Charotar University of Science and Technology

INDUKAKA IPCOWALA INSTITUTE OF MANAGEMENT

CHANGA, CHARUSAT
A project on:-
Cost Accounting System Used By Pharmaceutical Companies

SUBMITTED BY:
Mitesh Nenwani
ID NO: 16MBA041

SUBJECT: CCS

ACADEMIC YEAR: 2016-17

SUBMITTED TO:

Paresh shah
COST ACCOUNTING:
Cost accounting is the process of accounting for cost. The process begins with the
recording of income and expenditure and ends with the preparation of statistical data. It
can be inferred to as the formal mechanism by means of which the cost of products or
services are ascertained and controlled.

Cost accounting is primarily concerned with the determination of the cost of a product, a
service, a process, or an operation. Thereafter, cost accounting relates these costs to
the sales values according to the cost objective of the management and determines
profit and profitability.

ESSENTIALS OF COST ACCOUNTING SYSTEMS:

The following are the essential features of good cost accounting system:

The cost accounting system be simple and easy to operate, and it should enable
the managers to exercise cost control.
It should be adopted to suit the general organization of the factory.
There should be coordination and cooperation among the executives of various
departments.
It should ensure proper accounting and allocation of material cost, labour cost,
and overheads.
Cost accounts should be capable of reconciling with financial accounts, or else,
an integral accounting system should be followed.
Finally, the expenses of the costing systems should be commensurate with the
results. In other words the whole system should be introduced economically.

TYPES OF COSTING SYSTEMS:

For ascertaining the cost, the following types of costing systems are usually used.

UNIFORM COSTING: When a number of firms in an industry agree among

themselves to follow the same system of costing in detail by adapting common
terminology and calculation methods for various items of expenses, they are said
to follow a system of uniform costing. In such a case, a comparison of the
performance of each of the firms can made with that of another, or with the
average performance of the industry. In such a system, it is possible to determine
the average cost of production of goods for an industry as a whole. Uniform
 costing is found to be a useful when tax relief, subsidy or production quota is
sought from the govt.

MARGINAL COSTING: It is defined as the ascertainment of marginal

cost by differentiating between fixed and variable costs. It is used to ascertain the
effects of changes in the volume or level output on profit.

According to the Chartered Institute Of Management Accountants (CIMA),

London, variable costs are changed to cost units and the fixed cost attributable to
the relevant period is written off in full against the contribution for that period. The
contribution results in a positive difference between sales revenue and total
variable costs.

STANDARD COSTING: