Archive about 'Cost Concepts and Classifications'

Difference Between Direct And Indirect Costs

Direct costs:

Those costs that are traced to a specific cost objective like product/service.

Indirect costs:

Those costs that CANNOT be directly traceable to a particular cost objective and incurred for multiple cost objectives.
Can also be called Common Cost.

Salient Point:

Direct costs are ALLOCATED to [...]

Cost Concepts And Classification : Difference between Product & Period Costs

Product costs:

Those costs that are identified with goods purchased or produced for resale. In manufacturing firm, these costs are attached to the product and included in stock valuation for finished goods or work-in-progress, until they are sold.

Period costs:

Those costs that are identified with a SPECIFIC [...]

Costing Principles: Costs Classification

The fundamental principle of classification of cost depends on the purpose for which costs are required.
 
Cost can be classified as follows:

(1) By Nature

Based on nature of major costs like material, labour and other expenses.
 
Material can be sub-classified into:
Raw material, semi-finished materials, components, consumables, maintenance materials
 
 
Labour can be sub-classified into:
Maintenance, supervision, clerical [...]

Costing Principles: Cost Unit Versus Cost Centre

What is the difference between cost unit and cost centre?

A Cost Unit

Is the quantitative unit of product or service in relation to which costs can be ascertained.

Examples:
Jobs, contracts, kilowatt hours, cost per patient day

A Cost Centre

Is “a location, person or item of equipment ( or group of these) in respect of [...]

Costing And Reasons For Its Importance

What is Costing?

Costing is basically the ascertainment of cost whether for a specified thing or activity.
 
To ascertain cost, we need to apply accounting and costing principles, methods and techniques
 
Costs may be historical/being incurred or estimates.
 

Importance of  Costing:

In view of the complexity of businesses and increasing changes in industry, trade and commerce, costing is [...]