Showing posts with label Cost Accounting. Show all posts
Showing posts with label Cost Accounting. Show all posts
Cost Volume Profit (C.V.P) Analysis
COST VOLUME PROFIT ANALYSIS
Cost Volume Profit (C.V.P) analysis is the analysis of the relationship between cost and volume of activities and the effect of the relationship on profit. Managers can use the concept of cost-volume-profit analysis to forecast volume of activity at which the firm will break-even or attain target profits. CVP analysis is therefore, a useful tool that helps managers, business owners and entrepreneurs to determine the profit potential of a new firm or the impact on profit due to changes in selling price, cost or level of activities of current business.
Materials Control: Definition, Objectives, Needs and Essentials
Material Control
The systematic control over the purchase, store and consumption of materials is what we refer to as Material control. It helps in maintaining a regular and very timely supply of materials by avoiding both over and under-stocking. It ensures that the right quantity and quality of materials is available to the organization at the right time.
Concept of labour and factors affecting the size of abour force
INTRODUCTION
Labour can be defined as all human efforts of any kind, either skilled or unskilled, mental or manual, directed towards the production of goods and services.
Market, on the other hand, is defined as a place or any means of communication whereby the sellers and buyers can communicate with one another, to exchange goods and services at prices determined by the market forces.
Labour can be defined as all human efforts of any kind, either skilled or unskilled, mental or manual, directed towards the production of goods and services.
Market, on the other hand, is defined as a place or any means of communication whereby the sellers and buyers can communicate with one another, to exchange goods and services at prices determined by the market forces.
How To Prepare Income Statement Using Principles of Marginal And Absorption Costing
MARGINAL COSTING
The marginal cost of an item is its variable cost. The marginal production cost of an item is the addition of its direct materials cost, direct labour cost, direct expenses cost and variable production overhead cost. The higher the volume of production, the higher will be the total variable cost of sales.
Contrarily, fixed costs are costs that remain unchanged in the short run, regardless of the quantity of production and sale.
The marginal cost of an item is its variable cost. The marginal production cost of an item is the addition of its direct materials cost, direct labour cost, direct expenses cost and variable production overhead cost. The higher the volume of production, the higher will be the total variable cost of sales.
Contrarily, fixed costs are costs that remain unchanged in the short run, regardless of the quantity of production and sale.
Depreciation of Fixed Assets
INTRODUCTION
Fixed assets are assets which are of permanent nature and they create revenue for the business. They can last for a long period of time. Fixed assets of a business lose value or are said to depreciate with usage. Depreciation can be defined as a reduction in the economic service potentials of an asset as a result of wears, tears, usage and passage of time. It can also be defined as the permanent and continuous decrease in the quality,quantity and value of an asset.
Fixed assets are assets which are of permanent nature and they create revenue for the business. They can last for a long period of time. Fixed assets of a business lose value or are said to depreciate with usage. Depreciation can be defined as a reduction in the economic service potentials of an asset as a result of wears, tears, usage and passage of time. It can also be defined as the permanent and continuous decrease in the quality,quantity and value of an asset.
Job and Batch costing
Job costing
According to CIMA, job costing is a form of specific order costing which applies where work is undertaken to customers` special requirements and each other is of comparatively short duration. The work is usually carried out under a roof or in a factory and moved through many processes and operations as a continuously identifiable unit.
Cost Centre and Cost Unit: What You Need To Know
COST CENTRE AND COST UNIT
Cost Unit
DefinitionAccording to businessdictionary.com, In cost accounting, cost unit is the unit of product or service for which cost is computed. Cost units are selected to allow for comparison between actual cost and standard cost, or between different actual costs.
In the preparation of cost accounts, it is necessary to choose a unit with which expenditure may be identified. The quantity upon which cost can be conveniently allocated is known as cost unit.
The Chartered Institute of Management Accountants (CIMA) defines a cost unit as a unit of quantity of product, service or time in relation to which costs may be ascertained or expressed.
Unit chosen should not be ambiguous. It should be a simple and commonly used unit. The following are examples of cost units;
- Steel mills use per ton of steel made
- Transport companies use per passenger km
- Textile mills use per yard
- Electrical companies use per unit of electricity generated
Cost Centre
DefinitionAccording to businessdictionary,com, cost centre is a distinctly identifiable department, division, or unit of an organization whose managers are responsible for all its associated costs and for ensuring adherence to its budgets. Also called cost pool or expense center.
A cost centre is a department within a company that does not produce direct profit and adds to the cost of running a company. However, all cost centres perform an important job. It improves the satisfaction of customers and indirectly increases sales.
The manager and employees of cost centre are not accountable for its profit and investment decision but they are responsible for its cost. They are liable for keeping their cost in line or below budget because cost centre does not produce directly from its activities.
The performance of the managers is assessed by comparing the actual expenses incurred with the budgeted expenses for the cost centre. The two main types of cost centre are;
- Product centre
- Service centre
Cost centres may be classified into;
- Productive, unproductive and mixed cost centers
- Personal and impersonal cost centers
- Operation and process cost center
Mixed costs centers are centres that are engaged sometimes on productive and service works. Impersonal cost center is a centre which consists of a department, a plant or an item of equipment whereas a personal cost center consists of a person or a group of persons. In case a cost center consists of those machines or persons which carry out the same operation, it is termed as operation cost center. If a cost center consists of a continuous sequence of operations, it is called process cost center. As for operation cost center, cost is analyzed and related to a series of operations in sequence such as in chemical industries, oil refineries and other process industries. The objective of such an analysis is to ascertain the cost of each operation irrespective of its location inside the factory.
Cost Unit and cost centre
1. Cost unit can be defined as a quantitative unit of a product, an item, or service in connection to which costs are measured.
2. A cost centre is a person, location or an item of equipment or a group of items of equipment for which costs are ascertained and used for the sole purpose of controlling cost.
3. A cost unit, simply stated, refers to a unit of finished good, services or their combination in connection to which cost is expressed and ascertained.
