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Ô V  : Joint Products, Co-Products and By-Products
Ô Joint Products :
Ô When two or more products of equal or more or less equal importance are
produced simultaneously, they are known as DzJoint Productsdz
Ô Co-Products :
Ô Refers to the production of two or more products at the same time, but not
necessarily from the same processing operations or the same raw material.
Ô Example : In lumbering operations, it is possible to obtain oak, pine and
walnut boards at the same time but from different trees (Raw materials).
Ô By-Products :
Ô These are products recovered from material discarded in a main process, or
from the production of some major products, where the material value is to
be considered at the time of severance from the main product . It can be
otherwise described as Dzany saleable or usable value incidentally produced in
addition to the main product.
Ô Example : Oil refinery : Main product - petrol, By-product - Sulphur, bitumen,
etc
 
Operating costs have been defined as the costs of providing and operating a
service. Operating costing is usually applied to transport services, utility services,
like hospitals, canteens, etc. and distribution services like supply of electricity,
gas and the like. In short, it is adopted generally by industries rendering services
instead of producing goods.


 
 


 
   
Costs are classified into three broad heads :
 
 
   
 : These will include :
(i) Petrol/Diesel, Oil, grease, etc.
(ii) Wages of driver, conductor, attendant, etc. if payment is related to time or
distance to trips
(iii) Commission on takings, if any
(iv) Depreciation


 

 : Semi variable expenses are included in this group :
(i) Tyres and Tubes
(ii) Repairs and paintings
(iii) Overhaul, etc.
ð

ð
    
      . A quantity of identical articles when
produced as a single job is termed as a batch. In Job costing, a job is a cost
unit, while in the case of Batch costing a batch is treated as a cost unit. Similar
to Job costing a unique account is opened for each batch. Batch is used in a
shoe manufacturing industry, toy manufacturers, and component parts of
appliances such as radios, TVs, Computers, etc. The accounting procedure is the
same as in case of Job costing. The cost of each unit in the batch is obtained
by dividing the total cost of the batch by the number of units in the batch.


 
Batch costing may be used in the following circumstances :
a. When the output of a job consists of a number of units and it is not
economical to ascertain cost of every unit of output independently.
b. When customerǯs annual requirements is to be supplied in uniform quantities
over the year.
c. When certain physical characteristics like size, colour, taste, quality, etc.
are required uniformly over a collection of units e.g., garments of the same
size, pharmaceuticals, etc.
d. When an internal manufacturing order is made out for production of
components/sub-parts e.g. Component parts of radio sets, watches, etc.
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 ð ORMALIITY
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Direct Direct Manufacturing


Materials Labor Overhead

The Product
|  

Direct costs Indirect costs


Ô Costs that can be Ô Costs cannot be easily
easily and conveniently and conveniently traced

 to a unit of product to a unit of product or
or other cost objective. other cost object.
Ô Examples: direct material Ô Example: manufacturing
and direct labor overhead
   
    

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The potential benefit that is given


up when one alternative is
selected over another.

Example: If you were


not attending college,
you could be earning
$15,000 per year.
Your opportunity cost
of attending college for one
year is $15,000.
6 
Sunk costs cannot be changed by any decision. They are
not differential costs and should be ignored when
making decisions.

Example: You bought an automobile that cost


$10,000 two years ago. The $10,000 cost is sunk
because whether you drive it, park it, trade it, or sell
it, you cannot change the $10,000 cost.

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