Introduction to Cost accounting

1. UNIT 1
COST ACCOUNTING

2. COST
• The term cost refers to the monetary value of expenditures for
services, supplies, raw materials, labor, products, equipment,
etc.

3. COST ACCOUNTING
• Cost accounting is a form of managerial accounting that aims
to capture a company's total cost of production by assessing
the variable costs of each step of production as well as fixed
costs, such as a lease expense.

4. ELEMENTS OF COST ACCOUNTING
• MATERIALS
• LABOUR
• OVERHEAD

5. OBJECTIVES OF COST ACCOUNTING
• COST CONTROL
• COST REDUCTION
• DETERMINATION OF SELLING PRICE
• DECISION MAKING
• ASCERTAINMENT OF PRICE

6. COST SHEET
• A cost sheet is a formal documentation of the fixed, variable,
direct, and indirect costs a business incurs from start to finish
in its production process.
• Based on this information, a company can determine the total
production cost and fix the price per item for the commodities

7. ELEMENTS IN COST SHEET
• Direct Material Cost.
• Direct Employee Cost.
• Direct Expenses.
• Manufacturing Overheads.
• Administration Overheads.
• Selling Overheads.
• Distribution Overheads.

8. DIRECT MATERIALS
• Direct material. Direct material costs are the costs of raw
materials or parts that go directly into producing products.
• For example, if Company A is a toy manufacturer, an example
of a direct material cost would be the plastic used to make the
toys.

9. PRIME COST
• A prime cost is the total direct costs of production, including
raw materials and labor.
• FORMULA
• Prime cost:- Direct material+ Direct labour+ Direct expenses

10. WORK COST
• Works cost is the sum of prime costs and factory costs or
overhead expenses.
• WORK COST= PRIME COST+ FACTORY OVERHEADS

11. COST OF PRODUCTION
• Costs of production refer to all the expenses incurred in the
process of creating and delivering a product or service.
• These expenses can include raw materials, labour, equipment,
rent, and marketing costs.

12. TENDER AND QUOTATION
• The quotation is a fixed price offer, which once accepted by the
customer, cannot be modified or changed.
• On the other extreme, the tender is a response to the
invitation to tender, which is used to find out the best value for
money, from the prospective suppliers.