Archive about 'Cost Accounting'

Gives examples of Material losses

Tweet Material losses include loss of quantity, weight or volume of materials. Some examples of material losses which are incurred from the following: Obsolescence re: change of specification results in certain type of materials become useless Losses during handling like in pilferage, breakage, etc Storage like fading, rusting, warping affect the materials or inventories Loss […]

What do you think should the objectives of an efficient system of storekeeping

Tweet Inventories whether they are materials, work-in-progress and finished goods constitutes a large part of cost for an organization. It is therefore important to understand the following major objectives of an efficient system of storekeeping which are as follows:- That not too much inventories is held That not too little inventories is held That loss […]

Explain what is a Cost Statement?

Tweet A cost statement or cost sheet or cost card shows the detailed cost of a cost centre or cost unit.Append below is a simple format of a cost statement: Cost Statement or Cost sheet or Cost Card  $ Direct material cost            5,000 Direct labor cost            4,000 Direct expenses            1,000 PRIME COST […]

In a manufacturing account, how do we find or compute the cost of production on completed goods?

Tweet Very often in a manufacturing concern, there are goods  which are in partly manufactured state at the end of the accounting period. Such goods  which are known as work-in-progress are usually valued according to the amount of materials, labour and expenses which have so far been incurred. To find or compute the cost of […]

How to adjust the books of account when Physical Stocktaking is not precisely on the Accounting Date

Tweet The dual purpose of a physical stock take is to ensure:- the physical existence and the value of the stocks owned by the firm at the Balance Sheet Date. Note that stocks or inventories comprise raw material, work-in-progress or completed product. Any discrepancies between the book stocks and physical count must be investigated and […]

What is Administrative Overhead and how is it treated in Cost Accounting?

Tweet Administrative overhead: Costs relating to formulating policy, directing and controlling operation of an undertaking Not related directly to production activity or function. On a norm, administration overhead are all expenses incurred on policy formulation, direction, control, office administration,etc What are the methods to treat Administrative overhead in Cost Accounting: (a)    Charge to Costing Profit […]

How to do we treat Idle Capacity in Cost Accounts?(Part 2 of 2)

Tweet Idle capacity can be broadly divided into  Normal or AbnormalTreatment of NORMAL IDLE CAPACITY in the cost accounts: Due to unavoidable reasons are included in works overheads and absorbed into the cost of production either by inflating the overhead rate or  by means of a supplementary overhead rate ( see article on details of […]

Name the different stages in Activity-based costing

Tweet In cost accounting, besides looking at marginal and total costing, we have the activity-based costing where the stages or process involves the following: Different stages/steps in activity-based costing are: Identify the different activities within the organization Relate the overheads cost to the identified activities Support activities are then spread across the primary activities Determine […]

What is a cost driver? Business units with examples of some cost drivers

Tweet A cost driver: Is any factor whose change causes a change in the total cost of a related cost object.  Hence a change in the level of cost driver will cause a change in the level of the total cost of a related cost object. Examples of cost driver used in the following business […]

Explain what is Cost allocation and Cost Absorption

Tweet Cost allocation: Is the allotment of whole item of cost to a cost centre or a cost unit. It is the process of identifying, assigning or allowing cost to a cost centre or a cost unit Whereas Cost absorption: Is the process of absorbing all indirect costs or overhead costs allocated to or apportioned […]