COST_ACCOUNTING

Examples: Indirect labour and indirect materials
Wages paid to employees who are not directly involved in production work.
Examples: maintenance workers, janitors, and security guards.
By xuezhen zhu7Topic 1.3 Cost Classification
1. Cost classification for stock valuation and
profit measurement
Product costs
Direct material cost Direct Labour cost Other Direct expenses Overhead Indirect material Indirect labour Other Indirect expenses
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Topic 1.4 Cost behaviour and Analysis
2. Cost behaviour patterns. ① Fixed costs are costs which are not affected by the level of activity within a relevant range. ② Step costs are fixed within a narrow range of activity. ③ Variable costs are costs which increase with the level of activity within a relevant range. ④ Semi-variable costs(semi-fixed cost/mixed cost) are costs which contains both fixed and variable components and so are partly affected by change in the level of activity.
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Materials used to support the production process.
Examples: lubricants and cleaning supplies used in the automobile assembly plant.
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Selling and Administrative Cost
Topic 1.3 Cost Classification
2. Cost Classification for Control
Controllable costs
Costs that can be influenced by management decisions and actions. Examples:advertising expenses,maintenance expenses.
Selling (Marketing) costs are the costs necessary to market, distribute a product.
Example: Advertising, and freight cost.
Administrative costs are the costs associated with research, development, and general administration of the organization that cannot reasonably be assigned to either marketing or production.
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Topic 1.2 Cost Centers and Cost Units
1. Structure of manufacturing organization
Board of Directors
President Production Mixing Baking Administration Stores Marketing
Chapter 1
Cost Accounting, Cost Classification and Cost Behaviour
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Content
Topic 1.1 Cost Accounting Topic 1.2 Cost Centers and Cost Units Topic 1.3 Cost Classification Topic 1.4 Cost behaviour and Analysis
Example: Wages paid to automobile assembly workers
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Overhead
Overheads include indirect material cost,indirect wages costs and other indirect expenses incurred by a business.
Period costs
Selling costs Administrative costs
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Topic 1.3 Cost Classification
Product costs are costs identified with a finished product and are included in the value of stock. Periods costs are costs deducted as expenses in the current period and are not included in the value of stock.
Example: A radio installed in an automobile
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Direct labour(wages) Cost
Direct wages are all wages paid for labour that can be easily traced to individual units of product.
Indirect costs
Costs cannot be easily and conveniently traced to a unit of product or other cost object.
Direct cost(prime costs) Direct material Direct Labour Other Direct expenses
A. B. C. D. E.
Recording how much money has been spent Estimating the costs of various projects under consideration
Preparing a cash budget (forecast)
Checking monetary records compiled by others Calculating the profit or loss achieved from a particular activity
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Product Costs
Direct Materials Direct Labour Manufacturing Overhead
The Product
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Direct Materials Cost
Direct materials become an part of the finished product, and that can be physically and conveniently traced directly to it.
Indirect costs Indirect material cost Indirect Labour cost Other Indirect expenses
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Activity
Activity 1 P8
Activity 2 P10
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Uncontrollable costs
Costs cannot be affected by management within a given time span.
Examples:utility rates,tax rates.
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Topic 1.4 Cost behaviour and Analysis
Example: Legal fees, salary of the chief executive officer.
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Cost Classifications for Assigning Costs
Direct costs
Costs that can be easily and conveniently traced to a unit of product or other cost object.
1. Cost behaviour and levels of activity
Cost behaviour is the variability of input costs with activity undertaken. Activity levels Units produced Machine hours Kilometres driven Labour hours