COST MANAGEMENT
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COST MANAGEMENT

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PGDM BATCH 2010-12

PGDM BATCH 2010-12

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COST MANAGEMENT COST MANAGEMENT Document Transcript

  • What is cost?<br />Cost means the amount of expenditure (actual or notional) incurred on, or attributable to, a given thing<br />What is cost accounting?<br />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.<br />A/c to CIMA<br />The application of costing and cost accounting principles, methods and techniques to the art science and practice of cost control and ascertainment of profitability.<br />Why cost accounting?<br />To calculate cost of each product. Job, process.<br />Data to calculate SP <br />Data to send quotations<br />Comparative cost statement<br />Analysis and classification of various operations<br />To disclose wastage and inefficiencies<br />Relative study of various operations<br />Inventory of stores <br />HOW COST ACCOUNTING IS DIFFER FROM FINANCIAL ACCOUNTING?<br />
    • Cost accounting is job undertaken by firm. Financial accounting is concerned with recording of business transaction in the books accounts.
    Cost accounting helps in finding out cost of a product and control of cost. Where as financial accounting helps in knowing the financial position of the business i.e. is profit or loss in a financial year.<br />The Difference between financial and cost is that in financial accounting all business transaction between debtor and creditor are determined. Cost accounting is used for managerial decision making, how much cost is spent in all production as well as admin department. What amount of budget is required in future and all receipt forecasting.<br />Financial accounting covers accounts of the whole business <br />Relating to all the commercial transactions. Cost accounting directs its attention only to the transactions vices concerning, manufacturing and sale of Products and services.<br />COST OF RUNING OF ADMINISTRATION AT J K BUSINESS SCHOOL<br />OPERATING COSTING<br />It applies where standardized services are provided by an undertaking or by a service cost centre within an undertaking.<br />CIMA Defines the method Operating costing applies where standardized services are provided by an undertaking.<br />Operating costing is used by concern running diverse nature of activities, the cost system is obviously different from that for manufacturing concerns. <br />
    • CLASSIFICATION OF COST
    • Fixed or Standing Charges. (Depreciation, insurance, taxes etc…)
    • Maintenance Charges: (repairs, tyros, tubes, spares, maintenance, etc…
    • Running or Operating Charges. (Petrol, diesel, lubricating oil, etc….)
    DEFINITION OF VARIABLE COST<br />Variable costs are the total expense changes as volume changes. Room supplies are a common variable cost. The supplies are directly related to the number of rooms that are filled.<br />Variable charges – (power, repairs and maintenance) etc...<br />DEFINITION OF FIXED COST<br />Costs are identified as fixed if they do not change as volume changes. For instance, a late night registration desk would be attended by one person, whether there was one guest or one hundred.<br />Fixed charges or standing charges (salary, rent, insurance) etc... <br />MAINTENANCE CHARGES<br />Maintenance Charges: These are cost of semi-variable nature and include expenditure on repairs, maintenance, tyres, tubes, accessories and spares. <br />VARIABLE COST OF JK BUSINESS SCHOOL<br />Particulars Monthly ExpensesTotal Rs.in lackTotal yearly Electricity & Diesel 6L 72 Hostel Fooding etc.4L 48 Marketing Expanses 15L 180 Placement Expenses 5L 60 Telephone Communication0.5L 6 Scholopership1 L 12 Administrative Expenses 1 L 12 Seminar & Conference0.5L 6 Faculty Development 0.5L 6 Library Updation1L 12 Examination fee/AICTE/ etc1.5L 18 Stationary Charges0.5L 6 misc. Expenses 1L 12 TOTAL EXPENCES(A)38L 456L Per day variable exp. 456L/365 1.249315 <br />FIXED COST OF J K BUSINESS SCHOOL<br />Particulars No. of employ Monthly salary each Monthly Total Total yearly Director1 2L 2L 24L FACULTYDEC4 0.8L 3.2L 38.4University18 0.9L 16.2L 194.4AICTE16 1L 16L 192<br />Registrar1L 0.5L 0.5L 6L Examination Head1L 0.5L 0.5L 6L <br />Marketing Department30.41.214.4Acount Department20.20.44.8Placement Department30.30.910.8Admin Dpartment30.20.67.2Hostel warden BOYS10.40.44.8Hostel Warden GIRLS10.40.44.8<br />Office BOYS/Peons80.060.485.76Drivers30.080.242.88Securty Guard100.080.89.6House keeping Staff100.060.67.2TOTAL Salary(B)8910.9847.52570.24Per day fixed expense 570.24/365 1.56230137 <br />NOW THE TOTAL OPERATING COST<br />Operating cost = Variable cost+ Fixed cost<br /> = 456 + 570.24 <br /> = 1026.24 Lack annually<br />Per day cost is<br /> =1026.24/365<br /> =2.811616438 Lack per day<br /> 2 lack 81 thousand 1hundred 61 rupees. Per day<br />TOTAL ASSET OF JK BUSINESS SCHOOL<br />Land (10 acre) rate 1 crore acre = 10 crores (estimated)<br />Appreciation 15% on land<br />10 core*15% = 1.5 core (increase every year )<br />Building cost (estimated) 5 cores<br />Estimated life of building 50 years<br />Depreciation 10% on building<br />=50000000*10/50*100 = 100000<br />Boys Hostel 2.5 core (estimated)<br />Girls Hostel 2.5 core (estimated)<br />Life of both building is 50 years estimated<br />10% depreciation on both buildings<br />= (2.5 +2.5)*10/50*100 = 1 lakh decrease every year <br />