Saturday, August 15, 2015

Costing Concepts, Cost Sheet, Objectives, Types of Cost Centre, Methods of Costing.

CLASSIFICATION OF COSTS
 

COST SHEET


OBJECTIVES OF COST ACCOUNTING
  • Ascertainment of cost 
  • Determination of selling price 
  • Ascertaining the profit of each activity 
  • Cost control 
  • Costing Concepts, Cost Sheet, Objectives, Types of Cost Center, Methods of Costing.

Three-fold assumptions in cost reduction
  • There is a saving in unit cost.
  • Such saving is of permanent nature.
  • The utility and quality of the goods and services remain unaffected, if not improved.
ESSENTIAL FACTORS FOR INSTALLING A COST ACCOUNTING SYSTEM

FACTORS
  • The objective of the system.
  • Scope and extent of coverage.
  • The general organisational set up of the business.
  • The technical aspects of the concern.
  • The attitude and behavior of the people in the organisation
  • The manner in which different variable expenses would be affected with the expansion or cessation of different operations.
  • The manner in which Cost and Financial Accounts could be inter-locked into a single integral accounting system.
  • The maximum amount of information that would be sufficient (Information Requirements).
PRACTICAL DIFFICULTIES WHILE INSTALLING A COSTING SYSTEM

  1. Lack of support from top management.
  2. Resistance from accounting staff.
  3. Lack of co–operation at the operating levels.
  4. Shortage of trained staffs.
  5. Costs of the operating systems.

FEATURES OF A GOOD COST ACCOUNTING SYSTEM

  1. It should be tailor-made
  2. Collected Data should be accurate
  3. Cooperation from all other departments
  4. Cost and Benefit should match
  5. It should not sacrifice the utility by including unnecessary details
  6. Usage of network analysis
  7. Faith and Confident
COST CENTER

It is defined as a   
  • location,   
  • person or   
  • an item of equipment or   
  • group of these   
for which cost may be ascertained and used for the purpose of Cost Control.

COST CENTER TYPES


COST UNIT
It is a unit of
  • Product,
  • Service or
  • Time or
Combination of these
 
 

RESPONSIBILITY CENTER

It is an activity center of a business organisation entrusted with a special task.

CATEGORIES:

  • Cost Centers;
  • Profit Centers; and
  • Investment Centers;

Methods of segregating Semi-variable costs into fixed and variable costs
  1. Graphical method
  2. High points and low points method
  3. Analytical method
  4. Comparison by period or level of activity method
  5. Least squares method
Formula: Variable cost per unit = Change in cost / change in no. of units

METHODS OF COSTING


SOURCE
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