Ranika Chaudhary

Cost means the amount of

expenditure ( actual or
notional) incurred on, or
attributable to, a given thing.

Cost accounting is concerned with

recording, classifying and
summarizing costs for
determination of costs of products
or services, planning, controlling
and reducing such costs and
furnishing of information to
management for decision making

According to C.I.M.A
The application of costing and cost
accounting principles, methods and
techniques to the art ,science and practice
of cost control and ascertainment of
profitability.

To calculate cost of each product. Job,

process, deptt or service
Data to calculate SP
Data to send quotations
Comparative cost statement
Analysis and classification of various
operations
To disclose wastage and inefficiencies

Relative study of various operations

Provides a base for business policy and
decision making
Compliance of statutory requirements(u/s
209 (1)(d)

Need
Availability of information
objective
Focus
Price determination
Estimates vs. Actual
Internal vs. external parties
Continuous reporting
Decision making

Presentation
Legal compliance
nature

Ascertainment
Analysis
Allocation
Apportionment
Absorption

ELEMENTS
OF

COST

COST
MATERIALS

LABOUR

INDIRECT
DIRECT

DIRECT

INDIRECT

OTHER EXPENSES

DIRECT

INDIRECT

OVERHEADS

FOH

AOH

SOH

DOH

At factory level lubricants, oil,

consumables, etc.
At office level Printing &
stationery, Brooms, Dusters, etc.
At selling & dist. level Packing
materials, printing & stationery,
etc.

At factory level foremens

salary, works managers salary,
gate keepers salary,etc
At office level Accountants
salary, GMs salary, Managers
salary, etc.
At selling and dist.level
salesmen salaries, Logistics
manager salary, etc.

At factory level factory rent, factory

insurance, lighting, etc.
At office level office rent, office insurance,
office lighting, etc.
At sales & dist.level advertising, show room
expenses like rent, insurance, etc.

Nature
Function
Direct & indirect
Variability
Controllability
Normality
Financial accounting classification
Time
Planning and control
Managerial decision making

MATERIALS

LABOUR

EXPENSES

MANUFACTURING COSTS

ADM. COSTS
S&D COSTS

DIRECT COSTS

INDIRECT COSTS

FIXED COSTS

VARIABLE COSTS

SEMI VARIABLE COSTS

CONTROLLABLE COSTS

UNCONTROLLABLE COSTS

NORMAL COSTS

ABNORMAL COSTS

CAPITAL COSTS

REVENUE COSTS

DEFERRED REVENUE COSTS

HISTORICAL COSTS

PRE DETERMINED COSTS

BUDGETED COSTS

STANDARD COSTS

MARGINAL COSTS
OUT OF POCKET COSTS
SUNK COSTS
IMPUTED COSTS
OPPORTUNITY COSTS
REPLACEMENT COSTS
AVOIDABLE COSTS
UNAVOIDABLE COSTS
RELEVANT AND IRRELEVANT COSTS
DIFFERENTIAL COSTS

JOB COSTING-Machines ,tools, Repairs

CONTRACT COSTING-Roads ,bridges, civil
engineering contracts
BATCH COSTING-Toys ,garments,
medicines
PROCESS COSTING-Textiles, chemicals,
paper
UNIT COSTING- Cement ,bricks, mines

OPERATION COSTINGTransport industry, power supply

,telephone services, hospital
MUTIPLE COSTINGAutomobile industry, radio ,computer

COST
COST
COST
COST
COST
COST
COST
COST

UNIT
CENTRE
ESTIMATION
ASCERTAINMENT
ALLOCATION
APPORTIONMENT
REDUCTION
CONTROL

A unit of qty of product ,service or time in

relation to which cost is to be ascertained.
It can be meter ,tonne or Quintals, dozen
Litre numbers etc.
A cost unit can be
single cost unit
Composite cost unit-when two cost units are
merged into one like passenger Per Km, Per
room per day

It means a location person, or item of

equipment for which cost may be
ascertained and used for the purpose of
cost control
Location- production deptt,sales deptt
Person- foreman ,salesman
Item machine , truck

Cost centre can be

Personal and impersonal
Productive, service or mixed
Process cost centre
Profit centre
Responsibility centre

It is the process of calculating probable cost

of any product

It is the process of determining costs on the

basis of actual data

Certain items of cost can directly be

identified with particular deptt or cost
centre. Allotment of cost to such centre is
allocation

On what basis an item of cost will be charged

to cost centre.
Like :Rent of building
floor area
Depreciation of p&m
value of asset
Lighting expenses no. of light points
Holiday pay
direct wages

It helps in planning
Organizing
Motivation
control

Imparting training
Incentive plans
Welfare schemes

Reasonable prices
Good quality products

Import and export policy

Tax policy

Worthiness of transactions

Control on wastage
Economy in cost
Utilization of plant
Cost comparison

Based on estimates
Not applicable for trading concerns
Problem of different base, methods,
techniques
Certain expenses not considered
Problem of marginal costing