B.

SC NURSING (POST BASIC) III YEAR

COURSE TITLE: NURSING ADMINISTRATION

BLOCK 3: UNIT 5 – COST ANALYSIS & AUDITING

MRS.CHERANMADEVI. P
LECTURER
VHS-M.A.CHIDAMBARAM COLLEGE OF NURSING(2577)
V.H.S CAMPUS, CHENNAI -113
COST ANALYSIS
MEANING OF COST
A cost is an expenditure required to produce or
sell a product or get an asset ready for normal use.
In other words, it’s the amount paid to
manufacture a product, purchase inventory, sell
merchandise, or get equipment ready to use in a
business process
TYPES OF COSTS
 Opportunity cost and actual cost
 Direct and indirect cost
 Explicit and implicit cost
 Historical and replacement cost
 Fixed cost and variable cost
 Real and prime cost
 Total,average,and marginal cost
Cont…
 Opportunity cost : Cost incurred for loosing
next best alternative
 Actual cost : An actual amount paid or incurred,
as opposed to estimated cost or standard cost.
 Explicit cost refers to the money expended to
buy or hire resources from outside the
organization for the process of production
 Implicit cost refers to the cost of use of the self
owned resources of organization that are used
in production
Cont…
 Direct Cost: Direct costs are those cost that
have directly accountable to specific cost
object such as a process or product Ex:wages
paid ,salary paid labor, material…etc
 Indirect cost: Indirect cost are those costs

which are not directly accountable to specific

cost object or not directly related to
production Ex: insurance, mentainence
,telecom, ….etc
CONT…
 Historical cost refers to the original (actual)
cost incurred at the time the asset was
acquired
 The replacement cost is the price that an

entity would pay to replace an existing assets

at current market price that may not be
market value of that asset.
 Fixed cost is the cost that remains unchanged

irrespective of the output level or sales

revenue such as intrest,rent,salaries etc
CONT…
 Variable cost are thoese costs that vary depending
on a company’s production volume; they raise as
production increases and fall as production
decreases
 Real cost of a production refers to the physical
quantities of various factors used in producing
commodity Ex: Real cost of a table composes of a
carpenter’s labor to cubic feet of a wood ,a dozen of
nails, half a bottle of varnish…..etc “ Real cost thus
signifies the aggregate of real productive resources
absorbed in the production”
COST ANALYSIS
Meaning:
Cost analysis assumes a great significance in
all major business decisions because the term
‘cost’ has different meaning under different
settings and is subject to varying
interpretations.
Cont…
The analysis cost is an important factor in
almost all business analysis and business
decision making like
a) locating the weak points in the production
management.
b) Minimizing the cost.
c) Finding the optimum level of output.
d) Determining price and dealers; margins.
e) Estimating or projecting the cost of
operation.
AUDITING
" An unbiased examination and evaluation of
the financial statements of an organization. It
can be done internally (by employees of the
organization) or externally (by an outside
firm)."
Purposes of Auditing
i) To review and appraise the soundness, adequacy and application of

accounting,

financial and operating cost.

ii) To assess the extent of compliance with established policies, plans and

procedures of the organization.

iii) To assess the extent to which the organization assets are accounted for and

to safeguard same from losses of all kinds.

iv) To assess the quality of performance in carrying Ollt assigned

responsibilities.
Objectives of Auditing
Primary Objective
 To respect to the owners of his business

expressing his opinion whether account

exhibits true and fair view of the state of
affairs of the business.
Secondary Objective
 Detection and prevention of errors
TYPES OF AUDITING
 External Audit
External audit is referring to the audit firms
that offer certain auditing services including
Assurance Service, Consultant Service, Tax
Consultant Service, Legal Service, Financial
Advisory, and Risk Management Advisory.
Cont…
 Internal Audit
Internal Auditing is an independence and
objectivity consulting service that is designed
to add value to the business and improve the
entity’s operation.
It provides a systematic and disciplined
approach to evaluating and assessing the
entity’s risk management, internal control,
and corporate governance.