What is Cost Accounting.pptx

7/28/2019 What is Cost Accounting.pptx

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Subject .

cost and advance accounting

Topic .

What is Cost Accounting

Submitted to.

Sir, Tanveer Hussain

Present By.

Samiullah 61

Waseem 62

Tayyab 63

Adnan 64

Azhar 655/28/2013 University Of Sargodha


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Cost:

Cost mean amount of expenditure incurred or resources

used to attain something.

OR Sacrifice of resources to obtain a benefit or any other

resources.


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Cost accounting is concerned with recording, classifying

and summarization of cost for determination of cost of

product or services, planning, controlling and reducing

these cost and furnishing of information to management

for decision making.


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cost material labour other

expenses

indirect/direct Direct/indirect

Direct/indirect

FOH


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The substance from which the finish product is made

known as Material. Material is of two types

1.direct 2.indirect

Direct Material: Material that can be easily traced in a product is known

as direct material. E.g. cloth in dressing etc.

Indirect Material:

Material that can not be easily trace in the product knownas indirect material. E.g. lubricants, oil, at office level

printing and stationary etc.


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Human effort required to convert material into finish

product is known as labour. Labour is of two types

1.direct 2.indirect

Direct labour: Labour that can be easily allocated to a product ,

particular job or process is known as direct labour such

as fee paid to tailor.

Indirect labour: Labour that can not be easily allocated to a product,

particular job or process is known as indirect labour such

as gate keeper salary , salesmen salary etc.


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Expenses other than material and labour are known as

other expense. These are of two types

1.Direct

2.Indirect

Direct expenses:

Expense that can be easily assign to a product ,

particular job or process are known as direct expenses.

e.g. duty etc.

Indirect expenses:

Expenses that cannot be easily assign to a product,

particular job or process. E.g. factory rent , lightning

expenses. Insurance etc.


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Costs can be classified on the basis of

1.nature

2.function

3.time. 4.variability

5.controllability

6.By decision making


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By nature cost may be

Material cost

Labour cost

2.By function:

It may be production costs.

Costs begin with process of supplying material labour andservices and end with packing finish goods.

Selling cost.

Referred to expense incurred in promoting sales and retaining

customers. Distribution cost.

Begin with the process of making packed products available fordispatch and end with making reconditioned empty packagesavailable for use.


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Fixed cost

Cost which do not change by the increase or decrease in

number of unit e.g. rent , supervisor salary

Variable cost Which change by the number of units change

Semi veriable cost

Which are partially fixed and partially variable e.g.

telephone bill etc.


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Controable cost

These are those cost which are influenced by the action

of a specified member of the organization

Uncontrollable cost Cost which are not influenced by the specific member of

the organization.


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By time costs can be classified as

Historical cost

Predetermine cost Historical costs:

Costs that are already has been incurred during the

period

Predetermine cost: Cost which are not has been incurred and we are

estimating

On the basis of historical cost data these are also known

as future costs.


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In making decision, it is essential to have a firm grasps of theconcepts

opportunity cost

differential cost

sunk cost

1.Opportunity cost: It is the potential benefit that is given up when one alternative is

selected over another.

2.differential cost:

Each business have its own costs and benefits that must becompared with the costs and benefits of other available alternative.

Difference between cost of any two alternative is known asdifferential cost.

3.Sunk cost:

Cost that has been already incurred and cannot be changed by thedecision now and in future.


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What is Cost Accounting.pptx

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