The slides provide for the fundamental principles and calculations of cost accounting. It is useful for the foundation levels. People to go through these slides must expect the very basics of cost accounting. Also it does not only provide for the fundamentals, but it also gives more complex calculations, which are well explained.

1. INTRODUTION TO ACCOUNTING
BY SAMUKELO NELSON SAOLA
1SCHOOL ACADEMIC SUPPORT

2. Contents
Unit 1 : Introduction to Cost
Accounting
2

3. UNIT – 1: OBJECTIVES
  Define and explain concepts
  Identify basic cost concepts
  Calculate all cost incurred in a manufacturing business
  Prepare all ledger accounts of the manufacturing business
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4. 3. COST TERMINOLOGY
 COST: Cost means the amount of expenditure
incurred on a particular thing.
 COSTING: Costing means the process of
ascertainment of costs.
 COST ACCOUNTING: The application of cost control
methods and the ascertainment of the profitability of
activities carried out or planned”.
 COST CONTROL: Cost control means the control of
costs by management. Following are the aspects or
stages of cost control.
4

5. TrabelsiSlaheddine(c)2013
5
MATERIAL: The substance from which
the finished product is made is known
as material.

6. 6
(a) DIRECT MATERIAL:
is one which can be directly or
easily identified in the product Eg:
Timber in furniture, Cloth in dress,
etc.

7. 7(b) INDIRECT MATERIAL:
one which cannot be easily
identified in the product.

8. EXAMPLES OF INDIRECT MATERIAL
At factory level – lubricants, oil,
consumables, etc.
At office level – Printing & stationery,
Brooms, Dusters, etc.
At selling & dist. level – Packing
materials, printing & stationery, etc.
SamukeloNelsonSaola(c)2017
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9. SamukeloNelsonSaola
(c)2017
9
LABOUR: The human effort required to convert
the materials into finished product is called
labour.

10. 10(a) DIRECT LABOUR:
is one which can be conveniently
identified or attributed wholly
to a particular job, product or
process.
Eg:wages paid to carpenter,
fees paid to tailor,etc.

11. 11(b) INDIRECT LABOUR:
is one which cannot be
conveniently identified or
attributed wholly to a particular
job, product or process.

12. EXAMPLES OF INDIRECT LABOUR
At factory level – foremen’s salary,
works manager’s salary, gate
keeper’s salary,etc
At office level – Accountant’s salary,
GM’s salary, Manager’s salary, etc.
At selling and dist.level – salesmen
salaries, Logistics manager salary,
etc.
SamukeloNelsonSaola
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13. TrabelsiSlaheddine(c)2013
13OTHER EXPENSES: are those expenses other than
materials and labour.
DIRECT EXPENSES: are those expenses which can be
directly allocated to particular job, process or
product. Eg : Excise duty, royalty, special hire
charges,etc.
INDIRECT EXPENSES: are those expenses which
cannot be directly allocated to particular job,
process or product.

14. Examples of other expenses
At factory level : factory rent,
factory insurance, lighting, etc.
At office level : office rent, office
insurance, office lighting, etc.
At sales & dist.level : advertising,
show room expenses like rent,
insurance, etc.
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15. 15
BASIC COST SHEET
DIRECT MATERIAL ………………………………..
DIRECT LABOUR ………………………………
DIRECT EXPENSES …………………………………
PRIME COST ………………………………….
FACTORY OVERHEADS …………………………………..
FACTORY COST
OFFICE OVERHEADS
COST OF PRODUCTION
SELL & DIST OVERHEADS
COST OF SALES ………………………………
PROFIT ……………………………….
SALES

16. 16
COST SHEET - ADVANCED
OPENING STOCK OF RAW MATERIALS
+PURCHASES
+CARRIAGE INWARDS
-CLOSING STOCK OF RAW MATERIALS
VALUE OF MATERIALS CONSUMED
+DIRECT WAGES
+DIRECT EXPENSES
PRIME COST
+FACTORY OVERHEADS
+OPENING STOCK OF WIP
-CLOSING STOCK OF WIP
FACTORY COST
(CONT.)

17. 17
FACTORY COST
+ADMINISTRATIVE OVERHEADS
COST OF PRODUCTION
+OPENING STOCK OF FINISHED GOODS
-CLOSING STOCK OF FINISHED GOODS
COST OF GOODS SOLD
+SELL. & DIST. OVERHEADS
COST OF SALES
+PROFIT
SALES

18. Manufacturing
Cost
Accounting
SAMUKELO NELSON SAOLA
UNIVERSITY OF JOHANNESBURG
18

19. INTRODUCTION TO COST
ACCOUNTING
LESSON 2
UNIT 2: CALCULATIONS
PRESENTED: SAMUKELO NELSON
SAOLA
DIRECTOR: SCHOOL ACADEMIC
SUPPORT

20. Unit 2: Calculations
You are provided with information taken from the
records of Fluzzie Cleaners for the financial year
ended 28 February 2015. The business manufactures
and sells a single type of cleaning broom.

21. 21

22. Unit 2: Calculations
2) Post to the Work-In-Process Stock account in the
General Ledger.
( Show all workings in brackets)
Information:
1) Raw material stock
2014: 27500
2015: 33650
2) Work-in-process-stock
2014: 17600
2015: 19950

23. Unit 2: Calculations
3) Factory indirect material stock
2014: 3330
2015: 2170
Additional information
Raw material purchased amounted to 826500
Damaged raw material returned to suppliers 5200
Carriage on raw material purchased 7840
Factory indirect material purchased 85180
Direct material cost
Balance3 at the beginning 27500
Raw material Purchased- 826500
Damaged raw material returned (5200)
Carriage on raw material purchased 7840
Direct material cost (822990)
Total 33650

24. Unit 2: Calculations
 You add all the cost which are incurred into
bringing the material to the factory
 7200 is the amount of material that we gave
back to the suppliers
WHY ??
 Damaged, wrong delivered goods.

25. Unit 2: Calculations
 Salaries: Factory Foreman: 62500
Office workers : 32200
 Wages: Production wages: ???
Office workers : 7900
 Number of workers in production- 6 employees
 Normal hours worked by each factory worker above- 1
680 hours
 Overtime hours worked by each worker above- 240
hours
 Normal time wage rate - R75 per hour
 Overtime wage rate- R120 per hour

26. Unit2: Calculations
 Direct labour cost
No of Employees Normal time worked wage rate ₌ₓ ₓ
6employees 1680hours 75per hourₓ ₓ
Total for normal
hours= 756000
6employees 24hours 120per hourₓ ₓ
Total for overtime
hours= 17280
UIF CONTRIBUTIONS 1% OF 75600
UIF
CONTRIBUTIONS = 7560
Total direct material cost = 780840

27. Unit2: Calculations
 UIF Factory foreman 625
 Factory indirect material purchased 85 180
 Advertising 7 500
 Factory maintenance 24 285
 Rent expense 108 000
 Bad debts 9 200
 Brooms stolen 3 720
 Water and electricity 67 100
 Depreciation of factory plant 16 660
 Sundry expenses 45 700

28. Unit2: Calculations
 Rent is apportioned according to the floor space
occupied by each department. Floor space
occupied is as follows:
 Factory 2100 m2
 Sales 1 100 m2
 Office 800 m2
 Water and Electricity: 10% of this amount is
allocated to the office and 25% to the sales
department. The balance applies to the factory.
 Sundry expenses must be divided between the
factory and the sales department in the ratio 3 :
1.

29. Unit 2 Calculations
 Indirect material cost = 86340
{3330+ 85180- 2170}
 Factory foreman = 63125
{62500+625}
Rent expense = 56700
(108 000 x 21/40) 56 700
Maintenance = 24 285
Depreciation of factory plant = 16 660
Sundry expenses = 34275
(45 700 x ¾)
Water and electricity = 43615
(67 100 x 65%)
TOTAL FACTORY OVERHEAD COST= 325 000

30. Unit2: Calculations
End of the
slides !!!!!
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31. Reference list
Babasab, P. (2012) Cost accounting. Available from Slideshare at
https://www.slideshare.net/BabasabPatil/cost-accounting-ppt
Mahvesh, Z. (2014) Basic concepts of cost accounting. Available from
Slideshare at
https://www.slideshare.net/mahveshkhan18/basic-concepts-of-cost-accounting
Praveen, O. (2012) Cost Concept. Available from Slideshare at
https://www.slideshare.net/praveen-ojha/cost-concept-10931564
Rsingh96. (2013) Introduction to cost accounting. Available from Slideshare
at
https://www.slideshare.net/rsingh96/introduction-to-cost-accounting
Shahzad, K. (2012) Cost accounting. Available from Slideshare at
https://www.slideshare.net/sk_prince/cost-accounting-5611016
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