PERFORMANCE MANAGEMENT

Specialist cost and management accounting techniques

3 . COSTING
1
Costing is the process of determining the cost of products, services or activities.

Costs are of 2 types

1. Direct costs
Material
Labour Production Costs
Expenses

2.Indirect Cost/ overhead

Production = Absorbed Overhead Under/over absorbed Overhead
production Cost Total Cost

Non Production Total Cost

2
The problems of overheads
Indiect costs/overheads are costs incurred in making a product or providing a service but which cannot
be traced directly to products or services.

ABSORPTION COSTING
it is a means0 f incorporating a fair share of these costs into the cost of each unit of product manufactured or each s

Eg. Of indirect costs

Factory rent and rates
Supervision costs
machine depreciation
Heating and lighting
hich cannot

manufactured or each service provided.