2. CONTENTS
MEANING OF COST AND COST ACCOUNTING
TERMINOLOGY OF COST
OBJECTIVES OF COST ACCOUNTING
ELEMENTS OF COST
DIVISIONS OF COST
METHODS OF COSTING
3. MEANING OF COST
Cost means the amount of expenditure incurred on a
given thing.
Example: The cost of making a chair includes, the
amount spent on materials like timber, nail, wages
paid to carpenter and etc.,
4. Meaning of cost accounting
Cost accounting is the process of classifying, recording,
allocating and reporting the various costs incurred in
the operation of an enterprise.
5. Objectives of cost accounting
• Ascertainment total cost and cost per unit
• Discloser of proportion of different l elements of cost
• Providing necessary data for fixing selling price
• Ascertainment of profitability
• Aiding in the preparation of tender and quotation
• Identification of sources of wastages and losses
• Facilitate formulation of incentive and bonus plan
• Cost control and cost reduction
6. Terminology of cost
Costing
• It means the technique and process of ascertaining cost.
• Technique- refers to the body of principles and rules.
• Process – refers to the procedure.
• The process and technique of costing depend on the nature of
industry and type of product and the method of production
7. Terminology of cost
Cost unit
It refers to a unit of product, service or time in
relation to which costs may be ascertained or
expressed.
Example:
8. Terminology of cost
Cost center
It is a location, person or item of equipment or group of this in relation to which
cost can be ascertained. It is a sub-division of the organization to which costs can
be charged.
Example:
Location – works department, welding shop etc.,
Person – supervisor, salesman
Item of equipment – delivery van and other equipment
10. Divisions of cost
Prime cost = Direct material + Direct labour + Direct
expenses
Factory cost = Prime cost + Factory overhead
Cost of Production = Factory cost + Administrative overheads
Cost of sales = Cost of production + Selling and Distribution
overheads
11. METHODS OF COSTING
• Job Costing
• Contract Costing
• Batch Costing
• Process Costing
• Unit Costing
• Operation Costing
• Activity Based Costing
