This document discusses different costing techniques used in various industries and businesses. It provides examples of four costing techniques - marginal costing, standard costing, budgetary costing and how they help in decision making, cost control and cost reduction. Marginal costing helps management take short-term decisions and control variable costs. Standard costing enables cost control and performance evaluation by comparing actual and standard costs. Budgetary costing facilitates achieving organizational goals through periodic review of actual performance against budgets.
Foreign Exchange management, Bcom SEM 6th
1) Foreign Exchange Rate? Factors determining the exchange rate under different market conditions?
2) Explain briefly various foreign Exchange theories?
3) Explain various types of exchange rate systems in detail?
4) What is FDI? Explain its determinants, advantages and disadvantages?
5) What is foreign Exchange risk? Discuss its types with reference to various foreign currency exposure?
Hand written notes of risk management and insurance...
Risk management and insurance notes
Details:-
1) What is risk management ? Methods of handling risk ? Steps in risk management process?
2) What do you mean by annuities and its types?
3) What do you mean by estate planning? Procedure and its significance?
4) Types of risk with examples?
5) Personal risk management? Its application in detail?
Internal check regarding cash receipts and cash paymentAnand Saran
Internal check is an accounting procedure that divides duties so that no single individual can carry out all stages of a transaction. This helps prevent errors and fraud. The document outlines procedures for controlling cash receipts and payments, including having separate cashiers, issuing pre-numbered receipts, daily bank deposits, reconciling bank statements, and requiring authorized signatures on checks. It emphasizes dividing duties, timely recording, safeguarding assets, and oversight as key parts of internal checks.
Introduction of costing , its elements & cost sheetKamlesh Shinde
Basically presentation is based on the costing , its various elements, their classification and the illustration on a simple cost sheet and Estimated Cost sheet. It is very useful to beginners in cost accounting , B.Com and M.com Students.
Hand written Notes of corporate governance
1) Ethics & Theories of business ethics?
2) Stakeholders Protection?
3) Pillars of Corporate governance?
4) Whistle Blowing/ types & Effects?
5) FUNCTIONS & Working of CRA?
6) Common Problems in corporate failures?
This document outlines 30 journal entries for a non-integrated accounting system, where cost and financial books are maintained separately. Key entries include recording receipts and issues of materials and expenses in the cost books, and corresponding entries in the financial books for payments and collections. Manufacturing costs like wages, overhead and production costs are allocated to jobs/products in the cost books, while sales and profits are recorded in the financial books. The document provides details to ensure proper recording and reconciliation between the cost and financial books under a non-integrated accounting system.
Absorption Costing and Marginal Costing pptVaseemParry
Marginal costing and absorption costing are two different costing methods. Absorption costing treats all manufacturing costs, including both fixed and variable costs, as product costs. Marginal costing only treats variable manufacturing costs as product costs and treats fixed costs as period costs. Absorption costing results in higher inventory valuations as it includes fixed overhead costs in product costs. Marginal costing is useful for decision making as it focuses only on variable costs relevant to production changes. While marginal costing is simpler, absorption costing follows accounting standards by fully allocating costs.
Foreign Exchange management, Bcom SEM 6th
1) Foreign Exchange Rate? Factors determining the exchange rate under different market conditions?
2) Explain briefly various foreign Exchange theories?
3) Explain various types of exchange rate systems in detail?
4) What is FDI? Explain its determinants, advantages and disadvantages?
5) What is foreign Exchange risk? Discuss its types with reference to various foreign currency exposure?
Hand written notes of risk management and insurance...
Risk management and insurance notes
Details:-
1) What is risk management ? Methods of handling risk ? Steps in risk management process?
2) What do you mean by annuities and its types?
3) What do you mean by estate planning? Procedure and its significance?
4) Types of risk with examples?
5) Personal risk management? Its application in detail?
Internal check regarding cash receipts and cash paymentAnand Saran
Internal check is an accounting procedure that divides duties so that no single individual can carry out all stages of a transaction. This helps prevent errors and fraud. The document outlines procedures for controlling cash receipts and payments, including having separate cashiers, issuing pre-numbered receipts, daily bank deposits, reconciling bank statements, and requiring authorized signatures on checks. It emphasizes dividing duties, timely recording, safeguarding assets, and oversight as key parts of internal checks.
Introduction of costing , its elements & cost sheetKamlesh Shinde
Basically presentation is based on the costing , its various elements, their classification and the illustration on a simple cost sheet and Estimated Cost sheet. It is very useful to beginners in cost accounting , B.Com and M.com Students.
Hand written Notes of corporate governance
1) Ethics & Theories of business ethics?
2) Stakeholders Protection?
3) Pillars of Corporate governance?
4) Whistle Blowing/ types & Effects?
5) FUNCTIONS & Working of CRA?
6) Common Problems in corporate failures?
This document outlines 30 journal entries for a non-integrated accounting system, where cost and financial books are maintained separately. Key entries include recording receipts and issues of materials and expenses in the cost books, and corresponding entries in the financial books for payments and collections. Manufacturing costs like wages, overhead and production costs are allocated to jobs/products in the cost books, while sales and profits are recorded in the financial books. The document provides details to ensure proper recording and reconciliation between the cost and financial books under a non-integrated accounting system.
Absorption Costing and Marginal Costing pptVaseemParry
Marginal costing and absorption costing are two different costing methods. Absorption costing treats all manufacturing costs, including both fixed and variable costs, as product costs. Marginal costing only treats variable manufacturing costs as product costs and treats fixed costs as period costs. Absorption costing results in higher inventory valuations as it includes fixed overhead costs in product costs. Marginal costing is useful for decision making as it focuses only on variable costs relevant to production changes. While marginal costing is simpler, absorption costing follows accounting standards by fully allocating costs.
Hand written Notes of banking and insurance
1) Central Bank and its functions?
2) Financial inclusion and its importance?
3) Irda mission / power/ duties?
4) Asset liability management &its techniques?
Face Value is the original value of share issued mentioned in the share certificate at beginning when co. gets listed on stock exchange.
Face value does not change and stay constant unless stock is split.
Book Value is the Net worth of the Co.
Net worth = Total assets – Total liabilities.
Book value per Share equals : Net Worth / Total No. of O/s Shares
A company's book value is the amount that the shareholders would receive after all assets were liquidated and liabilities paid off.
Market Value is the current trading price of the stock quoted on exchange.
Market value is calculated by multiplying the total number of shares outstanding with the current market price of a share.
Book value and market value are both helpful in calculating whether a stock is fairly valued, overvalued or undervalued.
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Contract costing is a method of accounting for construction or manufacturing projects that take longer than one accounting period to complete. It involves opening a separate account for each contract to track direct costs like materials, labor, and overhead. As work is completed and certified, the contract account is credited for the corresponding portion of the contract price to calculate the profit or loss on that portion. For incomplete contracts at the end of an accounting period, only a portion of the estimated total profit is recognized depending on how much of the work has been certified complete. This method aims to match revenues and expenses across accounting periods for long-term contracts.
Hand written Notes of gst
1) Introduction to gst / advantages/ disadvantages
2) Registration of business under GST
3) GST payment, process and modes
4) Gst eco system
5) Gst suvidha providers
The document discusses the objectives of cost accounting. It lists the main objectives as ascertaining costs, fixing selling prices, proper recording and presentation of cost data to management. Some key specific objectives mentioned include:
- Ascertaining the cost per unit of different products and providing a correct analysis of costs by process, operations, and elements.
- Disclosing sources of wastage and preparing reports to control wastage.
- Providing data to guide price fixing and ascertain profitability of products.
- Exercising effective cost control of stocks and revealing sources of economy through cost control of labor, overheads, and materials.
The document discusses various methods and concepts in cost accounting, including:
1. Different types of costing methods like unit costing, job costing, contract costing, batch costing, operating costing, process costing, and multiple/uniform costing.
2. The need to reconcile cost and financial accounts when they are maintained separately, to check for differences in reported profit/loss.
3. Key aspects of cost sheets like classifying cost components, ascertaining product costs, fixing selling prices, and aiding cost control and management decisions.
Reconciliation of Cost & Financial AccountsDhrumil Shah
The cost and financial accounts of a firm need to be reconciled when the profits reported in each do not match. Reasons for differences include items recorded in one account but not the other, and under or over absorption of overheads or valuation of inventory. The reconciliation statement balances the profits by adding income and expenses only in one account and subtracting the same from the other. It helps check accuracy and identify reasons for profit differences between accounts. An example shows reconciling the ₹3.5 lakh profit reported in cost accounts of JK Ltd to the ₹3.385 lakh profit in financial accounts by adjusting for various items treated differently.
This document is a project report submitted by a student on the topic of operating costing. It provides an introduction to operating costing and cost accounting. It defines operating costs and operating costing, and explains that operating costing is used to determine the cost of providing a service. The document outlines different costing methods and provides examples of operating costing for transport, hotels, and hospitals.
This document provides an introduction to cost and management accounting. It discusses key concepts such as cost accounting, management accounting, costing, and the differences between financial accounting and management accounting. The objectives of cost accounting are to ascertain costs, control costs, aid decision-making, determine selling prices, and more. Management accounting builds on cost and financial accounting data to provide information for planning, control, and decision-making. It focuses on the internal needs of management rather than external reporting.
Unit or output costing is used to determine the cost per unit of standard, identical products produced through a common process. A cost sheet or statement of cost can be used to calculate total cost, unit cost, and costs at different stages of production. Key elements of cost include prime cost (direct materials, labor, expenses), works/factory cost (prime cost plus factory overheads), cost of production (works cost plus office/administrative costs), and total cost (cost of production plus selling/distribution costs). Comparative cost sheets analyze costs across multiple time periods or products. Cost sheets provide management information to control expenses, determine selling prices, and evaluate production efficiency.
Contract costing is a method of accounting for construction projects that take over a year to complete. Each construction project is treated as a separate cost unit or "contract". The costs incurred are tracked to each individual contract and profits or losses are calculated periodically. At the end of each accounting period, only a portion of estimated profits for incomplete contracts are recognized based on the percentage of work completed. This helps match revenues with expenses over the life of long-term contracts.
Hand written Notes of direct Tax Laws
1) Introduction to Income Tax Act 1961 , history/ components of income tax act
2) Agricultural Income under income tax act 1961
3) PGBP principles and computation
4) Income from Other Sources under income tax act 1961
5) Tax deductible at source under income tax act 1961 and its provisions
This document discusses depreciation, which refers to the reduction in value of fixed assets over time due to usage and age. It defines depreciation and lists assets that are depreciated, such as machinery, furniture, vehicles, and electronics used for business. The objectives and causes of depreciation are outlined. Several depreciation methods are presented, including the straight-line method and written down value method. Examples are provided to illustrate how to calculate depreciation using each method. The advantages and disadvantages of the straight-line and written down value methods are also summarized.
This document is an audit report for Hari leela co-op housing society for the period of April 2009 to March 2011. It includes an introduction and analysis of the society's balance sheet as of March 2011. On the liabilities side, it notes the share capital of Rs. 4,500 and reserve fund of Rs. 60,770. On the assets side, it details the cash and bank balances totaling Rs. 67,885 as well as investments, deposits, and fixed assets. The auditor awarded the society an audit classification of "B" based on its financial position and overall workings during the period reviewed.
Cost audit is defined as the verification of correctness of cost accounts and adherence to cost accounting principles, plans, and procedures. It aims to be a preventative measure and guide for management decisions by acting as a barometer of performance. The objectives of cost audit include detecting errors and preventing fraud, verifying cost accounts are maintained according to principles, and ensuring efficiency.
This document provides information on the process of vouching in accounting. It defines vouching as comparing accounting entries to supporting documents like receipts. It then discusses vouching for different types of cash transactions recorded in the cash book, including opening balances, cash sales, payments to creditors, and payments for expenses. For each transaction type, it lists the supporting documents that should be examined to verify the entry, such as cash memos, invoices, pay stubs, and receipts. The document provides guidance on steps an auditor should take to properly voucher transactions during an audit.
This document discusses different types of costing methods including job costing and contract costing. It provides details on:
- Job costing is used to determine costs for specific jobs or orders and is commonly used in job order industries. Costs are tracked separately for each job.
- Contract costing is a variant of job costing applied to construction projects. Each contract is treated as a separate cost unit and costs are tracked separately for each contract over its duration.
- Key aspects of contract costing include maintaining separate accounts for each contract, charging costs incurred directly to the relevant contract, and payment being made based on certified work completed.
This document provides an overview of marginal costing. It begins with an introduction to marginal costing, defining it as a technique that differentiates between fixed and variable costs. It then covers key aspects of marginal costing including its meaning, features, advantages, and disadvantages. Examples of how marginal costing can be used for decision making are also provided. The document concludes with sections on absorption costing, the differences between marginal and absorption costing, contribution analysis, break-even analysis, and cost-volume-profit analysis.
4methods of costing in cost accounting.pdfNeha234608
The document discusses various methods of costing including unit costing, job costing, contract costing, batch costing, operating/service costing, process costing, multiple costing, and uniform costing. It provides examples of different industries that use each method. It also discusses other costing techniques like marginal costing, absorption costing, standard costing, and historical costing. The document outlines the need for reconciliation when cost and financial accounts are maintained separately.
The document describes various methods of costing used in cost accounting including: unit costing, job costing, contract costing, batch costing, operating/service costing, process costing, multiple costing, and uniform costing. It provides examples of different industries that use each method and brief descriptions of how each method works.
Hand written Notes of banking and insurance
1) Central Bank and its functions?
2) Financial inclusion and its importance?
3) Irda mission / power/ duties?
4) Asset liability management &its techniques?
Face Value is the original value of share issued mentioned in the share certificate at beginning when co. gets listed on stock exchange.
Face value does not change and stay constant unless stock is split.
Book Value is the Net worth of the Co.
Net worth = Total assets – Total liabilities.
Book value per Share equals : Net Worth / Total No. of O/s Shares
A company's book value is the amount that the shareholders would receive after all assets were liquidated and liabilities paid off.
Market Value is the current trading price of the stock quoted on exchange.
Market value is calculated by multiplying the total number of shares outstanding with the current market price of a share.
Book value and market value are both helpful in calculating whether a stock is fairly valued, overvalued or undervalued.
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Thank You For Watching
Please Subscribe To DevTech Finance
Contract costing is a method of accounting for construction or manufacturing projects that take longer than one accounting period to complete. It involves opening a separate account for each contract to track direct costs like materials, labor, and overhead. As work is completed and certified, the contract account is credited for the corresponding portion of the contract price to calculate the profit or loss on that portion. For incomplete contracts at the end of an accounting period, only a portion of the estimated total profit is recognized depending on how much of the work has been certified complete. This method aims to match revenues and expenses across accounting periods for long-term contracts.
Hand written Notes of gst
1) Introduction to gst / advantages/ disadvantages
2) Registration of business under GST
3) GST payment, process and modes
4) Gst eco system
5) Gst suvidha providers
The document discusses the objectives of cost accounting. It lists the main objectives as ascertaining costs, fixing selling prices, proper recording and presentation of cost data to management. Some key specific objectives mentioned include:
- Ascertaining the cost per unit of different products and providing a correct analysis of costs by process, operations, and elements.
- Disclosing sources of wastage and preparing reports to control wastage.
- Providing data to guide price fixing and ascertain profitability of products.
- Exercising effective cost control of stocks and revealing sources of economy through cost control of labor, overheads, and materials.
The document discusses various methods and concepts in cost accounting, including:
1. Different types of costing methods like unit costing, job costing, contract costing, batch costing, operating costing, process costing, and multiple/uniform costing.
2. The need to reconcile cost and financial accounts when they are maintained separately, to check for differences in reported profit/loss.
3. Key aspects of cost sheets like classifying cost components, ascertaining product costs, fixing selling prices, and aiding cost control and management decisions.
Reconciliation of Cost & Financial AccountsDhrumil Shah
The cost and financial accounts of a firm need to be reconciled when the profits reported in each do not match. Reasons for differences include items recorded in one account but not the other, and under or over absorption of overheads or valuation of inventory. The reconciliation statement balances the profits by adding income and expenses only in one account and subtracting the same from the other. It helps check accuracy and identify reasons for profit differences between accounts. An example shows reconciling the ₹3.5 lakh profit reported in cost accounts of JK Ltd to the ₹3.385 lakh profit in financial accounts by adjusting for various items treated differently.
This document is a project report submitted by a student on the topic of operating costing. It provides an introduction to operating costing and cost accounting. It defines operating costs and operating costing, and explains that operating costing is used to determine the cost of providing a service. The document outlines different costing methods and provides examples of operating costing for transport, hotels, and hospitals.
This document provides an introduction to cost and management accounting. It discusses key concepts such as cost accounting, management accounting, costing, and the differences between financial accounting and management accounting. The objectives of cost accounting are to ascertain costs, control costs, aid decision-making, determine selling prices, and more. Management accounting builds on cost and financial accounting data to provide information for planning, control, and decision-making. It focuses on the internal needs of management rather than external reporting.
Unit or output costing is used to determine the cost per unit of standard, identical products produced through a common process. A cost sheet or statement of cost can be used to calculate total cost, unit cost, and costs at different stages of production. Key elements of cost include prime cost (direct materials, labor, expenses), works/factory cost (prime cost plus factory overheads), cost of production (works cost plus office/administrative costs), and total cost (cost of production plus selling/distribution costs). Comparative cost sheets analyze costs across multiple time periods or products. Cost sheets provide management information to control expenses, determine selling prices, and evaluate production efficiency.
Contract costing is a method of accounting for construction projects that take over a year to complete. Each construction project is treated as a separate cost unit or "contract". The costs incurred are tracked to each individual contract and profits or losses are calculated periodically. At the end of each accounting period, only a portion of estimated profits for incomplete contracts are recognized based on the percentage of work completed. This helps match revenues with expenses over the life of long-term contracts.
Hand written Notes of direct Tax Laws
1) Introduction to Income Tax Act 1961 , history/ components of income tax act
2) Agricultural Income under income tax act 1961
3) PGBP principles and computation
4) Income from Other Sources under income tax act 1961
5) Tax deductible at source under income tax act 1961 and its provisions
This document discusses depreciation, which refers to the reduction in value of fixed assets over time due to usage and age. It defines depreciation and lists assets that are depreciated, such as machinery, furniture, vehicles, and electronics used for business. The objectives and causes of depreciation are outlined. Several depreciation methods are presented, including the straight-line method and written down value method. Examples are provided to illustrate how to calculate depreciation using each method. The advantages and disadvantages of the straight-line and written down value methods are also summarized.
This document is an audit report for Hari leela co-op housing society for the period of April 2009 to March 2011. It includes an introduction and analysis of the society's balance sheet as of March 2011. On the liabilities side, it notes the share capital of Rs. 4,500 and reserve fund of Rs. 60,770. On the assets side, it details the cash and bank balances totaling Rs. 67,885 as well as investments, deposits, and fixed assets. The auditor awarded the society an audit classification of "B" based on its financial position and overall workings during the period reviewed.
Cost audit is defined as the verification of correctness of cost accounts and adherence to cost accounting principles, plans, and procedures. It aims to be a preventative measure and guide for management decisions by acting as a barometer of performance. The objectives of cost audit include detecting errors and preventing fraud, verifying cost accounts are maintained according to principles, and ensuring efficiency.
This document provides information on the process of vouching in accounting. It defines vouching as comparing accounting entries to supporting documents like receipts. It then discusses vouching for different types of cash transactions recorded in the cash book, including opening balances, cash sales, payments to creditors, and payments for expenses. For each transaction type, it lists the supporting documents that should be examined to verify the entry, such as cash memos, invoices, pay stubs, and receipts. The document provides guidance on steps an auditor should take to properly voucher transactions during an audit.
This document discusses different types of costing methods including job costing and contract costing. It provides details on:
- Job costing is used to determine costs for specific jobs or orders and is commonly used in job order industries. Costs are tracked separately for each job.
- Contract costing is a variant of job costing applied to construction projects. Each contract is treated as a separate cost unit and costs are tracked separately for each contract over its duration.
- Key aspects of contract costing include maintaining separate accounts for each contract, charging costs incurred directly to the relevant contract, and payment being made based on certified work completed.
This document provides an overview of marginal costing. It begins with an introduction to marginal costing, defining it as a technique that differentiates between fixed and variable costs. It then covers key aspects of marginal costing including its meaning, features, advantages, and disadvantages. Examples of how marginal costing can be used for decision making are also provided. The document concludes with sections on absorption costing, the differences between marginal and absorption costing, contribution analysis, break-even analysis, and cost-volume-profit analysis.
4methods of costing in cost accounting.pdfNeha234608
The document discusses various methods of costing including unit costing, job costing, contract costing, batch costing, operating/service costing, process costing, multiple costing, and uniform costing. It provides examples of different industries that use each method. It also discusses other costing techniques like marginal costing, absorption costing, standard costing, and historical costing. The document outlines the need for reconciliation when cost and financial accounts are maintained separately.
The document describes various methods of costing used in cost accounting including: unit costing, job costing, contract costing, batch costing, operating/service costing, process costing, multiple costing, and uniform costing. It provides examples of different industries that use each method and brief descriptions of how each method works.
This document provides information about cost estimation. It defines cost estimation and discusses its purpose and importance. It outlines the key elements involved in cost estimation like direct labor cost, material cost, and overhead charges. It also describes different types of estimates and the typical cost estimating procedure. Common costing methods like job costing, process costing, and uniform costing are defined. Examples are provided to demonstrate how to calculate prime cost, factory cost, production cost, total cost and selling price.
This document discusses various methods and types of costing used in accounting. It describes unit costing, job costing, contract costing, batch costing, operating/service costing, process costing, multiple costing, uniform costing, marginal costing, absorption costing, standard costing, and historical costing. It also covers reconciliation of cost and financial accounts, and integral versus non-integral accounting methods. The overall purpose is to outline different approaches to determining and classifying costs that are suited to various industries and types of production.
PPCE unit 3 (ME8793 – PROCESS PLANNING AND COST ESTIMATION) TAMILMECHKIT
UNIT III - INTRODUCTION TO COST ESTIMATION
Importance of costing and estimation –methods of costing-elements of cost estimation –Types of estimates – Estimating procedure- Estimation labor cost, material cost- allocation of over head charges- Calculation of depreciation cost
This document discusses various methods, techniques, and systems of costing. It describes job costing, contract costing, batch costing, process costing, operation costing, and others. It also covers techniques like marginal costing, direct costing, and absorption costing. For systems of costing, it explains historical costing using post-costing and continuous costing, as well as standard costing.
Cost accounting is used to track the various costs of production and services. It involves maintaining detailed records of materials, labor, and expenses for products. This allows businesses to understand per-unit costs, control costs, and provide reliable cost data for decision making. Cost accounting techniques include standard costing, marginal costing, single costing for uniform products, process costing for multi-step production, and departmental costing for multiple products. Key factors for an effective cost accounting system include timely cost information, cooperation across departments, efficient production processes, qualified accounting staff, and honest management.
This document provides an overview of cost estimation and costing. It defines estimation as calculating expected costs before production, while costing determines actual costs after production. The key stages of estimating procedure are discussed, including determining design, materials, labor, overhead costs, and profit. Objectives of estimating include establishing policies and prices. Factory overheads, administrative expenses, and selling expenses are also explained. Methods of costing and important elements of cost like materials, labor, and expenses are outlined.
This document discusses various costing methods and techniques. It defines key terms like cost, costing, and cost accounting. It identifies Luca Pacioli as the father of cost accounting. The main costing methods discussed are specific order costing methods like job costing, contract costing, and batch costing, as well as continuous operation costing methods like process costing, single/output costing, and operating/service costing. The document also outlines techniques like historical costing, standard costing, marginal costing, direct costing, absorption costing, and uniform costing.
The document discusses process costing, which is used to assign costs to standardized products produced continuously. It describes the five steps of process costing: 1) analyzing physical unit flow, 2) computing equivalent units, 3) computing equivalent unit costs, 4) summarizing total costs, and 5) assigning costs to completed units and work-in-process. The two main methods are weighted average and FIFO. Examples show journal entries to record costs and calculations to assign costs using equivalent units and cost per equivalent unit.
The document discusses different types of costing methods used for specific industries, including job costing, batch costing, and contract costing. Job costing tracks costs for individual jobs or orders. Batch costing calculates total costs for batches of identical products. Contract costing treats each contract as a separate cost unit, tracking all direct and indirect costs associated with completing the contract. Overhead costs are typically a small percentage of total costs for contract work. Materials, labor, direct expenses, plant usage, and overhead costs are all tracked and allocated to the appropriate job, batch, or contract under each respective costing method.
This document discusses different methods of costing including job costing, batch costing, contract costing, and process costing. It provides details on each method:
- Job costing involves producing products to meet specific customer orders. Batch costing is used when units are manufactured in batches for assembly. Contract costing is for large jobs that take over a year to complete.
- Process costing is used when production is continuous, with the output of one process becoming the input of the next. It describes normal loss, abnormal loss/gain, and how to record these in process accounts with or without opening/closing work in progress.
- The key differences between job/batch costing and process cost
This document discusses different methods of costing used in various industries. It describes job costing, contract costing, batch costing, process costing, unit costing, multiple costing, and operation costing. Job costing and process costing are identified as the two basic methods of costing, with other methods being combinations or extensions of these. Each method is suitable for different types of industries and production processes. The purpose of the different costing methods is to accurately ascertain the costs incurred for jobs, contracts, batches, units or operations.
The document provides information on preparing cost estimates for manufactured products. It discusses gathering cost information, identifying and calculating labor costs, establishing resource requirements, developing estimated costs, and verifying estimates. It describes direct and indirect costs, and outlines methods of costing like process, job, and batch costing. Key components of a cost estimate like materials, labor, expenses/overheads are defined. The document is intended to guide understanding of cost estimation processes.
The document discusses cost estimating and costing. It defines cost estimating as determining the probable cost of manufacturing a product before production starts. This involves estimating costs for materials, labor, overhead etc. Costing determines the actual costs incurred during production. It provides information for setting prices, cost control, make-or-buy decisions and more. The document outlines different types of costing systems used such as job costing, batch costing and process costing.
The document provides an overview of cost accounting concepts. It defines cost accounting as the process of identifying, measuring, accumulating, analyzing, preparing, interpreting, and communicating information to permit informed judgments and decisions by users of the information. It discusses the objectives, scope, importance and limitations of cost accounting. It also covers the classification of costs based on different criteria such as nature, variability, controllability, and managerial functions. The document provides examples and explanations of key cost accounting terms and concepts.
This document provides an introduction to cost accounting. It defines cost accounting as the process of identifying, measuring, accumulating, analyzing, preparing, interpreting, and communicating information to permit informed judgments and decisions by users of the information. It discusses the differences between cost accounting, financial accounting, and management accounting. Key aspects of cost accounting covered include objectives, scope, importance, limitations, and classifications of costs based on nature, variability, component, controllability, and managerial function. The document also provides examples to illustrate different types of costs.
Job order costing accumulates manufacturing costs by job for companies that produce customized products in small batches. It calculates unit costs by dividing total job costs by units produced. Process costing is used for mass production of homogeneous items and accumulates costs by department over time. Job order costing tracks material, labor, and overhead costs through accounts to job cost sheets and calculates variances between actual and applied overhead. It summarizes cost flows from raw materials to finished goods and cost of goods sold.
Preparing cost estimate for manufactured products.ppt by-aragaw gebremedhinAragaw Gebremedhin
Here are the solutions to the examples provided:
1) A) Prime cost (PC) = Direct material cost + Direct labour cost = $160 + $200 = $360
B) Factory cost (FC) = Prime cost + 35% of prime cost = $360 + 35% of $360 = $360 + $126 = $486
C) Total production cost (TC) = Factory cost + 20% of factory cost = $486 + 20% of $486 = $486 + $97.20 = $583.20
D) Selling price = Total cost + 10% of total cost = $583.20 + 10% of $583.20 = $583.20 + $58.32
India - targeted stimulus continues (Tranche 2)Rutuja Chudnaik
In the latest stimulus package announced by the Finance Minister, priority was given to migrant labourers, farmers, and small businesses. Measures included free food grains and portability of ration cards for migrants, interest subvention and credit boosts for farmers and small businesses, and affordable housing schemes. The total stimulus package amounted to INR 3.16 trillion, although the actual fiscal cost will be lower, estimated at INR 35 billion for food grains for migrants and INR 15 billion for interest subvention on small loans. The targeted support aims to provide relief to those most impacted by the pandemic.
Future forward - COVID 19 Government Stimulus (Tranche 1)Rutuja Chudnaik
details of the Rs 20 lakh crore economic stimulusKey Takeaways:Tranche has about 15 different measures -
six of them for MSMEs
two for Employee provident funds
two for NBFCs
two for MFIs
one to discoms
three tax related
Classified as Others -
one to real estate
one contractors
A bank guarantee is a commercial instrument in the nature of a contract, intended between two parties, to secure compliance with the contract. It is an off-shoot of the main contract between two parties. It is a guarantee made by a bank on behalf of a customer. There are three parties to guarantee, i.e., surety, principal debtor (bank’s customer) and creditor.
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Building A Winning Resume - RM Saravanan
Handling Criticism With Grace - Ms. Suruchi Yadav
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Mr. Ranjeet Mudholkar (Chairman & CEO FPSB– Financial Planning Standards Board of India)
Mr. Prasanth Nair - Global Head – HR – Cipla
Mr. Yogesh Naik, Director - Research & Innovation IGATE Patni
Newswire
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11 Daily Habits Of Exceptionally Successful People
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BREXIT
Brexit 1
What is Brexit? 1
What are the main arguments for Brexit? 1
What are the arguments against Brexit? 2
Why Britain voted to leave the EU 2
What could the prospect of Brexit mean for India? 2
Brexit And Indian Corporates In The Long Run 3
Brexit And Indian Corporates In The Short Run 4
Brexit and IT Corporates 4
Brexit and Pharmaceutical Industry 5
Brexit and Auto Component Manufacturers 5
Strategies to survive the BREXIT impact for Indian Corporates 5
Way Forward 8
AUDIT ASSIGNMENT- M.COM PART II – SEMESTER IV, AUDIT REPORT, CARO 2015, AUDIT REPORT OF JINDAL STEEL & POWER LIMITED, SA 230 AUDIT DOCUMENTATION (REVISED), SA 500: AUDIT EVIDENCE.
The document is a project report submitted by Rutuja Deepak Chudnaik for their M.Com degree. The report focuses on comparing the Payback Method and Internal Rate of Return (IRR) Method for capital budgeting and investment decisions. The report includes an introduction to capital budgeting, the objectives and basic principles. It also provides details on the calculation of payback period for projects with constant and uneven cash flows. The report is submitted to the University of Mumbai under the guidance of their project guide, Prof. Dhiren Kanabar.
This document provides instructions for handling accounts with incomplete records or single entry bookkeeping systems. It discusses two approaches - 1) converting the incomplete records into final accounts and 2) calculating profit. For the conversion approach, it outlines seven rules, including gathering all information, preparing necessary accounts like debtors/creditors, old and new balance sheets, trading and profit & loss accounts. It notes the use of gross profit ratios to calculate missing sales or cost values. The rules also cover handling missing cash/bank values and tallied accounts. It emphasizes using all given information and ratios to calculate missing values.
This document contains a schedule of subjects, dates, and chapters for various courses including Audit, Advanced Accounting, Costing, Financial Management, Direct Taxation, Law, Accounting, and Information Technology & Systems Management. For each date listed, there is an associated subject and chapter. The schedule spans from September 15 to November 15 and covers a range of accounting, finance, taxation, law and IT topics.
Research methodology mcom part II sem IV assignmentRutuja Chudnaik
This document appears to be a research project report on diabetes mellitus and its treatment trends submitted by a student, Rutuja Deepak Chudnaik, to the University of Mumbai. The report includes an acknowledgement section thanking those who assisted with the project, a declaration by the student, and a table of contents outlining the various sections of the report such as an introduction on diabetes, prevention, methodology, data collection and analysis procedures, findings on perceived blood glucose control, diet and medication, and conclusions. The student conducted the research under the guidance of a professor for a degree program in research methodology.
• Finance Minister Arun Jaitley presented the Union Budget for fiscal 2015-16 in the Lok Sabha.
Budget 2015
• A legendary budget catering to people belonging to all categories of society, with Insurance for poor at Rs. 12 premium as well as reduction of corporate tax.
The budget highlights the following key points:
1) Corporate tax rates will be reduced from 30% to 25% over the next 4 years. Service tax will increase from 12.36% to 14% and excise duty will increase slightly. Wealth tax will be abolished and a 2% surcharge will be added for high-income individuals.
2) Several deductions will be increased, including the health insurance deduction from Rs. 15,000 to Rs. 20,000 and the transport allowance exemption. Limits for health insurance premium deductions and senior citizen health expenses will also be raised.
3) Implementation of the Goods and Services Tax (GST) is targeted for April 2016.
PROVISIONS RELATING TO CO-OPERATIVE SOCIETIES IN MAHARASHTRARutuja Chudnaik
PROVISIONS RELATING TO CO-OPERATIVE SOCIETIES IN MAHARASHTRA, The Maharashtra Co-operative Societies Act, 1960 (MCS Act) and The Maharashtra Co-operative Societies Rules, 1961 are applicable to any co-operative society registered in Maharashtra and having no branches outside Maharashtra. If any state does not have its own State Act, the Co-operative Societies Act, 1912 and Rules become applicable. However, if a society has operations beyond one State, it is governed by a Central Act viz. the Multi-State Co-operative Societies Act, 2002 (MSCS) and its Rules.
The income earned by a co-operative society is subject to income tax under the Income-tax Act, 1961 and its Rules. It may be noted the income of a co-operative society is eligible for deduction u/s 80P of the Income-tax Act and not an exemption u/s 10. Hence, it is mandatory for all co-operative societies to file income tax return.
Co-operative societies are also governed by circulars, notifications and directives issued from time to time by the various departments of co-operation. A society is also bound by its bye-laws. It has also to follow various accounting and assurance standards issued by the Institute of Chartered Accountants of India.
As 22 final,AS 22 has become applicable to all listed companies with effect from 01/04/2001. The AS will also be applicable to all non-listed corporates with effect from 01/04/2002 and all other non-corporate entities with effect from 01/04/2003. Hence, now in financial statements two taxes will be accounted for (a) current income tax and (b) deferred income tax. AS 22 is a measurement standard meaning thereby that it involves accounting along with disclosure requirement in financial statements.
Trends and challenges of BOP of India,Balance Of Payments Position in India,Balance Of Payments – Introduction
Components Of A BOP Statement
Balance Of Payment in India
Bop Crisis In India
Developments In India’s Bop During April-June 2014
Measures of Correcting Balance of Payment
With help of two suitable example, Explain following concept under operating costing in case of a transporter (Hotel / Hospital)
Solution:-
1. Fixed Cost / Standing Cost, Variable Cost. Absolute tonne km, Commercial Tonne Km.Effective passenger km.
2. Decision making
3. Integral accounting system
4. Non - Integral Accounting System
Challenges and Perspective of Disaster ManagementRutuja Chudnaik
Challenges and Perspective of Disaster Management,Disaster- An Introduction,The cost and consequences of disasters, Development and natural disasters, Disaster Risk Reduction, Disaster Management Cycle, Disaster management in India, Natural Disaster – Droughts, Drought: causes and effects, Impact of drought: Indian scenario, Drought disaster challenges and mitigation in India, Drought assessment: tools and techniques, Drought management and challenges, Drought management framework in India, Conclusion.
The assessee claimed credit for TDS that was denied by the AO because the entries did not match Form 26AS. The CIT(A) said credit should be given to the extent shown in the department's system. The tribunal referred to court precedents that said credit must be given even without a TDS certificate, based on evidence. It directed the department to give credit based on original challans, system details, or evidence of TDS, even if the deductor did not issue a certificate. It also allowed the assessee's claim for interest on delayed payment of interest.
The Central Board of Direct Taxes (CBDT) issued a draft circular clarifying that no interest under section 234A of the Income Tax Act should be charged on self-assessment tax paid before the due date for filing a tax return. Previously, interest was charged on self-assessment tax even if paid before the due date. The CBDT reviewed this after the Supreme Court ruled that interest under section 234A should only apply to tax amounts unpaid before the due date. Therefore, the CBDT decided that no interest will be charged under section 234A on self-assessment tax paid before the due date for filing a return.
Strategies for Effective Upskilling is a presentation by Chinwendu Peace in a Your Skill Boost Masterclass organisation by the Excellence Foundation for South Sudan on 08th and 09th June 2024 from 1 PM to 3 PM on each day.
This presentation was provided by Steph Pollock of The American Psychological Association’s Journals Program, and Damita Snow, of The American Society of Civil Engineers (ASCE), for the initial session of NISO's 2024 Training Series "DEIA in the Scholarly Landscape." Session One: 'Setting Expectations: a DEIA Primer,' was held June 6, 2024.
How to Make a Field Mandatory in Odoo 17Celine George
In Odoo, making a field required can be done through both Python code and XML views. When you set the required attribute to True in Python code, it makes the field required across all views where it's used. Conversely, when you set the required attribute in XML views, it makes the field required only in the context of that particular view.
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This document provides an overview of wound healing, its functions, stages, mechanisms, factors affecting it, and complications.
A wound is a break in the integrity of the skin or tissues, which may be associated with disruption of the structure and function.
Healing is the body’s response to injury in an attempt to restore normal structure and functions.
Healing can occur in two ways: Regeneration and Repair
There are 4 phases of wound healing: hemostasis, inflammation, proliferation, and remodeling. This document also describes the mechanism of wound healing. Factors that affect healing include infection, uncontrolled diabetes, poor nutrition, age, anemia, the presence of foreign bodies, etc.
Complications of wound healing like infection, hyperpigmentation of scar, contractures, and keloid formation.
How to Setup Warehouse & Location in Odoo 17 InventoryCeline George
In this slide, we'll explore how to set up warehouses and locations in Odoo 17 Inventory. This will help us manage our stock effectively, track inventory levels, and streamline warehouse operations.
Beyond Degrees - Empowering the Workforce in the Context of Skills-First.pptxEduSkills OECD
Iván Bornacelly, Policy Analyst at the OECD Centre for Skills, OECD, presents at the webinar 'Tackling job market gaps with a skills-first approach' on 12 June 2024
Leveraging Generative AI to Drive Nonprofit InnovationTechSoup
In this webinar, participants learned how to utilize Generative AI to streamline operations and elevate member engagement. Amazon Web Service experts provided a customer specific use cases and dived into low/no-code tools that are quick and easy to deploy through Amazon Web Service (AWS.)
Chapter wise All Notes of First year Basic Civil Engineering.pptxDenish Jangid
Chapter wise All Notes of First year Basic Civil Engineering
Syllabus
Chapter-1
Introduction to objective, scope and outcome the subject
Chapter 2
Introduction: Scope and Specialization of Civil Engineering, Role of civil Engineer in Society, Impact of infrastructural development on economy of country.
Chapter 3
Surveying: Object Principles & Types of Surveying; Site Plans, Plans & Maps; Scales & Unit of different Measurements.
Linear Measurements: Instruments used. Linear Measurement by Tape, Ranging out Survey Lines and overcoming Obstructions; Measurements on sloping ground; Tape corrections, conventional symbols. Angular Measurements: Instruments used; Introduction to Compass Surveying, Bearings and Longitude & Latitude of a Line, Introduction to total station.
Levelling: Instrument used Object of levelling, Methods of levelling in brief, and Contour maps.
Chapter 4
Buildings: Selection of site for Buildings, Layout of Building Plan, Types of buildings, Plinth area, carpet area, floor space index, Introduction to building byelaws, concept of sun light & ventilation. Components of Buildings & their functions, Basic concept of R.C.C., Introduction to types of foundation
Chapter 5
Transportation: Introduction to Transportation Engineering; Traffic and Road Safety: Types and Characteristics of Various Modes of Transportation; Various Road Traffic Signs, Causes of Accidents and Road Safety Measures.
Chapter 6
Environmental Engineering: Environmental Pollution, Environmental Acts and Regulations, Functional Concepts of Ecology, Basics of Species, Biodiversity, Ecosystem, Hydrological Cycle; Chemical Cycles: Carbon, Nitrogen & Phosphorus; Energy Flow in Ecosystems.
Water Pollution: Water Quality standards, Introduction to Treatment & Disposal of Waste Water. Reuse and Saving of Water, Rain Water Harvesting. Solid Waste Management: Classification of Solid Waste, Collection, Transportation and Disposal of Solid. Recycling of Solid Waste: Energy Recovery, Sanitary Landfill, On-Site Sanitation. Air & Noise Pollution: Primary and Secondary air pollutants, Harmful effects of Air Pollution, Control of Air Pollution. . Noise Pollution Harmful Effects of noise pollution, control of noise pollution, Global warming & Climate Change, Ozone depletion, Greenhouse effect
Text Books:
1. Palancharmy, Basic Civil Engineering, McGraw Hill publishers.
2. Satheesh Gopi, Basic Civil Engineering, Pearson Publishers.
3. Ketki Rangwala Dalal, Essentials of Civil Engineering, Charotar Publishing House.
4. BCP, Surveying volume 1
Chapter wise All Notes of First year Basic Civil Engineering.pptx
Cost Accountancy Assignment
1. Advanced Cost Accountancy
INDEX
SR. No.
PARTICULARS
PAGE NO.
1.
Part - I
02
2.
Part - II
10
3.
Part – III (Group – C)
Question 1
Question 2
Question 3
Question 4
18
4.
Reference / Bibliography
39
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Part I
QUESTION PART - I “There is no universal method of costing which is applicable for all cost units. The methods differ as the cost units.” Through statement with the help of atleast four cost units and costing methods relevant to them. Solution:- We know that costing is the system of calculating the cost. In the system of costing, we use different methods of costing. Any method of costing can be used in any business according to the need. Following are the main methods of costing. 1. Job Costing
In job costing, we calculate and collect the expenses for each work. This work is done on the basis of order. So, this is the part of specific order costing. A job card is made for each work or job. This method of costing is used in the factories which produce the machine tool and other engineering products, furniture projects, hardware and interior decoration. This method of costing is also called a piece of work costing or terminal costing.
The objective under this method of costing is to ascertain the cost of each job order. A job card is prepared for each job to accumulate costs. The cost of the job is determined by adding all costs against the job it is incurred.
This method of costing is used in printing press, foundries and general engineering workshop, advertising etc.
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When continuous production is not carried out but production depends on specific order received from customer, then in such case technique of Job costing is adopted for cost & profit calculation. Each order represent separate Job and we have to prepare Job cost sheet. The technique of Job costing is applied for preparation of Tender or Quotation.
In Absence of Information following points should be considered for preparing Job cost sheet.
[1] First a fall prepare cost sheet of running business or transaction took place in previous period.
[2] Calculate per unit cost of direct material, Direct labour, Direct Expenses and Selling & Distribution Overheads. Any Increase or Decrease will be adjusted to such per unit cost. The Revise per unit cost will be multiplied by Quantity of the Job order and we will get respective cost per job cost sheet.
[3] Calculate % of Factory overheads to Direct labour, using Data of previous period transactions.
[4] Apply this % on Direct Labour of Job cost sheet & we will get Factory overheads for Job cost sheet.
[5] Normally in Job Cost Sheet there will be no opening and closing WIP & Finished Goods. Even sale of scrape will not be taken place.
[6] Calculate % of office overheads to Works Cost using data of previous period. Apply this % to works cost of job cost sheet, & we will get office overheads for job cost sheet.
[7] Calculate % of Profit to cost of sale using data of previous period. Apply this % to cost of sale of Job Cost sheet & we will get the profit for job cost sheet.
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Following are its features a) Cost of Each unit of production is calculated separately. b) A cost sheet is made for each job. 2. Batch Costing
Batch costing is just the extension of job costing. In batch costing, we do not calculate and collect the cost of each unit of production but we calculate the cost of each group or batch. Each group will be one unit of production under batch costing. For example, we are calculating the cost of 1000 bricks. It is one unit and under batch cost, we will calculate the material cost, labour cost and overhead cost of producing 1000 bricks. Except this example, we can take the example of ready-made garments batch, biscuit batch of 10 units in one packet etc.
Output costing is also called Unit Costing (or) Single Costing. This method of costing is applicable where a concern undertakes mass and continuous production of single unit or two or three types of similar products or different grades of the same products. Under this method cost per unit is measured by dividing the total cost by number of units produced. Process Costing is used in industries like Cement, Cigarettes, Pencils, Quarries etc.
Batch Costing is used in drug industries, ready-made garments industries, electronic components manufacturing, T V Sets, etc.
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We have to prepare cost sheet for particular Batch size. The Overall amount of fixed cost will not change according to Batch size but per unit fixed cost will be change according to Batch size. 3. Contract Costing
Under this method, costs are collected according to each contract work. Contract costing is also termed as Terminal Costing. The principles of job costing are applicable to contract costing and are used by such concerns of builders, public works contractors, constructional and mechanical engineering firms and ship builders etc. who undertake work on a contract basis.
Here, the cost of each contract is ascertained separately. It is suitable for firms engaged in the construction of bridges, roads, buildings, etc.
Features Of Contract Costing
Following are the distinctive features of contract costing:
1. A separate contract account is maintained for each contract
2. Each contract is considered as a cost unit.
3. A major portion of contract work is done at the contract site.
4. Expenses incurred at the contract site are considered to be direct expenses.
5. Establishment expenses like head office, central store department are treated as overhead expenses. These overheads are recovered either based on the material consumption ratio, labor cost ratio, labor hour ratio or the value of material or labor consumption ratio.
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6. Number of contract works with a contractor may not be very large. When the form of work will be big, at that time, we will use contract costing. We keep different contract account for each contract. Contract costing is used in building construction, machine construction contract. Actually like job costing, we will calculate the cost of material, cost of labour and cost of overhead of each contract. Suppose, we have to construct the 40 foot by 40 foot shopping mall. This one contract will be the cost unit. Our contract price is just like our sale value. After deducting our all expenses, we will calculate our profit from contract. If any contract goes more than one year, we will calculate the notion profit on the basis of completed work of contract. 4. Process Costing
Process costing is used where production process will active all the time. Every production in one process will be the raw material of other process. Because produced product will become at the end of process, we will not only calculate the cost of each process but we will calculate the unit cost. For every process, we will open process account. We will show all the expenses relating to process in it. We will use the process costing in oil industry, chemical industry, paper industry etc.
This kind of costing is used for the products which go through different processes. For example, manufacturing cloths goes through different process. Fist process is spinning. The output of spinning is yarn. It is a finished product which can be sold in the market to the weavers as well as use as a raw material for weaving in the same manufacturing unit. For the purpose of finding out the cost of yarn, the cost of spinning process is to be ascertained. The second step is the weaving process. The output of weaving process is cloth which also can be
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sold as a finished product in the market. In such case, the cost of cloth needs to be evaluated. The third process is converting cloth in to finished product such as shirt or trouser etc. Each process is to be evaluated separately as the output of each process can be treated as a finished good as well as consumed as a raw material for the next process. In such industries process costing is used to ascertaining the cost at each stage of production. 5. Unit Costing
Unit costing is also called single or output costing. This method of costing is used for products which can be expressed in identical quantitative units and is suitable for products which are manufactured by continuous manufacturing activity. Costs are ascertained for convenient units of output. In cement industry, we can see the example of unit costing. Every bag of cement is important. We will calculate its production cost when we have to decide its sale price. When we produce the many units, we calculate unit cost by dividing total cost with total units of product. 6. Operating Costing
When any company provides the service instead of production of goods, this method of costing is used. For example, transport carriers, electricity distributing company, municipal committee, hospitals and hotels.
Operating Costing method is normally used in service sector. When the service is not completely standardized, it is the cost of producing and monitoring a service. It is a method
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of costing applied to undertakings which provide service rather than production of commodities. Service may be performed internally and externally. Services are termed as internal when they have to be performed on inter-departmental basis in factory itself e.g.
Power house services, canteen service etc.
We have to Calculate Cost & Quantity for Period of Operation.
It is concerned with the determination of the cost of each operation rather than process. It offers scope for computation of unit operation cost at the end of each operation by dividing the total operation cost by total output of units.
This method of costing is suitable for concerns rendering services.
Cost Unit:
Determining the suitable cost unit to be used for cost ascertainment is a major problem in service costing. Selection of a proper cost unit is a difficult task. A proper unit of cost must be related with reference to nature of world and the cost objectives.
The cost unit related must be simple i.e. per bed in a hospital, per cup of tea sold in a canteen and per child in a school. In a certain cases a composite unit is used i.e. Passenger – Kilometer in a transport company.
The following are some of example of cost units used in different organizations
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Different Organizations
Cost Units
Enterprises
Cost per unit
Passenger transport
Kilometer
Goods
transport Ton – Kilometer
Hotel
Per room per day
Hospital
Per bed per day
Canteen
Per item, per meal
Water supply
Per 1000 liters
Electricity
Per kilowatt
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PART – II “Costing techniques plays significant role in decision making, cost control and cost reduction.” Through the statement with the help of following Costing techniques. a) Marginal Costing b) Standard Costing c) Budgetary Costing. Solution:- 1. Marginal Costing Marginal costing is not a system of costing. It is a technique used by the management to measure the profitability of the undertaking by considering the behaviour of costs. On the other hand, it is a technique that applies the existing methods in a particular way to bring out the relationship between profit and volume of output. It is the establishment of marginal cost to decide the relationship between profit and volume of output. Marginal cost is synonymous with variable costs, prime costs plus variable overheads in the short run but, in a way, would also include fixed cost in the planning production activities over a long period of time involving an increase in the productive capacity of business. Theoretically marginal cost and differential cost are the same. If there is no change in fixed cost then both these cost will be same. Thus marginal cost does not include fixed cost at all whereas differential cost may include an element of fixed cost as well if fixed cost changes due to a decision.
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1.1 Decision Making It is a simple technique in decision making. Since fixed overheads are not included in the cost of production there is no need for complicated and expensive method of finding out overheads recovery rate, its modifications from time to time and allocating overheads. Thus, this technique is free from complications and confusion. Management can easily understand the income statement prepared by allocating fixed expenses and variable expenses separately. Moreover, stock valuation becomes easier since it is valued at marginal cost which remains constant. The main utility of marginal costing lies in the fact that this technique helps the management in taking various important managerial decisions—particularly in dealing with problems that require-short-term decision. 1.2 Cost Control Marginal Costing is essentially a managerial tool for cost control, cost analysis and cost presentation. It presents the data in a manner which helps the various levels of management for controlling costs. It is also an important tool for cost reduction. Since this technique recognises only variable costs, which are always controllable, it becomes easier to fix the responsibility for these costs and to effect control over them. On the other hand, fixed costs can be controlled effectively because they are treated as a whole in the determination of profit. This technique contributes significantly to the area of price policy and price determination. If the organisation faces the problem of fixing optimum price, minimum price, dumping price or price under recession, correct and sound decision may be taken on the basis of information revealed by technique of marginal costing.
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1.3 Cost Reduction Marginal Costing helps the management in the area of Cost Reduction and Profit planning. Break-even Analysis and Margin of Safety are the tools for profit planning. It also facilitates the analysis of cost profit-volume relationship. The contribution ratio of marginal ratio which is the ratio of marginal contribution to sales indicates the relative profitability of the different sectors of business organisation whenever there is a change in variable cost, fixed costs, sale price or product mix. The technique of Marginal Costing serves as a tool of cost reduction and profitability appraisals. The different departments have revenue earning potentialities. The performance of each department or segment can be measured or evaluated by means of marginal cost analysis and thus the cost is controlled. 2. Standard Costing Standard costing is the technique of using standard costs for the purposes of cost control. It is a system of cost accounting which is designed to find out how much the cost of a product under defined conditions should be. Standard costing is a management control technique for every activity. The actual cost can be ascertained only when production is undertaken. The predetermined cost is compared to the actual cost and a variance between the two enables the management to take necessary corrective measures. It is not only useful for cost control purposes but is also helpful in production planning and policy formulation. It allows management by exception. It enables the management to evaluate performance of various cost centers by comparing actual costs with standard costs. The performance variances are determined by comparing actual costs with standard costs. Management is able to spot out the place of inefficiencies. It
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can fix responsibility for deviation in performance. It is possible to take corrective measures at the earliest. A regular check on various expenditures is also ensured by standard cost system. 2.1 Decision Making The most important benefit which may be derived from a standard costing system is the atmosphere of cost consciousness which is fostered among executives and foremen. Each individual is aware that the costs and output for which he is responsible are being measured, and that he will be called on to take whatever action is necessary should large variances occur. As we concluded earlier, if the philosophy of top management is positive and supportive, standard costing may act as an incentive to individuals to act in the best interest of the firm. Moreover, a standard costing system which allows subordinates to participate in setting the standards fosters a knowledge of costing down to shop floor level, and assists in decision making at all levels. Thus, if there should occur spoilt work necessitating a decision from the foreman in charge on whether to scrap or rectify the part involved, a knowledge of costs will enable him to make the best decision. 2.2 Cost Control Standard costing is a useful method of control in a number of ways. First, the process of evaluating performance by determining how efficiently current operations are being carried out may be facilitated by the process of management by exception. Very often the problem facing management is the time lost in sifting large masses of feedback information and in deciding what information is significant and relevant to the control problem. Management by exception overcomes this problem by
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highlighting only the important control information that is the variances between the standard set and the actual result. This process allows management to focus attention on important problems so that maximum energy may be devoted to correcting situations which are falling out of control. 2.3 Cost Reduction A standard costing system may lead to cost reductions. The installation of such a system demands a re-appraisal of current production methods as it necessitates the standardization of practices. This examination often leads to an improvement in the methods employed which is reflected in a reduction of the costs of the product. One example of cost reductions through increased efficiency may be seen in the simplication of the clerical procedures relating to inventory control. All similar items of inventory may be recorded in the accounts at a uniform price; this eliminates the need which arises under historical costing for re-calculating a new unit price whenever a purchase of inventory is made at a different price. 3. Budgetary Costing Budgetary control is very important in the management of an organisation because it helps in achieving organizational goals. Once the final budget is agreed to, it becomes a plan against which the actual cost, revenue and performance are periodically reviewed and compared with. Budgetary control is exercised by line management for control over cost through continuous appraisal of actual expenditures, using as a guide the planned costs as expressed in the budget. The principle is also applied to the various types of income and to items that affect the balance sheet, such as receivables inventories, cash, fixed assets, etc.
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Budgetary control is the preparation of targets or budgets for agreed areas of business. An area may be a functional management area e.g. sales, purchases or production it may be an agreed cost centre area, e.g. machinery assembly, planning which may consist of a machine, group of machines or a group of employees. 3.1 Decision Making Budgeting and budgetary control has been viewed as a tool to management decision. Budget fulfills both planning and control purpose. Though, during strategic and tactical planning, some limitations may be imposed which are capable of hindering the planning process. These are known as limiting factors which are market demand for the products, the number of skilled employees available, the availability of materials supplies; and the amount of each credit facilities available to finance the business. Some of these limitations may be due to natural causes which will eventually be modified and most of them can be overcome or avoided by planning decisions. The result in the decision making is derived at by going through the correct channels budgeting process and stages to reach a decision. 3.2 Cost Control
Budgetary control, as such, controls nothing. Management has a control “yardstick” and when the actual results are compared with the budget figure management should be prompted into action. The information can assist in controlling operations and improving decision making budgetary control of it will control nothing. It is the importance of budgetary control that with this, we can use the forecasting techniques. Three departments work hard for calculating best estimation of future. Accounting department provides old data. Statistical department provides the tools
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and techniques of forecasting like probability, time series other sampling methods. Management department uses both department services to estimate the expenditures and revenue of business under the normal conditions of business. So, no departments say anything wrong in making of budget. So, it is necessary for business to use budgetary control techniques. 3.3 Cost Reduction:
As time passes, the actual performance of an operation can be compared against the planned targets. This provides prompt feedback to employees about their performance. If necessary, employees can use such feedback to adjust their activities in the future and reduce the cost respectively.
Feedback received in the form of budget report from the responsibility centre. This report is helpful to know the performance of the concerned unit and reducing cost to achieve desired results.
Any unexpected changes into the conditions which were prevailing at the time of preparing budget are taken into account and budgets are revised to show true performance yardstick.
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PART – III - A Question No. 01 DISCUSS THE NATURE AND APPLICATION OF PROCESS COSTING
Solution : - Meaning of Process Costing
Process Costing is a method of costing used in industries where the material has to pass through two or more processes for being converted into a final product. It is defined as “a method of Cost Accounting whereby costs are charged to processes or operations and averaged over units produced”. A separate account for each process is opened and all expenditure pertaining to a process is charged to that process account. Such type of costing method is useful in the manufacturing of products like steel, paper, medicines soap, chemicals, rubber, vegetable oil, paints, varnish etc. where the production process is continuous and the output of one process becomes the input of the following process till completion.
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The processes in this industry are-
Cane Shredding
The cane is broken/cut into small pieces to enable easier movement through the milling machine.
Milling
The shredded cane is passed through rollers which crush them to extract cane juice. [Similarly, to the cane juice extracted by the vendors who sell you sugar cane juice.]
Heating and Adding lime
The extracted juice is then heated to make it a concentrate and lime is added to the heated juice.
Clarification
Muddy substance is removed from the concentrate through this process.
Evaporation
Water is removed from the juice by evaporation.
Crystallization and Separation
Sugar crystals are grown from the dry juice concentrate in this process.
Spinning
Molasses are separated from sugar using Centrifugals in this process.
Drying
Sugar is obtained by drying the wet raw sugar obtained in the spinning process.
Following general principles are followed for cost determination under Process
Costing—
(a) The production activities of the factory are classified by processes or departments.
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Each process or department includes a number of operations, none of which is separately measurable and each of which completes a distinct stage in the manufacture of the product. The boundaries of the process are determined by
(i) Jurisdiction or supervision,
(ii) Similarity of work performed, and
(iii) Physical location of men and machines in the plant.
(b) All direct and indirect cost of a particular period is classified by processes.
Each process account is debited with the amount of direct material, and labour and with a proportionate part of overhead expenses.
(c) Production in terms of physical quantities is recorded in respective process accounts.
(d) The total cost of each process is divided by the total production of the process and average cost per unit for the period is obtained.
(e) When products are processed in more than one department, costs of one department are transferred to the next department as initial costs. The total cost and cost per unit is thus determined by cumulating costs of different departments.
(f) In case of loss or spoilage of units in a department, the loss is borne by the units produced in that department. Thus the average cost per unit is increased.
Basic features / Applications:
Industries, where process costing can be applied, have normally one or more of the following features:
1. Each plant or factory is divided into a number of processes, cost centres or departments, and each such division is a stage of production or a process.
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2. Manufacturing activity is carried on continuously by means of one or more process run sequentially, selectively or simultaneously.
3. The output of one process becomes the input of another process.
4. The end product usually is of like units not distinguishable from one another.
5. It is not possible to trace the identity of any particular lot of output to any lot of input materials. For example, in the sugar industry, it is impossible to trace any lot of sugar bags to a particular lot of sugarcane fed or vice versa.
6. Production of a product may give rise to Joint and/or By-Products.
2. Costing Procedure:
The Cost of each process comprises the cost of :
(i) Materials
(ii) Labour
(iii) Direct expenses, and
(iv) Overheads of production.
Materials –
Materials and supplies which are required for each process are drawn against material requisitions from stores. Each process for which the above drawn materials will be used should be debited with the cost of materials consumed on the basis of the information received from the Cost Accounting department. The finished product of first process general y become the raw materials of second process; under such a situation the account of second process, be debited with the cost of transfer from the
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first process and the cost of any additional material required under this second process.
Labour –
Each process account should be debited with the labour cost or wages paid to labour for carrying out the processing activities. Sometimes the wages paid are apportioned over the different processes after selecting appropriate basis.
Direct expenses –
Each process account should be debited with direct expenses like depreciation, repairs, maintenance, insurance etc. associated with it.
Overheads of production –
Expenses like rent, power expenses, lighting bills, gas and water bills etc. are known as production overheads. These expenses cannot be allocated to a process. The suitable way-out to recover them is to apportion them over different processes by using suitable basis. Usually, these expenses are estimated in advance and the processes debited with these expenses on a pre-determined basis.
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Question No. 02
DISCUSS THE CONCEPT OF NORMAL PROCESS LOSS, ABNORMAL PROCESS LOSS AND ABNORMAL GAIN IN THE PROCESS OF ASCERTAINING COST OF FINISHED PRODUCT.
Solution: -
Treatment of Normal Process Loss, Abnormal Process Loss and Abnormal Gain
Loss of material is inherent during processing operation. The loss of material under different processes arises due to reasons like evaporation or a change in the moisture content etc.
Process loss is defined as the loss of material arising during the course of a processing operation and is equal to the difference between the input quantity of the material and its output.
There are two types of material losses viz. (i) Normal loss and (ii) Abnormal loss.
(i) Normal Process Loss:
It is defined as the loss of material which is inherent in the nature of work. Such a loss can be reasonably anticipated from the nature of the material, nature of operation, the experience and technical data. It is unavoidable because of nature of the material or the process. It also includes units withdrawn from the process for test or sampling.
This means the usual percentage of wastage arising in a particular process or operation.
The loss due to normal wastage should be charged to the effectives, i.e. the good units arising out of the process. Thus, cost of spoiled and lost units is absorbed as an
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additional cost of good units produced by the process. In this connection the following points must not be lost sight of:
(a) In some cases the defective or scrapped units possess some value. This amount should be credited to the process concerned.
(b) In case the scrap is of very small value, it will be inexpedient to credit each process with the amount which the scrap can realise. It will be better to credit the total proceeds of the scrap in such a case to Works Overheads Account. In any case loss in weight or volume must be shown in the Process Account.
(c) In some processes a proportion of the output must be re-worked either in the same process or an earlier one. The value of such output is not more than the value of crude materials to which it corresponds. The relevant process should be credited with the value of such crude material and should be charged to the process to which such material is relegated.
Treatment in Cost Accounts:
The cost of normal process loss in practice is absorbed by good units produced under the process. The amount realized by the sale of normal process loss units should be credited to the process account.
(ii) Abnormal Process Loss:
It is defined as the loss in excess of the pre-determined loss (Normal process loss). This type of loss may occur due to the carelessness of workers, a bad plant design or operation, sabotage etc. Such a loss cannot obviously be estimated in advance. But it can be kept under control by taking suitable measures.
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It consists of loss in excess of the normal process loss. This loss is due to carelessness, bad plant design or operation, sabotage etc. The management must keep a close watch on this loss to find out the exact point in the production process at which the units are lost and take steps to check it at the earliest.
Abnormal wastage should not be allowed to affect the cost of good units otherwise cost of production per unit will unnecessary fluctuate and costing itself will give misleading results. At the same time it is necessary to show the amount of abnormal loss in cost accounts. It will be easy for students to follow the following procedure:
(a) Find out the quantum of Normal Loss. This is to be shown as discussed before.
(b) Find out the cost of production per unit of the relevant process (after considering normal loss) assuming that there is no abnormal loss.
(c) Multiply the lost abnormal units with the cost per unit [computed as per (b)]. This will give you the total value of abnormal wastage.
(d) Debit ‘Abnormal Wastage Account’ and credit the relevant Process Account with the amount and quantity of abnormal wastage.
(e) The balance now in the Process Account is the cost of good units produced by the process.
(f) Credit the Abnormal Wastage Account with any saleable value of abnormal loss units.
(g) “Abnormal Wastage Account” will be closed by transferring it to the Costing Profit and Loss Account.
Treatment in Cost Accounts:
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The cost of an abnormal process loss unit is equal to the cost of a good unit. The total cost of abnormal process loss is credited to the process account from which it arises. Cost of abnormal process loss is not treated as a part of the cost of the product. In fact, the total cost of abnormal process loss is debited to costing profit and loss account.
(iii) Abnormal Process Gains:
Sometimes, loss under a process is less than the anticipated normal figure. In other words, the actual production exceeds the expected figures. Under such a situation the difference between actual and expected loss and actual and expected production is known as abnormal gain. So abnormal gain may be defined as unexpected gain in production under normal conditions.
The Abnormal Gain is also known as Abnormal Effectiveness. In case the actual production of a process is more than the expected production, the excess is known as abnormal effectiveness. The presence of abnormal effectiveness should not affect the cost of good units in the normal circumstances. They, therefore, shall be valued at the rate at which the good units would have been valued had there been wastage at the normal rate. The amount shall be debited to the relevant Process Account and credited to “Abnormal Effectives Account” which will be closed by transferring to the Costing Profit and Loss Account.
Treatment in Cost Accounts:
The process account under which abnormal gain arises is debited with the abnormal gain and credited to Abnormal gain account which will be closed by transferring to
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the Costing Profit and loss account. The cost of abnormal gain is computed on the basis of normal production.
HOW TO VALUE ABNORMAL GAIN OR ABNORMAL LOSS OR TRANSFER TO OTHER PROCESS.
Rate per unit =
Total Input cost-Scrap value of normal loss & By product
Total units introduced-Normal loss units.& by-product units
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Question No. 03
DISCUSS THE CONCEPT OF EQUIVALENT PRODUCTION AND ITS APPLICATION IN PROCESS COSTING UNDER FIFO METHOD AND WEIGHTED AVERAGE METHOD.
Solution: -
COSTING OF EQUIVALENT PRODUCTION UNITS
Manufacturing products is a continuous process. At the end of the accounting period generally in all manufacturing firms there is some work-in-progress. The cost of such work is determined by calculating Equivalent or Effective Production.
Accounting Procedure:
The following procedure is followed when there is Work-in- Progress
(1) Find out equivalent production after taking into account of the process losses, degree of completion of opening and / or closing stock.
(2) Find out net process cost according to elements of costs i.e. material, labour and overheads.
(3) Ascertain cost per unit of equivalent production of each element of cost separately by dividing each element of costs by respective equivalent production units.
(4) Evaluate the cost of output finished and transferred work in Progress.
The total cost per unit of equivalent units will be equal to the total cost divided by effective units and cost of work-in progress will be equal to the equivalent units of work-in progress multiply by the cost per unit of effective production.
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In short the following from steps an involved.
Step 1 – prepare statement of Equivalent production
Step 2 – Prepare statement of cost per Equivalent unit
Step 3 – Prepare of Evaluation
Step 4 – Prepare process account
Equivalent or Effective Production
Equivalent or effective production implies production of a process in a terms of completed units. For example, if 60 units are incomplete in process A, and they have been estimated at 75% complete, the stock at the end of the accounting period be taken as equivalent to 45% complete units. A correct estimates regarding the degree of completion is very necessary because erroneous valuation of these units will affect the valuation of stock in final accounts.
In the case of process type of industries, it is possible to determine the average cost per unit by dividing the total cost incurred during a given period of time by the total number of units produced during the same period. But this is hardly the case in most of the process type industries where manufacturing is a continuous activity. The reason is that the cost incurred in such industries represents the cost of work carried on opening work-in-progress, closing working-progress and completed units. Thus to ascertain the cost of each completed unit it is
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necessary to ascertain the cost of work-in-progress in the beginning and at the end of the process.
FORMAT FOR CALCULATING EQUIVALENT PRODUCTION
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The valuation of work-in-progress presents a good deal of difficulty because it has units under different stages of completion from those in which work has just begun to those which are only a step short of completion. Work-in-progress can be valued on actual basis, i.e., materials used on the unfinished units and the actual amount of labour expenses involved. However, the degree of accuracy in such a case cannot be satisfactory. An alternative method is based on converting partly finished units into equivalent finished units.
Equivalent production means converting the incomplete production units into their equivalent completed units. Under each process, an estimate is made of the percentage completion of work-in-progress with regard to different elements of costs, viz., material, labour and overheads. It is important that the estimate of percentage of completion should be as accurate as possible. The formula for computing equivalent completed units is:
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Equivalent completed units =
{Actual number of units in the process of manufacture} × {Percentage of work completed}
For instance, if 25% of work has been done on the average of units still under process, then 200 such units will be equal to 50 completed units and the cost of work-in-progress will be equal to the cost of 50 finished units.
Manufacturing products is a continuous process. At the end of the accounting period generally in all manufacturing firms there is some work-in-progress. The cost of such work is determined by calculating Equivalent or Effective Production.
EQUIVALENT UNITS OF PRODUCTION – WEIGHTED AVERAGE METHOD:
At the end of most accounting periods, there is a balance in work-in-process inventory. This means incomplete units are still in process and must be assigned costs to in proportion to how complete they are with respect to each of direct materials, direct labor and manufacturing overhead.
To simplify the calculations, partially completed units are converted into equivalent whole units for each type of cost. Units completed and transferred out are always 100% complete for all types of costs.
Cost of Finished Goods
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EQUIVALENT UNITS OF PRODUCTION - FIFO METHOD In the weighted average method opening inventory values are added to current costs to provide an overall average cost per unit. With FIFO, opening WIP units are distinguished from those units added in the period. Unlike the weighted-average method, the FIFO method does not combine beginning inventory costs with current costs when computing equivalent unit costs. The FIFO method considers the beginning inventory as a batch of goods separate from the goods started and completed within the same period. The costs from each period are treated separately. We follow the same five steps as in the weighted-average method, however, in determining product costs. With FIFO it is assumed that the opening WIP units are completed first. This means that the process costs in the period must be allocated between:
TOTAL COSTS
Cost of opening WIP brought forward
Cost of Closing WIP carried forward
Period Costs
Cost of Finished Goods
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opening WIP units units started and completed in the period (fully-worked units) Closing WIP units. This also means that if opening WIP units are 75% complete with respect to materials and 40% complete with respect to labour, only 25% 'more work' will need to be carried out with respect to materials and 60% with respect to labour.
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COMPARISON OF WEIGHTED-AVERAGE AND FIFO METHODS
The key difference between the weighted-average and FIFO methods is the handling of partially completed beginning work-in-process inventory units.
The FIFO method separates the units in the beginning inventory from the units started and completed during the period. In contrast, the weighted-average method makes no separate treatment of the units in the beginning work-in-process inventory.
The FIFO method separates costs of the beginning work-in-process inventory from the current period costs, and it uses only the current period costs and work effort to calculate equivalent unit costs. As a result, the FIFO method separately calculates costs for units in the beginning inventory and units that were started during the period.
Current period costs
Cost of Finished Opening WIP
Cost of Finished Output
Cost of units started and finished
Cost of units started but not finished
Cost of Closing WIP carried forward
Costs of Opening WIP brought forward
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In contrast, the weighted-average method uses the calculated average unit cost for all units completed during the period, including both the beginning work-in-process inventory and the units started and completed during the period.
The weighted-average method generally is easier to use because the calculations are simpler.
This method is most appropriate when work-in-process is relatively small, or direct materials prices, conversion costs, and inventory levels are stable. The FIFO method is most appropriate when direct materials prices, conversion costs, or inventory levels fluctuate. Some firms prefer the FIFO method over the weighted-average method for purposes of cost control and performance evaluation because the cost per equivalent unit under FIFO represents the cost for the current period’s efforts only. Firms often evaluate department managers’ performance on only current period costs without mixing in the effects of performance during different periods.
Under the weighted-average method, the costs of the prior period and the current period are mixed, and deviations in performance in the current period could be concealed by inter period variations in unit costs.
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Question No. 04
DISCUSS THE CONCEPT OF INTER PROCESS PROFIT AND ITS APPLICATION IN PROCESS COSTING.
Solution: -
MEANING OF INTER-PROCESS PROFIT
The profit associated with the transfer of goods from one process to another process is called inter-process profit. Normally, finished goods are transferred to the immediate next process at the cost of production basis. In some process industries, finished goods are transfer to the immediate next process by including a nominal amount of profit. The profit so incorporated is called inter-process profit. The price fixed by adding the nominal amount of profit for the transfer of finished goods to the next process is known as transfer price. Adding profit on the goods transferred is termed as mark-up price. Transfer Price = Cost of output+ Profit Sometimes it is considered desirably by a manufacturing concern to value goods processed by each process at a price corresponding to the market price of comparable goods. Thus, profit or loss made by each process is revealed and the efficiency of one process is not affected by the efficiency or inefficiency of a previous process. The market price of the goods processed being generally higher than the cost to the process, each process account will show some profit. This profit is termed as inter-process profit.
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The system of accounting for inter-process profits has the following advantages:
1. It is very helpful for those businesses where there is a possibility of getting certain process performed outside the factory. If the market price of similar processed goods is less than the cost of manufacturing the goods in the factory, it will be beneficial for the business to buy partly processed materials rather than carrying the processing work internally.
2. The efficiency and economy of each process can be judged independently as the economies effected one process due to its efficiency are not transferred to the next process.
Objectives Of Inter-Process Profit The output of a particular process is transfer to the next process by adding a nominal amount of profit for the following objectives: * To assess the performance of the process operation. * To examine whether the output can compete with the MARKET or not. * To decide whether the output should be sold without further processing or putting for further processing
ADJUSTMENTS FOR INTER-PROCESS PROFITS
It is a sound financial principle that stock for balance sheet purposes should be valued at cost or market price whichever less is. Cost here means ‘Cost’ to the business as a whole. Thus, it is necessary to eliminate the inter-process profits included in the value of inventory in each
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process and the stock of finished goods at the end of the accounting period. A business cannot earn profit by trading with itself and, therefore, suitable adjustments are made in the value of closing inventory of each process and stock of finished goods by creating a Stock Reserve for an appropriate amount. Besides that value of stock of inventories fluctuates from year to year and, therefore, the Stock Reserve will have to be increased or decreased according to the circumstances. This profit on closing stock can be calculated with following formula :
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REFERENCE/ BIBILOGRAPHY
http://dosen.narotama.ac.id/
http://info.smithersrapra.com/
http://www.cimaglobal.com/
http://www.fao.org/
http://www.accountingtools.com/
http://www.svtuition.org/
http://accountlearning.blogspot.in/
http://iamsam.hubpages.com/
www.icai.org
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