Cost Accountingppt 120116222010 Phpapp02

7/23/2019 Cost Accountingppt 120116222010 Phpapp02

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Cost Accounting

CA is a formal system of accounting for costs inthe books of accounts by means of which costs ofproducts and services are ascertained andcontrolled.

Costmeans the price paid for something Cost ascertainmentis computation of actual costs

incurred

Cost estimationis a process of predetermining

costs of goods and service.


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Objectives of Cost Accounting

Ascertainment of cost

Control of cost

Guide to business policy such as make or buy

introduction of new product etc

!etermination of selling price


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CA and "A # Comparison

$urpose

%tatutory re&uirements

Analysis of cost and profit

$eriodicity of reporting Control aspect

'istorical and predetermined costs

"ormat of presenting information

(ypes of transactions recorded


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Cost Centre

Cost center isa location person or item ofe&uipment )or group of these* for which costs maybe ascertained and used for the purpose ofcontrol

+t refers to a section of the business towhich costs can be charged.

(ypes,$ersonal and +mpersonal cost centre

$roduction and %ervice cost centre


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Cost -nit

Cost units are the things that the business is setup to provide of which cost is ascertained.

-nit of product service or time in relation towhich cost may be ascertained or epressed

(ypes, -nits of production such as a ream of paper a tonne of

steel a meter of cable etc.

-nits of services such as passenger miles consultinghours room per day bed per day


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/ethods of costing

+t refers to the techni&ues and processesemployed in the ascertainment of costs

Choice of the method depends upon the type and

nature of manufacturing activity

(ypes, 0roadly

Job costing or job order costing

Process Costing

Other methods are variations of one of these

methods.


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/ethods of costing # (ypes

Job Order Costing1 Applies where work isundertaken to customers special re&uirements.

Contract Costing or Terminal Costing: +t is sameas 2ob order costing3 however job is small andcontract is big contract. Contract is of long

duration and may continue for more than afinancial year.

Batch costing:Cost of a batch or group ofidentical products is ascertained3 each batch of

products is a cost unit for which costs areascertained.


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/ethods of costing 1 (ypes4..

Process Costing1 Applies to a contet where thereis a continuous process. Costs are accumulatedfor each process. And then total cost of a processis divided by the number of units produced toarrive at cost per unit.

Operations Costing: +nvolves cost ascertainmentfor each operation.

Operating or services costing:+t is applied to

services3 cost units are passenger 1kilometerroom per day bed per day.


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/ethods of costing 1 (ypes4..

Multiple or composite costing1 Application ofmore than one method of costing in respect of thesame product. -sed in industries where a numberof components are separately manufactured andthen assembled into a final product.

Single output or unit costing: Applied to a contetwhere output produced are identical the cost perunit is found by dividing the total cost by thenumber of units produced. 5.g. %teel output is

identical but differentiated by grades.


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(echni&ues of costing 1 (ypes4..

Standard costing1 %tandard cost ispredetermined as target of performance and

actual performance is measured against the

standard.

Budgetar! control: 0y comparing actual withplanned 6 budgeted performance

Marginal costing: Only variable cost is allocated

to individual cost centers or cost units


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(echni&ues of costing 1 (ypes4..

Total "bsorption costing1 0oth fied and variablecosts are charged to products.

#niform Costing: +t is not a techni&ue but a

situation wherein several undertakings use the

same costing principle and practices.


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5lements of costs # /aterials

Material cost : cost of commodities supplied to anunderta$ing

%irect materials cost: those costs which are incurred forand conveniently identified with a particular cost unitprocess or department.

5, cost of raw material&ndirect materials cost: those costs which cannot beconveniently identified with a particular cost unitprocessor department.

5, cost of material that are inepensive but may or may not

physically become part of the finished goods


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5lements of costs 1 7abour cost

'abour cost : cost of remuneration ()agessalaries commissions bonuses etc etc* of the

emplo!ees of an underta$ing

!irect labour cost: )ages paid to )or$ers directl!

engaged in the production process.5g, 8ages of machine operator

+ndirect labour cost: those wages which cannot beconveniently identified with a particular cost unit

process or department


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5lements of costs 1 5penses

+,penses: (he cost of services provided to an undertaking

%irect +,penses: those epenses which can be identifiedwith and allocated to cost centers or units.

. 5g, 9oyalty paid depreciation of a plant used

&ndirect +,penses:All indirect costs other than indirectmaterials and labor. (hey cannot be directly identifiedwith a particular job process or work order and arecommon to cost units or cost centers

5, 9ent and rates lighting and power


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5lements of costs 1 $rice cost

%irect Material -%irect labour -

%irect +,penses


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5lements of costs 1 Over heads

&ndirect Material - &ndirect labour -

&ndirect e,penses

Overheads are divided into

a. Production overheads

b. Office and administration overheads

c. Selling and distribution overheads


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5lements of costs 1Production overheads

&ndirect Material such as coal oil greasestationary in factory office:

&ndirect labour such as work manager;s salary

salary of factory office staff salary of inspector

and supervisors watchman sweeper

&ndirect +,penses such as factory rent

depreciation of plant repairs and maintenance of

plant insurance of factory building factorylighting and power internal transport epenses


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1administration overheads

&ndirect Material such as stationary used inadministration office postage etc

&ndirect labour such as salary of office staff

salary of of /! !irectors watchman sweeper

&ndirect +,penses such as office rent insurance of

office building office lighting and power

telephone depreciation of office furniture office

a6c sundry office epenses

5l t f t S lli d


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5lements of costs 1Selling and

distribution overheads

Selling cost: cost of see$ing to create and stimulate demandand of securing orders such as ads samples and free giftssalaries of salesmen

%istribution cost: cost of ma$ing pac$ed product availablefor dispatch and returning of empt! pac$ages for reuse

&ndirect Material such as stationary used in sales officepacking mat cost of samples price list oil for deliveryvans

&ndirect labour such as salary of sales staff salary of of/! !irectors watchman sweeper

&ndirect +,penses such as advertising traveling epensesshowroom epenses carriage outwards rent ofwarehouse bad debts insurance of goods in transit etc.

C t f t t l t


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Components of total cost

< $rime Cost=. 8orks cost or factory cost

$rime cost : "actory Overheads

Cost of production8ork cost : Administration Overheads

(otal cost or cost of salesCost of production : %elling and

distribution overhead

Documents

Cost Accountingppt 120116222010 Phpapp02