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Process of determining & accumulating cost of product. y Measures operating efficiency of enterprise. y Aims at providing :y
Cost data Statements Reports
. To ascertain profitability.Cost Accounting y Costing involves :Classifying Recording Allocation of expenditure To determine the cost of product.
y y Controlling cost Increases the efficiency of enterprise. . Ascertaining costing profit Determine costing profit or loss on any activity By matching cost with revenue of activity.Objectives of Cost Accounting y Determining selling price Total product cost & cost per unit of product are important.
Shut down or continue operations at loss. y Preparation of Financial statements Information regarding stock of. x Raw material x Semi-finished goods x Finished goods .Objectives of Cost Accounting y Providing information for decision making Determination of cost volume profit relationship. Continuing with existing machinery or not. Make or buy a component.
office. printing & stationary. x Indirect Material x Cannot be easily identified & related with specific product.g. timber for furniture. Two types of materials :x Direct Material x Easily identified & related with specific product.Elements of Costs y Material Substance from which product is made. . sugarcane for making sugar. Becomes an internal part of finished product.g. x Used in factory. Raw or manufactured state. x For e.. selling & distribution department.. x For e.
. x For e.g. Main element of cost in product. x For e. wages of store keeper. .. x Can be easily identified & related with specific product.Elements of Costs y Labour Main factor of production.g. Two types of labour :x Direct Labour x Takes direct & active part in production of commodity. wages paid to carpenter for making furniture. x Indirect Labour x Labour not directly engaged in converting raw material into finished product.
x Indirect Expenses x Cannot be directly. x For e. easily & wholly allocated to specific cost centre. x For e.g.g. x Material cost x Labour cost Two types of expenses. consultants.. fees paid to architects.Elements of Costs y Expenses All cost incurred in production other than.. Insurance & depreciation of fixed assets. . x Direct Expenses x Directly. easily & wholly allocated to specific cost centre. x Treated as part of overheads.
y Overheads includes :y Indirect Material.Overheads Indirect cost are referred to as overheads. Indirect Expenses. Indirect Labour. .
Indirect Expenses x Rent & insurance of factory building.Types of Overheads y Factory/ Works/ Production Overhead Indirect cost incurred in the factory. Indirect material x Consumable stores. Indirect Labour x Salary of factory manager. . Municipal taxes. factory printing & stationary. Concerned with the running of factory. store keeper.
For e. . Salary of legal advisor.g. etc. Legal charges.Types of Overheads y Office & Administrative Overheads Expenses related to management & administration of business. Postage & stamp.. x x x x x x Office printing & stationary. Salary of cost accountant. Depreciation & repair of office building. bank charges.
x Executing orders ² Distributing overheads. x Dispatching goods sold. . x Securing orders.Types of Overheads y Selling & Distribution Overheads Incurred for :x Marketing of commodity. These overheads have 2 aspects:x Procuring orders ² Selling overheads.
postage & stamps. x Salary & commission of salesmen. x Indirect Expenses x Advertising. . Cost of sample. travelling expenses. x Printing & Stationary. x Indirect Lobour x Salary of sales manager.Types of Overheads y Selling & Distribution Overheads Selling Overheads x Indirect Material x Catalogues. clerk. x Rent & insurance of showroom.
x Indirect Expenses x Packing expenses. x Indirect Labour x Salary of go down employees. x Insurance in transit.Types of Overheads y Selling & Distribution Overheads Distribution Overheads x Indirect Material x Cost of packing material. . x Freight or carriage. x Wages of driver of delivery van.
Production increases ² fixed cost per unit decreases.. x Depreciation on plant & machinery. Production decreases ² fixed cost per unit increases. Inverse relation between fixed cost per unit & production units. .Classification of Cost y Fixed Cost Remains constant within given period of time. x Rent & insurance of building.g. For e.
Classification of Cost Output (in Units) 0 100 1000 2000 5000 10000 Total Fixed Cost (in Rs.) 10000 100 10 5 2 1 .) 10000 10000 10000 10000 10000 10000 Fixed Cost Per Unit (in Rs.
However. of output. of output increases or decreases. x Variable cost per unit remains same & dose not change if the total no. .Classification of Cost y Variable Cost Cost vary directly in proportion to change in volume of production. Direct relation between total variable cost & no.
) 0 1000 10000 20000 50000 100000 Variable Cost Per Unit (in Rs.Classification of Cost Output (in Units) 0 100 1000 2000 5000 10000 Total Variable Cost (in Rs.) 0 10 10 10 10 10 .
Some part of cost remains fixed at given level of production. . Affected by fluctuations in the level of production.Classification of Cost y Semi ² Variable Cost Cost contains both fixed & variable component . Other part varies with the change in volume of production.
Classification of Cost y Semi ² Variable Cost Semi²Variable = Fixed Cost + Variable Cost Cost Variable Cost per unit = Change in Cost Change in Output .
is constant up to 70% capacity (7. 000 units). 000/. But increases by 10% over 70% but up to 80% & then increases by 20% over 80% but up to 100% capacity.. . 50.g. Semi-variable cost of Rs.Classification of Cost y Semi ² Variable Cost For e.1.
) 30 25 21.Classification of Cost Capacity Output (in Units) 5000 6000 7000 8000 9000 100000 Semi-Variable Cost (in Rs.43 20.62 21.67 19.) 150000 150000 150000 165000 195000 195000 Semi-Variable Cost Per Unit (in Rs.50 50% 60% 70% 80% 90% 100% .
Classification of Cost y Product Cost Cost which are charged & identified with the product. Cost of manufacturing a product. Includes :x x x x Direct Material Cost Direct Labour Cost Direct Expenses Cost Manufacturing Overheads .
Classification of Cost y Period Cost Cost charged to product but written off as expenses against revenue. Includes :x x x x Fixed cost Administration cost Selling cost Distribution cost .
x Purchase of raw material. rent & depreciation. For e. salary of supervisor. x Wages paid to labour.Classification of Cost y Direct Cost All traceable cost.g.g. y Indirect Cost Expenses incurred on those items which are not directly charged to single product.. .. For e.
Distinction between Cost Accounting & Financial Accounting Coverage y Parties involved y Actual basis / Estimates y Results y Final Statement y Valuation of Stock y Purpose y .
Distinction between Cost Accounting & Management Accounting Deals with y Base y Role y Status y Outlook y Tools & Techniques y Scope y .