Cost Accounting and Analysis Presentation

1. Cost Accounting and
Analysis
BERKAN TAŞÇI
140065
INDUSTRIAL ENGINEERING
ENGL201 - GROUP 24

2. Cost accounting is a process of collecting, recording, classifying,
analyzing, summarizing, allocating and evaluating various alternative
courses of action & control of costs. Its goal is to advise the
management on the most appropriate course of action based on the
cost efficiency and capability. Cost accounting provides the detailed
cost information that management needs to control current
operations and plan for the future.

3. ORIGINS OF COST
ACCOUNTING
All types of businesses, whether service, manufacturing or trading, require cost
accounting to track their activities. Cost accounting has long been used to help
managers understand the costs of running a business. Modern cost accounting
originated during the Industrial Revolution, when the complexities of running a
large scale business led to the development of systems for recording and
tracking costs to help business owners and managers make decisions.
In the early industrial age, most of the costs incurred by a business were what
modern accountants call variable costs because they varied directly with the
amount of production. Money was spent on labor, raw materials, power to run
factory, etc. in direct proportion to production. Managers could simply total
variable costs for a product and use this as a rough guide for decision-making
processes.

4. 1)Variable Costs
 A variable cost is the most important
part of cost accounting. It is an expense
that changes with production volume.
Variable costs are those costs that vary
depending on a organization's
manufacturing output; these costs rise
as production increases and fall as
production decreases.
 Why are some costs fixed and other
costs variable? Think about total
material costs in a company. Total
material costs are variable costs because
the material is bought, only when the
company need it. The company needs
more material, when the orders increase.
So that, this also increases the
production and manufacturing; and as
more bicycles are produced, it costs
more for the company.

5. 2-Fixed Costs
A fixed cost is a cost that remains constant even if there is a
decrease or increase in the amount of goods and services sold or
manufactured. Fixed costs are the ones that have to be paid by an
organization, independent of any business service. They are not
affected by the changes in any activity in a company

6. A fixed cost is an operating cost
of a job that can not be
prevented in any case of the
volume of production. Fixed
costs are generally used in
break-even analysis to compute
manufacturing, volume of sales
and pricing even if a firm
generates neither loss nor
profit. Variable costs and fixed
costs shapes the structure of
total cost in a firm; that plays a
very big role in maintaining its
profitability

7. 3-Cost Efficiency
Keeping costs low and having cost efficient
maintains a huge benefit if a company have a
strong and ambitious work. A strong
competition around the world has also made
decision errors. That caused a need of cost
accountants and cost efficiency. In order to
make a cost efficient, prices should be kept in
low levels. Many firms have become aware of
the need to improve their cost accounting
systems, in this way; they can manufacture
more accurate cost information to calculate
the cost of their services and products,
pinpoint loss-making activities and analyze
profits by products, sales outlets, customers,
markets, and monitor trends in costs over a
long period of time

8. Analysis of Cost Objects
A cost object is any item for which costs are being separately
measured. It is a key concept used in managing the costs of a
business. Here are some types of cost objects:
1)Direct Materials
2)Direct Labor
3)Manufacturing Overhead

9. Direct Materials
Costs that are assigned to cost objects
are two big categories that are direct
and indirect costs. Both of them can be
parted into direct and indirect materials.
Direct material costs indicate those
material costs that can be simply and
specifically defined with a special cost
object. In production firms where the
cost object is a product, after observing
physically they can be used to measure
the quantity consumed by each of the
products and the cost of direct
can be directly assigned to them.
Shortly, direct materials become part of
a normal product. For instance, iron
in the production of distinct types of
bicycles can be directly specified with
each particular type of bicycles

10. Direct Labor
Direct labor costs are that can be directly identified with a specific cost object.
Observation of products physically is used to measure the quantity of labor used
to produce a specific product or supply a service. The direct labor costs are
products that covers the cost of converting the raw materials into a product or
service, such as the expenses of the forklift truck drivers engaged in the
manufacturing process in the production of aluminum production.
 Indirect labors also exist as
well as direct labor exists in a
company. Indirect labors are
the opposite word of direct
labor in analyzing cost
objects. For example, an
engineer is an indirect labor,
because, they are not directly
in contact with product.

12. Manufacturing Overhead Costs
Manufacturing overhead cost is the most simplistic and traditional costing systems. It
assigns indirect costs to cost objects using only an overhead rate. These overhead rates
may change according to the related department. Because, some departments or units
use manufacturing overhead more than other departments. For example, electricity, rent,
insurance do not cost same with the other units of the manufacturing company. It means
that if a company produces an ‘’A’’ product. This product is assembled and processed in
different units of the company

13. All of these examples and statements are still used in the companies to
calculate costs of products according to their related department. Using of
accounting origins and classifying of cost objects helps the companies grow
faster..
CONCLUSION

14. THANK YOU
VERY MUCH