what is cost accounting.pptx
TRANSCRIPT
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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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