Archive about 'Cost Concepts and Classifications'

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 […]

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 […]

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 […]

Introduction to Basic Cost Concepts

Tweet Question: Generally when the term “ Cost” is mentioned, it encompassed a wide ranging meanings and also that this term is being used in different situations. So can we basically classify certain BASIC COST TERMS that are commonly used in the cost and management accounting books? Answer: As earlier mentioned, the term “ COST” […]

What Are The Purpose Of A Cost And Management Accounting System?

Tweet I have been asked by Management to set up a good Cost And Management Accounting System but the first thing I have to understand are or is the main purposes/objectives of having a Cost And Management Accounting System? Answer: The system should at least meeting the following requirements: · To allocate costs between cost […]

List Of Topics Under The Heading: Cost Concepts & Classifications

Tweet Click to the respective topic on Cost Concepts And Classifications: Content Page On COST CONCEPTS & CLASSIFICATIONS: 1.0 What is costing and reasons for its importance 2.0 Difference between Cost Unit And Cost Centre 3.0 Costing Principles- Costs Classification 4.0 Difference Between Product and Period Costs 5.0 Difference between Direct and Indirect Costs 6.0 […]

Factors To Consider When Installing a Cost Accounting System

Tweet Some of the following factors to consider when installing a Cost Accounting system: 1.0  The objectives and expectations of managements for installing it should be identified. How simple or complex will depends on the objectives of management 2.0 The need to properly understand the nature of business, its technical aspects, products, process flow & […]

Factors To Consider When Designing A Cost Accounting System

Tweet In order to have a good Cost Accounting System, during the stage of designing it, we should consider the following: The need to have a thorough understanding of the Organization structure, manufacturing process & procedures, selling and distribution process and types of cost information required by the company’s business The need to select a […]

Essential Features Of A Good Costing System

Tweet Append below are some of the essential features of a good costing Accounting system: 1.0 The Cost Accounting system should be simple and customized to meet the business requirements. 2.0 The method of costing should be suitable to the industry and serve its purpose 3.0 The system should consider the organizational structure of the […]

Objectives Of Setting Up/Introducing A Cost Accounting System

Tweet The following are some of the objectives of setting up a Cost Accounting System whether in a manufacturing or non manufacturing company: 1.0 Ascertainment of cost of each item 2.0 Determination of selling price of every item 3.0 Cost Control and Cost Reduction 4.0 Ascertainment of profit of each activity 5.0 Assisting management in […]