Basic Cost Concepts COST ACCOUNTING Chapter One

LEARNING OBJECTIVES  To understand the meaning of different costing terms  To understand different costing methods  To have a basic idea of different costing techniques  To understand the meaning of cost sheet

COST ACCOUNTING Cost accounting refers to the process of determining and accumulating the cost of some particular product or activity. It also covers classification, analysis and interpretation of costs.

OBJECTIVES OF COST ACCOUNTING To determine cost and control efficiency To Facilitate preparation of financial and other statement To provide basis for operating policy

Cost Accounting Vs. Financial Accounting accounting is prepared for the internal users. Financial accounting is concerned with providing information to external users. But cost

Role of Cost Accounting Cost accounting furnishes management with the necessary accounting tolls for planning and controlling activities. Specifically, the collection, presentation, and analysis of cost data should help management accomplish the following tasks:

Role of Cost Accounting Creating and executing plans for budget Establishing costing methods and procedures. Creating inventory values for costing and pricing

Role of Cost Accounting Determining company costs and profit for and annual accounting period. Choosing from among two or more alternatives which might increase revenues or decrease costs. Determining company costs and profit for and annual accounting period. Choosing from among two or more alternatives which might increase revenues or decrease costs.

Costs Terms, Concepts and Classifications  Manufacturing Cost  Non-Manufacturing Cost  Manufacturing Cost  Non-Manufacturing Cost

Manufacturing Cost Direct Material Direct Labor Manufacturing overhead Direct Material Direct Labor Manufacturing overhead

Non-Manufacturing Cost Administration Cost Selling and Distribution Administration Cost Selling and Distribution

COST TERMS Fixed Cost Variable Costs Semi Variable Cost