Cost accounting
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Transcript of Cost accounting
Cost Accounting
Presented By:Ahsan Anwar
Haseeba KhadimSidra SaleemUsman Aziz
Maryum Afzal
Cost
Accountants define cost as a resource sacrificed or forgone to achieve a specific objective. A cost (such as direct materials or advertising) is usually measured as the monetary amount that must be paid to acquire goods or services.
Cost Accounting
Measures, analyzes and reports financial and non-financial information relating to the costs of acquiring or using recourses in an organization.
For Example: Oil Refining. The process costing collects information about all costs during an accounting period and divides those costs by total quantity output
Elements/Components of Cost Accounting
Following are the main elements involved in the manufacturing process where process costing method is adopted. Direct Material
Secondary Material Primary Material
Direct Labor Direct Expenses Production Overheads
Methods of Costing
The methods of costing refer to the techniques and processes employed in the ascertainment of costs. Many methods have been designed to suit the needs of different industries. These methods can be summarized as follows:It should be noted that two basic methods of costing are1. Job costing2. Process Costing
Cost Sheet
Cost Sheet is a presentation of cost data incorporating its various components in a systematic way.
Cost Sheet or a cost statement is a document which provides for the assembly of the detailed cost of a cost Centre or cost unit.
Importance of Cost Sheet
Fixation of Selling Price Help in cost control Cost ascertainment Facilities the managerial decisions Break-up of total cost by elements and
sub-divisions
Mechanism of Cost Build Up
Prime cost = Direct Material + Direct Labor + Direct expenses
Factory Cost = Prime Cost + Factory Overheads
Cost of Production = Works cost + office and Administrative overhead
Total cost = Cost of Production + Selling and Distributive Overhead
Sales = Total cost + profit
Prime Cost
Factory Cost
Cost Of Production
Total Cost
Sales
Cost Sheet
The various components of cost explained above are presented in the form of a statement. Such a statement of cost consists of prime cost, works/factory cost, cost of production, total cost and sales, is termed as cost sheet.
The preparation of a cost sheet can be understood with the help of the following illustration:
Advantages OF Cost Accounting
It helps us to ascertain the costs of goods produced.
It provides required information to the management
It classifies the cost into material, labor, fixed overhead or variable overhead.
Cost sheet is the main format of cost accounting.
Profit or loss estimated on specific product, branch, department or job.
It is an effective control device.
Queries