Posts

Analysis of diff cost Marginal cost,Standard Cost?

Image
Marginal cost is the change in the total cost when the quantity produced is incremented by one. That is, it is the cost of producing one more unit of a good. For example, let us suppose: Variable cost per unit = Rs 25 Fixed cost = Rs 1,00,000 Cost of 10,000 units = 25 × 10,000 = Rs 2,50,000 Total Cost of 10,000 units = Fixed Cost + Variable Cost = 1,00,000 + 2,50,000 = Rs 3,50,000 Total cost of 10,001 units = 1,00,000 + 2,50,025 = Rs 3,50,025 Marginal Cost = 3,50,025 – 3,50,000 = Rs 25 Need for Marginal Costing Let us see why marginal costing is required: Variable cost per unit remains constant; any increase or decrease in production changes the total cost of output. Total fixed cost remains unchanged up to a certain level of production and does not vary with increase or decrease in production. It means the fixed cost remains c...
Post a Comment
Read more

Cost Accounting - Budgeting Analysis?

We are all well-familiar with the term budget . Budgeting is a powerful tool that helps the management in performing its functions such as planning, coordinating, and controlling the operations efficiently. The definition of budget is, A plan quantified in monetary terms prepared and approved prior to a define period of time usually showing planned income to be generated and/or expenditure to be incurred during the period and the capital to be employed to attain a given objective. ---CIMA, England Budget, Budgeting, and Budgetary Control Let us go through the terms sequentially. Budget Budget represents the objectives of any organization that is based on the implication of forecast and related to planned activities. Budget is neither an estimate nor a forecast because an estimation is a predetermination of future events, may be based on simple guess or any scientific principles. Similarly, a forecast may be an anticipation of events during a specified period ...
Post a Comment
Read more

Cost Accounting - Classification of Cost

Image
Costs can be classified based on the following attributes: By Nature In this type, material, labor and overheads are three costs, which can be further sub-divided into raw materials, consumables, packing materials, and spare parts etc. By Degree of Traceability of the Product Direct and indirect expenses are main types of costs come under it. Direct expenses may directly attributable to a particular product. Leather in shoe manufacturing is a direct expenses and salaries, rent of building etc. come under indirect expenses. By Controllability In this classification, two types of costs fall: Controllable - These are controlled by management like material labour and direct expenses. Uncontrollable - They are not influenced by management or any group of people. They include rent of a building, salaries, and other indirect expenses. By Relationship with Accounting Period Classifications are measured by the period of use and benefit. The capital expenditure and...
Post a Comment
Read more

Cost Accounting vs Financial Accounting

Both cost accounting and financial accounting help the management formulate and control organization policies. Financial management gives an overall picture of profit or loss and costing provides detailed product-wise analysis. No doubt, the purpose of both is same; but still there is a lot of difference in financial accounting and cost accounting. For example, if a company is dealing in 10 types of products, financial accounting provides information of all the products in totality under different categories of expense heads such as cost of material, cost of labor, freight charges, direct expenses, and indirect expenses. In contrast, cost accounting gives details of each overhead product-wise, such as much material, labor, direct and indirect expenses are consumed in each unit. With the help of costing, we get product-wise cost, selling price, and profitability. The following table broadly covers the most important differences between financial accounting and cost acco...
Post a Comment
Read more

Concepts of Cost Accounting

Cost There is a cost involved to purchase or produce anything. Costs may be different for the same product, depending upon the stages of completion. The cost changes according to the stage a product is in, for example, raw material, work in progress, finished goods, etc. The cost of a product cannot be perfect and it may vary for the same product depending upon different constraints and situations of production and market. Expenses Some costs are actual, such as raw material cost, freight cost, labor cost, etc. Some expenses are attributable to cost. To earn revenue, some expenses are incurred like rent, salary, insurance, selling & distribution cost, etc. Some expenses are variable, some are semi-variable, and some of fixed nature. Loss Expenses are incurred to obtain something and losses are incurred without any compensation. They add to the cost of product or services without any value addition to it. Cost Center Cost center refers to a particular area...
Post a Comment
Read more

Nature And Scope Of Accounting?

Scope of Accounting: Accounting has got a very wide scope and area of application. Its use is not confined to the business world alone, but spread over in all the spheres of the society and in all professions. Now-a-days, in any social institution or professional activity, whether that is profit earning or not, financial transactions must take place. So there arises the need for recording and summarizing these transactions when they occur and the necessity of finding out the net result of the same after the expiry of a certain fixed period. Besides, the is also the need for interpretation and communication of those information to the appropriate persons. Only accounting use can help overcome these problems. In the modern world, accounting system is practiced no only in all the business institutions but also in many non-trading institutions like Schools, Colleges, Hospitals, Charitable Trust Clubs, Co-operative Society etc.and also Government and Local Self-Government ...
Post a Comment
Read more