Cost Accounting

Shreyash Kore
 What is Cost Accounting:
Cost accounting is the process of recording, classifying, analyzing, summarizing, and
allocating costs associated with a process, and then developing various courses of
action to control the costs. Its goal is to advise the management on how to optimize
business practices and processes based on cost efficiency and capability. Cost
accounting provides the detailed cost information that management needs to
control current operations and plan for the future.

Cost accounting is determination of cost that may be

incurred while manufacturing a product.
 Material
Elements
of Cost Labour
Accounting
Other
 Direct
Material
Indirect

Elements Direct
of Cost Labour
Accounting Indirect

Direct
Other
Indirect
 Material
Direct Material Indirect Material
 Labour
Direct labour Indirect labour
 Other Expenses
Expenses other than Material and Labour costs

• Rents
• Utilities like gas, electricity, water
• Sales expenses
 Objectives

• To ascertain cost
• To control cost
• To help in fixation of selling price
• To aid the management
 Cost Sheet
Material Cost
Prime Cost +Direct Labour Cost
+Direct Expenses
Prime Cost
Work Cost
+Factory Overheads
Work Cost
Cost of Production
+Office & Admin Overheads
Cost of Production
Cost of Selling
+Selling & Distribution Overheads
Cost of Selling
Sales
+Profit
 Question
Activity Cost
Stock of raw materials on 01/01/2017 75000
Stock of raw materials on 31/12/2017 25000
Direct wages 12500
Direct expenses 7500
Indirect wages 11000
Purchase of raw materials 68000
Factory rent, rates and power 12000
Activity Cost
Depreciation cost 5000
Advertising 21500
Office rent and taxes 7000
Repairs plant and other Machinery 4000
Salary for Office Employees 13000
Warehouse 8500
Sales 280000
 Cost sheet
Prime Cost

Activity Cost
Stock of raw materials on 01/01/2017 75000
Stock of raw materials on 31/12/2017 - 25000
Purchase of raw materials + 68000
Direct Wages + 12500
Direct Expenses + 7500
PRIME COST = 138000
 Work Cost
Activity Cost
PRIME COST 138000
Indirect wages + 11000
Repairs plant and other Machinery + 4000
Depreciation cost + 5000
Factory rent, rates and power + 12000
WORK COST = 170000
 Cost of Production
Activity Cost
WORK COST 170000
Office rent and taxes + 7000
Salary for Office Employees + 13000
COST OF PRODUCTION = 190000
 Cost of Selling
Activity Cost
COST OF PRODUCTION 190000
Advertising + 21500
Warehouse + 8500
COST OF SELLING = 220000
 Profits
Activity Cost
SELLS 280000
COST OF SELLING - 220000
PROFITS = 60000