Cost Accounting - Continued

7/29/2019 Cost Accounting - Continued

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COST UNIT

ICMA defines cost unit as A unit of

quantity of product, service or time related

to which costs may be ascertained or

expressed.For e.g.

Brick works per 1,000 bricks

Steel co.s per tonne of steelTransport co.s per pass km


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COST CENTRE

ACCORDING TO ICMA, Cost

centre means A location, person or

item of equipment for which costs

may be ascertained and used for the

purpose of cost control.


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COST ESTIMATION

Cost estimation is the process of

pre determining the costs of acertain product, job or order.


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COST ASCERTAINMENT

Cost ascertainment is the process of

determining costs on the basis of

actual data.


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COST ALLOCATION

Cost allocation refers to the

allotment of whole items of costs to

cost centres or cost units.Eg: salary offoreman, power, etc.


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COST APPORTIONMENT

Cost apportionment refers to the

allotment of proportions of items of

cost to cost centres or cost units.Eg : Salary of GM is apportioned to

various departments on the basis of

time devoted by him.


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COST CONTROL AND COST

REDUCTION Cost control aims at maintaining the costs

in accordance with established standards

while cost reduction is concerned withreducing costs.

The objective of cost control is to achieve

the cost target while the that of costreduction is to improve the targets

themselves.


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COST CONTROL AND COST

REDUCTION CONTD. Cost control ends when targets are achieved

while cost reduction has no visible end.

Cost control is a preventive function while

cost reduction is a corrective function.


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METHODS OF COSTING

JOB COSTING

CONTRACT COSTING

BATCH COSTING

PROCESS COSTING

UNIT COSTING

OPERATING COSTING

MULTIPLE COSTING


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JOB COSTING

ICMA defines job costing as that

form of specific order costing which

applies where work is undertaken to

customers special requirements andproduction is not repetitive. Eg:

vehicle service, grill doors, etc.


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CONTRACT COSTING

ICMA defines contract costing as that form

of specific order costing which applies

where work is undertaken to customers

special requirements and each order is forlong duration. Eg: house construction, ship

building, etc.

A contract is a big job and job is a small

contract.


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BATCH COSTING

ICMA defines batch costing as that

form of specific order costing which

applies where similar articles are

manufactured in batches either forsale or for use with in the

undertaking.Eg: biscuit

manufacturing, pharma, ready madegarments, etc.


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PROCESS COSTING

It is a method of costing where cost is

ascertained at the stage of every

process and also after completing the

finished production.Eg: paints,textiles, etc.


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UNIT COSTING

It is a method of costing where thecost per unit of output or production

is ascertained and the amount of each

element constituting such cost isdetermined.Eg: brick making,

quarries, etc.


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OPERATING COSTING

ICMA defines operating costing asthat form of costing which applies

where standardised services are

provided either by an undertaking orby a service cost centre.Eg: transport

undertakings, electricity supply, etc.


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MULTIPLE COSTING

It is a method of costing used in those

industries which assemble various

components or parts. Such industriesmake use of more than one method of

costing.Eg: automobiles, TV

manufacturing, etc.


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TYPES OF COSTING

UNIFORM COSTING

MARGINAL COSTING

STANDARD COSTING

DIRECT COSTING

ABSORBTION COSTING

Cost Accounting - Continued

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