ‘se are those materials which when processed through various stages forms the main product or & os 552 INDUSTRIAL ENGINEERING AND ORGANIZATION “s Imainteance man, helpers and chowkida ec. PETA Expenses ‘Apart rome det mati and boron in ec ator thee re eer Such as cost of adverisement, deprecation charges of plant and_ machinery = Gost af packing ec whch ae Mme av expenses 0. canbe sud thal exp Git direct labour cost, all other expenditures which occur in an enterprise are called “Expens,” Expenses may be of wo types (4) Riect Expenses — Direct expenses are those which canbe chased dietly to particular job and incured for tac Joh only og. te Gs of eal iad sand coe speci neice ly rx pansy pro. Consany Sars pal fr manic of spe tte expense which camo! be Shared sh 0 patil podct mania ages oer an Oe alone dss bu eet al ESTEE oe ol ‘Tox a a ate 5 lel oe Sr oa “ip aianane ie i Seg ape “is. inte al ‘Administrative expenses include the expenses ‘management for efficent and proper functioning ofthe et & telegraph Mich tend to vary withthe volume of production. Examples of Ber fact consumed. Fajesor oF WeeTH tot Wie generally these ae feguenly seq FRE pie ade on salar Of sre suff ping and ther maimenance charges vet with coms comes of cot ot 1 lie cot 2 Fat co 5 omer con inal on Cut sao cle dies ot nd cos of it mario, tow ew cat ee oa Pin = Di ail ot Ds hn Ds ev 2.ector Cont isan Known wos secon f ime cot ad fy expense. Tes Go Pi Cat Jia tt came a coo omens ne ie Oe sot = Fay cnt + Adminstave expe. Ze cost also known as manufacturing cost or cost of production. mone ‘Cost: It includes office cost and selling and distritrion charges. ‘Toul cost = Production cost + Selling expenses + Distibution charges. Ph, S54 INDUSTRIAL ENGINEERING AND ORGANIZATIoy S. Selling Price: Ifthe profit of factory is ded inthe tot Ost Of & POGUE iis Koon, tice. So the customers get the itervartele by paying the price which is calle gx" The relation between the elements of cot and components of cost i ila py po" 22.10 DISTRIBUTION OF OVERHEAD COSTS IN MANUFACTURING CONCERy: tn industrial concerns engaged in production of prototype items, the distibution of overbeas protiem. Theta ented costs may simply e ded By the nanBer of Hem Pe overeat cost pe item. However in several instal conser WO OF MORE EMSA pr isc, the distibution of erica cst, deteminaton of overhead cst per piece of din ‘of production, is rather complicated. Thete are several methods by which the overhead costs may be allocated 10 diferejy

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