5. Cost Accounting

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COST STATEMENT

ITEM Amoun

t

Direct Material Cost

+ Direct Labour Cost

+ Direct Expenses

PRIME COST+ Factory On cost/Overheads

FACTORY / WORKS COST

+ Office & AdministrationOverheads

TOTAL COST

+ Selling & Distribution Overheads

COST OF SALES

+ PROFIT


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Cost Sheet

Sales

Total cost + Profit.

Total Cost

Factory Cost + AdminCost.

Factory Cost

Prime Cost + Factory Overheads.

PRIME COST

Direct Material +Direct Labour + DirectExpenses.


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MATERIAL COST

Procurement

Storing

Issue of Material


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Levels of Material

Levels ofMaterials

MinimumLevel

ReorderLevel

MaximumLevel

EOQ


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Valuation of Materials

First In, First Out ( FIFO )

Last In, First Out ( LIFO )

Average , Weighted Average


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Materials Control

Go down Control

Manual

Check

ABC

Analysis

Perpetual

InventoryControl


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LABOUR COST

Wage is reward for Labour as factor of Production.

WAGES: Money Wages/ Minimum Wages/

Real Wages / Fair Wages. TIME KEEPING and TIME BOOKING

IDLE TIME and EFFECTIVE TIME

Wages include - Salaries, Wages, Pay,

Compensations, Earnings, Bonus, Over-time, etc.

Labour Lawsto protect Workers interests.


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Methods of Payments

Time Basis of Pay

Piece Basis of Pay

Incentives / Bonus


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Documents in Labour Costing

AttendanceCard /

Punching

Job Card

Addl Job CardJob Transfer

Card

Idle Time Card

LabourIncentive Card

Labour

Over-TimeCard

WageDeductions

Card

SALARY /WAGE SHEET


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OVERHEADS/ INDIRECT COSTS

Direct Costs are directly identified with Product / Cost Centers.

Indirect Costs or, Overheads are not directly identified withProducts / Cost centers.

Classification of Overheads :a. Element-wise : Indirect material, Indirect Labour and Indirect

Expenses.

b. Function-wise : Factory Oncost, Admin Oncost, Selling &Distribution Oncost.

c.Variability-wise : Fixed , variable and Semi Variable Overheads.d. Controllability : Controllable and Uncontrollable Overheads.

e. Normality wise : Normal and Abnormal Overheads.


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Treatment of Overheads

AllocationApportionmentAbsorption : Under and Over Absorption.

Basis of Apportionment of Overheads:Item BasisCanteen Expenses No. of WorkersRent / Taxes Area occupiedPower HP / KWtGeneral Lighting No. of Light PointsDepreciation Value of AssetSupervision No. of Employees supervisedTelephone Expenses No. of calls madeFire Insurance value of Stock / Asset covered


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Basis for Secondary Apportionment

ITEM BasisMaintenance Deptt No. of Hours worked for maintenanceStores Deptt No. of Requisitions attendedPurchase Deptt No. of Purchase Orders attended

Building Service Deptt Area of each DepttWelfare / canteen No. of EmployeesPersonnel / Time keeping Deptt No. of EmployeesInternal transports Deptt Wt / Value of goods moved.

Absorption of Overheads:1. Direct material cost basis2. Direct Labour Cost basis3. Prime Cost Basis4. Labour Hour Rate5. Machine Hour Rate.