Presentation on topics:-
1. Measurement of Cost Behaviour
2. Cost Drivers and Cost Behaviour
3. Management Influence on Cost Behaviour
4. Cost Functions
5. Methods of Measuring Cost Functions
6. Cost Management System
ABC System (Concept and Principles)
7. Various Basis of Overhead Distribution
8. Different Cost for Different Decisions
The accuracy and Living in a house you own is still a dream for many people, and if you are finally ready to turn this dream into reality, you will want to do it right. Buying a plot is only the tip of the iceberg.
If truth be told, constructing a home is not as easy as it sounds. Moreover, with the increasing land rates, material prices, and labour charges, keeping the house construction costs under control is one of the most challenging aspects. However, with due diligence and planning in place, individual home builders (IHBs) can make significant savings on overall construction costs. In this blog, explore six different, yet connected, ways to reduce construction costs for you.
Smart Ways to Reduce Construction Costs for Home Builders
Choose the Right Plot
First things first, when it comes to building a house, the plot level plays a vital role. Try to select a land that is not only even, but also at the road level. If the plot is uneven, rocky or much lower than the road level on the front, it might increase the overall construction costs as you will require extra material or equipment for filling and levelling the land.Living in a house you own is still a dream for many people, and if you are finally ready to turn this dream into reality, you will want to do it right. Buying a plot is only the tip of the iceberg.
If truth be told, constructing a home is not as easy as it sounds. Moreover, with the increasing land rates, material prices, and labour charges, keeping the house construction costs under control is one of the most challenging aspects. However, with due diligence and planning in place, individual home builders (IHBs) can make significant savings on overall construction costs. In this blog, explore six different, yet connected, ways to reduce construction costs for you.
Smart Ways to Reduce Construction Costs for Home Builders
Choose the Right Plot
First things first, when it comes to building a house, the plot level plays a vital role. Try to select a land that is not only even, but also at the road level. If the plot is uneven, rocky or much lower than the road level on the front, it might increase the overall construction costs as you will require extra material or equipment for filling and levelling the land.Living in a house you own is still a dream for many people, and if you are finally ready to turn this dream into reality, you will want to do it right. Buying a plot is only the tip of the iceberg.
If truth be told, constructing a home is not as easy as it sounds. Moreover, with the increasing land rates, material prices, and labour charges, keeping the house construction costs under control is one of the most challenging aspects. However, with due diligence and planning in place, individual home builders (IHBs) can make significant savings on overall construction costs. In this blog, explore six different, yet connected, ways to reduce construction costs for you.
Smart Ways to Reduce Construction Costs for Ho
This document discusses key concepts in cost accounting, including the meaning and objectives of cost accounting, the relationship between cost accounting and other types of accounting, elements of cost like direct and indirect costs, and cost classification. It defines important cost accounting terms and concepts, explains the general principles and advantages/limitations of cost accounting, and describes how a cost sheet is used to analyze costs.
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.
This document provides an introduction to finance and cost accounting. It discusses key concepts in finance such as studying monetary assets and managing project risks. It then defines cost accounting and explains how it is used to examine finances and improve profitability. The document outlines various cost accounting techniques like cost ascertainment and cost control that are used to calculate, analyze, and reduce costs. It also discusses the advantages of cost accounting in providing cost data for pricing, controlling materials, and evaluating profitable activities.
Based on the literatures answer the following questionNo to e.docxikirkton
Based on the literatures answer the following question:
No to exceed 600 words in total
What tool do you need to control cost in your profit center?
What is the difference between cash and revenue?
This article explains the essential concepts of cost accounting. The overview provides an introduction to the basic cost accounting objectives and techniques, the roles of the controller and cost accountant within the corporate management structure and the ethical considerations that guide cost accountants. This article also explains the basic cost accumulation methods that are used in cost accounting systems. These methods include job order costing, process costing, backflush costing, hybrid costing and joint and by-product costing. Further, explanations of the most common costs that companies must plan for and control are included, such as direct labor, direct material and factory overhead costs. Finally, this overview describes how cost accounting techniques affect business considerations in areas such as budgeting, pricing and inventory costing methods, which include throughput, direct, absorption and activity-based costing systems.
Keywords Activity-Based Costing; Activity-based Management (ABM); Actual Cost System; Backflush Costing; Balance Sheet; By-product; Controller; Cost Accounting; Cost Accumulation; Cost Driver; Direct Labor; Direct Materials; Factory Cost; Factory Overhead; Fixed Cost; Indirect Cost; Job Order Costing; Joint Cost; Labor Productivity; Process Costing; Sunk Cost; Variable Cost
Accounting > Cost Accounting
Overview
Cost accounting is the application of accounting and costing principles to the tracking, recording and analysis of the costs associated with the products or services a business produces and the activities involved in the production process. Broadly speaking, cost accounting objectives include the preparation of statistical data, application of cost accumulation and cost control methods to production processes and analysis of an organization's profitability as compared with previous periods of time and projected budgets. Cost accountants use basic accounting techniques to compile and analyze data to meet these objectives. In performing these tasks, cost accountants work within the controller's office or the accounting department of most companies. And in addition to any internal company policies that govern their duties, cost accountants must consider the ethical principles that guide the accounting and financial reporting industries. The following sections provide a more in-depth explanation of these concepts.
Introduction to Cost Accounting
Cost accounting identifies, defines, measures, reports and analyzes the various elements of direct and indirect costs associated with producing and marketing goods and services. Cost accounting also measures performance, product quality and productivity. Direct costs can be directly traced to producing specific goods or services, such as the cost of raw mater ...
COST ACCOUNTING Cost accounting is a process of collecting, recording, classifying, analyzing, summarizing, allocating and evaluating various alternative courses of action & control of costs.
Its goal is to advise the management on the most appropriate course of action based on the cost efficiency and capability.
Cost accounting provides the detailed cost information that management needs to control current operations and plan for the future.
Definitions Cost accounting is the process of determining and accumulating the cost of product or activity.
It is defined as, 'the establishment of budgets, standard costs and actual costs of operations, processes, activities or products and the analysis of variances, profitability or the social use of funds.
Objectives of Cost AccountingTo control cost by using various techniques such as budgetary control, standard costing, and inventory control
To provide information for decision making and planning to formulate operative procedures
To help in directing and controlling operations
To ascertain costing profit
motivate to achieve the organization's goals
Scope of Cost Accounting Cost book-keeping
It involves maintaining complete record of all costs incurred from their incurrence to their charge to departments, products and services. Such recording is preferably done on the basis of double entry system.
Cost System
Proper accounting for costs requires systems and procedures.
Cost Ascertainment
Cost ascertainment forms the basis of managerial decision making for planning and control.
Cost Analysis
It involves the process of finding out the causal factors of actual costs varying from the budgeted costs and fixation of responsibility for cost increases.
Cost Comparisons
Cost accounting also includes comparisons between cost from alternative courses of action over a period of time.
Cost Control
Cost accounting is the utilization of cost information for exercising control. It involves a detailed examination of each cost in the light of benefit derived from the incurrence of the cost.
Cost Reports
The ultimate function of cost accounting is the presentation of reports. These reports are primarily for use by the management at different levels. Cost reports form the basis for planning and control, performance appraisal and managerial decision making.
Importance of Cost Accounting1. To Management
• Helps in ascertainment of cost of process, product, activity, by using different techniques such as job costing and process costing..
• Aids in price fixation by using demand and supply, activities of competitors, market condition to a great extent, also determine the price of product and cost to the producer does play an important role. The producer can take necessary help from costing records.
Helps in cost reduction by applying cost reduction pro gramme and improved methods are tried to reduce costs.
Elimination of wastage by checking the forms of waste, such as time and expenses et
This document provides information on cost accounting, cost-effectiveness analysis, and auditing in nursing. It defines cost accounting as collecting, recording, and analyzing costs to help management with decision making. Cost-effectiveness analysis compares the costs and outcomes of different programs or interventions. The key steps in a cost-effectiveness analysis are identifying alternatives, determining costs and outcomes, and comparing cost-outcome ratios. Auditing ensures adequate cost accounting information for nurses to perform administrative and managerial roles effectively.
Different techniques of costing in strategic management accounting discussed.
Marginal costing,budgetary control, standard costing,Activity based costing,responsibility costing.
The accuracy and Living in a house you own is still a dream for many people, and if you are finally ready to turn this dream into reality, you will want to do it right. Buying a plot is only the tip of the iceberg.
If truth be told, constructing a home is not as easy as it sounds. Moreover, with the increasing land rates, material prices, and labour charges, keeping the house construction costs under control is one of the most challenging aspects. However, with due diligence and planning in place, individual home builders (IHBs) can make significant savings on overall construction costs. In this blog, explore six different, yet connected, ways to reduce construction costs for you.
Smart Ways to Reduce Construction Costs for Home Builders
Choose the Right Plot
First things first, when it comes to building a house, the plot level plays a vital role. Try to select a land that is not only even, but also at the road level. If the plot is uneven, rocky or much lower than the road level on the front, it might increase the overall construction costs as you will require extra material or equipment for filling and levelling the land.Living in a house you own is still a dream for many people, and if you are finally ready to turn this dream into reality, you will want to do it right. Buying a plot is only the tip of the iceberg.
If truth be told, constructing a home is not as easy as it sounds. Moreover, with the increasing land rates, material prices, and labour charges, keeping the house construction costs under control is one of the most challenging aspects. However, with due diligence and planning in place, individual home builders (IHBs) can make significant savings on overall construction costs. In this blog, explore six different, yet connected, ways to reduce construction costs for you.
Smart Ways to Reduce Construction Costs for Home Builders
Choose the Right Plot
First things first, when it comes to building a house, the plot level plays a vital role. Try to select a land that is not only even, but also at the road level. If the plot is uneven, rocky or much lower than the road level on the front, it might increase the overall construction costs as you will require extra material or equipment for filling and levelling the land.Living in a house you own is still a dream for many people, and if you are finally ready to turn this dream into reality, you will want to do it right. Buying a plot is only the tip of the iceberg.
If truth be told, constructing a home is not as easy as it sounds. Moreover, with the increasing land rates, material prices, and labour charges, keeping the house construction costs under control is one of the most challenging aspects. However, with due diligence and planning in place, individual home builders (IHBs) can make significant savings on overall construction costs. In this blog, explore six different, yet connected, ways to reduce construction costs for you.
Smart Ways to Reduce Construction Costs for Ho
This document discusses key concepts in cost accounting, including the meaning and objectives of cost accounting, the relationship between cost accounting and other types of accounting, elements of cost like direct and indirect costs, and cost classification. It defines important cost accounting terms and concepts, explains the general principles and advantages/limitations of cost accounting, and describes how a cost sheet is used to analyze costs.
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.
This document provides an introduction to finance and cost accounting. It discusses key concepts in finance such as studying monetary assets and managing project risks. It then defines cost accounting and explains how it is used to examine finances and improve profitability. The document outlines various cost accounting techniques like cost ascertainment and cost control that are used to calculate, analyze, and reduce costs. It also discusses the advantages of cost accounting in providing cost data for pricing, controlling materials, and evaluating profitable activities.
Based on the literatures answer the following questionNo to e.docxikirkton
Based on the literatures answer the following question:
No to exceed 600 words in total
What tool do you need to control cost in your profit center?
What is the difference between cash and revenue?
This article explains the essential concepts of cost accounting. The overview provides an introduction to the basic cost accounting objectives and techniques, the roles of the controller and cost accountant within the corporate management structure and the ethical considerations that guide cost accountants. This article also explains the basic cost accumulation methods that are used in cost accounting systems. These methods include job order costing, process costing, backflush costing, hybrid costing and joint and by-product costing. Further, explanations of the most common costs that companies must plan for and control are included, such as direct labor, direct material and factory overhead costs. Finally, this overview describes how cost accounting techniques affect business considerations in areas such as budgeting, pricing and inventory costing methods, which include throughput, direct, absorption and activity-based costing systems.
Keywords Activity-Based Costing; Activity-based Management (ABM); Actual Cost System; Backflush Costing; Balance Sheet; By-product; Controller; Cost Accounting; Cost Accumulation; Cost Driver; Direct Labor; Direct Materials; Factory Cost; Factory Overhead; Fixed Cost; Indirect Cost; Job Order Costing; Joint Cost; Labor Productivity; Process Costing; Sunk Cost; Variable Cost
Accounting > Cost Accounting
Overview
Cost accounting is the application of accounting and costing principles to the tracking, recording and analysis of the costs associated with the products or services a business produces and the activities involved in the production process. Broadly speaking, cost accounting objectives include the preparation of statistical data, application of cost accumulation and cost control methods to production processes and analysis of an organization's profitability as compared with previous periods of time and projected budgets. Cost accountants use basic accounting techniques to compile and analyze data to meet these objectives. In performing these tasks, cost accountants work within the controller's office or the accounting department of most companies. And in addition to any internal company policies that govern their duties, cost accountants must consider the ethical principles that guide the accounting and financial reporting industries. The following sections provide a more in-depth explanation of these concepts.
Introduction to Cost Accounting
Cost accounting identifies, defines, measures, reports and analyzes the various elements of direct and indirect costs associated with producing and marketing goods and services. Cost accounting also measures performance, product quality and productivity. Direct costs can be directly traced to producing specific goods or services, such as the cost of raw mater ...
COST ACCOUNTING Cost accounting is a process of collecting, recording, classifying, analyzing, summarizing, allocating and evaluating various alternative courses of action & control of costs.
Its goal is to advise the management on the most appropriate course of action based on the cost efficiency and capability.
Cost accounting provides the detailed cost information that management needs to control current operations and plan for the future.
Definitions Cost accounting is the process of determining and accumulating the cost of product or activity.
It is defined as, 'the establishment of budgets, standard costs and actual costs of operations, processes, activities or products and the analysis of variances, profitability or the social use of funds.
Objectives of Cost AccountingTo control cost by using various techniques such as budgetary control, standard costing, and inventory control
To provide information for decision making and planning to formulate operative procedures
To help in directing and controlling operations
To ascertain costing profit
motivate to achieve the organization's goals
Scope of Cost Accounting Cost book-keeping
It involves maintaining complete record of all costs incurred from their incurrence to their charge to departments, products and services. Such recording is preferably done on the basis of double entry system.
Cost System
Proper accounting for costs requires systems and procedures.
Cost Ascertainment
Cost ascertainment forms the basis of managerial decision making for planning and control.
Cost Analysis
It involves the process of finding out the causal factors of actual costs varying from the budgeted costs and fixation of responsibility for cost increases.
Cost Comparisons
Cost accounting also includes comparisons between cost from alternative courses of action over a period of time.
Cost Control
Cost accounting is the utilization of cost information for exercising control. It involves a detailed examination of each cost in the light of benefit derived from the incurrence of the cost.
Cost Reports
The ultimate function of cost accounting is the presentation of reports. These reports are primarily for use by the management at different levels. Cost reports form the basis for planning and control, performance appraisal and managerial decision making.
Importance of Cost Accounting1. To Management
• Helps in ascertainment of cost of process, product, activity, by using different techniques such as job costing and process costing..
• Aids in price fixation by using demand and supply, activities of competitors, market condition to a great extent, also determine the price of product and cost to the producer does play an important role. The producer can take necessary help from costing records.
Helps in cost reduction by applying cost reduction pro gramme and improved methods are tried to reduce costs.
Elimination of wastage by checking the forms of waste, such as time and expenses et
This document provides information on cost accounting, cost-effectiveness analysis, and auditing in nursing. It defines cost accounting as collecting, recording, and analyzing costs to help management with decision making. Cost-effectiveness analysis compares the costs and outcomes of different programs or interventions. The key steps in a cost-effectiveness analysis are identifying alternatives, determining costs and outcomes, and comparing cost-outcome ratios. Auditing ensures adequate cost accounting information for nurses to perform administrative and managerial roles effectively.
Different techniques of costing in strategic management accounting discussed.
Marginal costing,budgetary control, standard costing,Activity based costing,responsibility costing.
Improving Profitability through Cost AnalysisAlan Boal
As an accountant, one of the key responsibilities is to help businesses improve their profitability. One effective way to achieve this is through cost analysis. By carefully examining and analysing the various costs incurred by a business, you can identify areas where cost savings can be achieved, ultimately leading to increased profitability.
This presentation will help you develop some learning regarding to budgeting its role and importance in planning and control and then will some shed light on Flexible Budgeting, Capacity and Volume of The Flexible Budget, Analysis of the Cost Behavior, Determining the Fixed & Variable Elements of the Semi Variable Expense, High & Low Points Method , Statistical Scatter Graph Method, Method of the Least Square, Preparing a Flexible Budget, Flexible Budget with Multiple Cost Drive and Flexible Budget Input versus Output. This presentation was prepared for my Cost Accounting class project.
Cost management involves planning, estimating, budgeting, and controlling costs to complete a project within budget. Common cost estimating techniques include analogous, parametric, and bottom-up estimating. Earned value management is used to measure project performance by comparing planned, earned, and actual costs and schedules.
This document outlines the objectives, outcomes, syllabus, and key concepts for the course "Cost and Management Accounting". The objectives are to impart knowledge about using financial data for managerial planning, control, and decision making. Key concepts covered include ratio analysis, budgeting, standard costing, marginal costing, and differences between cost accounting and management accounting. The syllabus is divided into four units covering topics such as financial statement analysis, variance analysis, budgetary control, and cost-volume-profit analysis. Key terminology around types of costs, cost concepts, and ratio analysis are also defined.
Controlling techniques presented include budgetary control, control through costing, break-even analysis, responsibility accounting, internal audit, PERT/CPM, financial ratio analysis, value added analysis, management audit, and human resource accounting. Budgetary control involves comparing actual performance to budgeted figures to calculate variances. Control through costing monitors costs through cost standards and classifications. Break-even analysis establishes the relationship between production quantity, costs, profits and sales price. Responsibility accounting assigns responsibility for costs and performance to responsibility centers.
Cost accounting is the process of tracking and recording costs associated with manufacturing or producing goods and services. It helps management make informed business decisions and set prices through cost analysis and control. The key objectives of cost accounting are to determine the actual cost of products, identify inefficiencies, provide cost comparisons, and analyze trends to help set production policies and programs. Maintaining an effective cost accounting system provides businesses with valuable information for activities like profitability analysis, inventory valuation, budgeting, and financial reporting.
Cost accounting is the process of determining and accumulating the cost of a product or activity. It provides information about the ascertainment and control of costs for products, services, and decision making. The objectives of cost accounting are determining selling prices, controlling costs, providing information for decisions, ascertaining profitability, and facilitating financial statements. Cost accounting differs from financial accounting in its objectives, nature, data recording, users, analysis, and presentation. It is important for management, employees, creditors, and the national economy by aiding price fixation, cost reduction, eliminating waste, and identifying unprofitable activities. Limitations include being expensive, increasing workload, and being unnecessary for cost control in some cases.
This document provides an overview of cost accounting. It begins with definitions of cost and cost accounting, noting that cost accounting is concerned with recording, classifying, summarizing, and analyzing costs to determine the costs of products or services and provide information to management for decision making. The document then discusses objectives of cost accounting like cost ascertainment and control, methods like job and process costing, techniques including standard and absorption costing, classifications of costs by nature, function, variability, and controllability, and purposes of cost accounting like price determination and profitability analysis. It provides examples throughout and concludes by listing references used.
Management accounting provides information to management for planning, controlling, and decision making. It involves identifying, measuring, accumulating, analyzing, preparing, interpreting and communicating financial information. Management accounting also includes preparing financial reports for external stakeholders. Cost accounting is a key part of management accounting and involves determining and tracking the costs of products, services, activities or resources.
Meaning & Definition
Objectives of Cost Accounting
Advantages of Cost Accounting
Difference between Cost Accounting and Financial Accounting
Cost concepts and classifications
Elements of cost
Chapter 10Cost Estimation and Cost- Volume-Profit Relati.docxketurahhazelhurst
Chapter 10
Cost Estimation and Cost-
Volume-Profit Relationships
Learning Objectives
• Understand the significance of cost behavior to decision making and control.
• Identify the interacting elements of cost-volume-profit analysis.
• Explain the break-even formula and its underlying assumptions.
• Calculate the effect on profits of changes in selling prices, variable costs, or fixed costs.
• Calculate operating leverage, determine its effects on changes in profit, and under-
stand how margin of safety relates to operating leverage.
• Find break-even points and volumes that attain desired profit levels when multiple
products are sold in combination.
• Obtain cost functions by account analysis and the high-low method.
James Forte/National Geographic/Getty Images
eps81189_10_c10.indd 207 12/20/13 9:45 AM
CHAPTER 10Introduction
Chapter Outline
Introduction
10.1 Significance of Cost Behavior to Decision Making and Control
Decision Making
Planning and Control
Trends in Fixed Costs
10.2 Cost-Volume-Profit (CVP) Analysis
Basics of CVP Analysis
A Desired Pretax Profit
A Desired Aftertax Profit
10.3 Graphical Analysis
The Break-Even Chart
Curvature of Revenue and Cost Lines
The Profit-Volume Graph
10.4 Analysis of Changes in CVP Variables
Sales Volume
Variable Costs
Price Policy
Fixed Costs
Ethical Considerations When Changing CVP Variables
10.5 Measures of Relationship Between Operating Levels and Break-Even Points
Operating Leverage
Margin of Safety
10.6 The Sales Mix
10.7 Cost Estimation
Account Analysis
High-Low Method
Ethical Considerations in Estimating Costs
Other Issues for Cost Estimation
Introduction
Managers need to understand cost behavior and cost estimation to be in a better posi-tion to plan, make decisions, and control costs. As we discussed in Chapter 9, cost
behavior describes the relationship between costs and an activity as the level of activ-
ity increases or decreases. Determining cost behavior is important to management’s
eps81189_10_c10.indd 208 12/20/13 9:45 AM
CHAPTER 10Section 10.1 Significance of Cost Behavior to Decision Making and Control
understanding of overhead costs, marketing costs, and general and administrative
expenses, as well as for proper implementation of budgets and budgetary controls. With
knowledge of cost behavior, managers can also estimate how costs are affected as future
activity levels change, which can lead to better decisions. In addition, knowledge of cost
behavior can assist managers in analyzing the interactions among revenues, costs, and
volume for profit-planning purposes. These interactions are covered later in this chapter.
10.1 Significance of Cost Behavior to Decision Making and Control
To understand more fully the significance of a manager’s analysis of cost behavior, we look at three areas: decision making, planning and control, and trends in fixed costs.
Decision Making
Cost behav ...
The document discusses cost analysis and control with reference to Hero Motocorp Pvt Ltd. It defines key terms like cost, cost-benefit analysis, and the need for cost reduction strategies.
The scope of the study is restricted to analyzing Hero Motocorp's cost systems and evaluating ways to modify the current system. Data will be collected from Hero Motocorp officers, journals, accounting records, books, and statistical records.
The objectives are to provide a framework for cost and cost control analysis, examine Hero Motocorp's cost system and objectives, and evaluate and propose modifications to the existing cost system with regards to different cost types and performance cost formulation.
This document provides an overview of the syllabus for a course on Cost and Management Accounting. The syllabus covers 14 units, including introductions to cost accounting, unit and output costing, material control, labor costing, overhead allocation, variance analysis, budgetary control, financial statement analysis, and recent developments in cost management. The objectives of the course are to familiarize students with cost concepts, costing methods, and tools for financial analysis and cost control.
Cost and management accounting are formal systems used to record and analyze financial data related to the costs of producing goods or services. Cost accounting tracks costs to help control expenses, while management accounting provides financial information to assist management in decision making, planning, and performance evaluation. Some key differences are that cost accounting focuses on historical costs, while management accounting also considers future forecasts and budgets. Both systems have merits like aiding management, but also demands like increased expenses.
PENGEKOSAN PRODUCTION OPERATION topic2 types of costEwan Raf II
This document discusses types of production costs and cost behavior. It begins by introducing direct materials, direct labor, and manufacturing overhead as the three main types of manufacturing costs. It then differentiates between product costs, which include these manufacturing costs, and period costs like selling and administrative expenses. The document goes on to explain different patterns of cost behavior like variable, fixed, step, and mixed costs. It also discusses how management decisions around capacity, commitments, and discretion can influence cost behavior.
Costing is the process of determining the cost of manufacturing a product or providing a service. Cost accounting is the formal process of recording costs and preparing financial statements to ascertain and control costs. Cost accountancy applies costing and cost accounting principles to control costs and determine profitability. The main objectives of cost accounting are determining selling prices, controlling costs, providing information for decision making, ascertaining costs and profits, and preparing financial statements. Cost accounting provides useful information to management, employees, consumers, creditors, and benefits the national economy. It helps classify and analyze costs, formulate business policies, enable budgeting, and ensure best use of limited resources.
This document provides an introduction to cost accounting. It defines cost accounting as the process of accounting for costs from when they are incurred to how they are allocated to cost centers and cost units. The objectives of cost accounting are also outlined, including cost ascertainment, estimation, control, and reduction to aid management decision making. Key cost accounting terminology is defined, such as cost, costing, cost control, job costing, and batch costing. The elements of cost - materials, labor, and other expenses - are also explained in terms of direct and indirect categories.
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.
Improving Profitability through Cost AnalysisAlan Boal
As an accountant, one of the key responsibilities is to help businesses improve their profitability. One effective way to achieve this is through cost analysis. By carefully examining and analysing the various costs incurred by a business, you can identify areas where cost savings can be achieved, ultimately leading to increased profitability.
This presentation will help you develop some learning regarding to budgeting its role and importance in planning and control and then will some shed light on Flexible Budgeting, Capacity and Volume of The Flexible Budget, Analysis of the Cost Behavior, Determining the Fixed & Variable Elements of the Semi Variable Expense, High & Low Points Method , Statistical Scatter Graph Method, Method of the Least Square, Preparing a Flexible Budget, Flexible Budget with Multiple Cost Drive and Flexible Budget Input versus Output. This presentation was prepared for my Cost Accounting class project.
Cost management involves planning, estimating, budgeting, and controlling costs to complete a project within budget. Common cost estimating techniques include analogous, parametric, and bottom-up estimating. Earned value management is used to measure project performance by comparing planned, earned, and actual costs and schedules.
This document outlines the objectives, outcomes, syllabus, and key concepts for the course "Cost and Management Accounting". The objectives are to impart knowledge about using financial data for managerial planning, control, and decision making. Key concepts covered include ratio analysis, budgeting, standard costing, marginal costing, and differences between cost accounting and management accounting. The syllabus is divided into four units covering topics such as financial statement analysis, variance analysis, budgetary control, and cost-volume-profit analysis. Key terminology around types of costs, cost concepts, and ratio analysis are also defined.
Controlling techniques presented include budgetary control, control through costing, break-even analysis, responsibility accounting, internal audit, PERT/CPM, financial ratio analysis, value added analysis, management audit, and human resource accounting. Budgetary control involves comparing actual performance to budgeted figures to calculate variances. Control through costing monitors costs through cost standards and classifications. Break-even analysis establishes the relationship between production quantity, costs, profits and sales price. Responsibility accounting assigns responsibility for costs and performance to responsibility centers.
Cost accounting is the process of tracking and recording costs associated with manufacturing or producing goods and services. It helps management make informed business decisions and set prices through cost analysis and control. The key objectives of cost accounting are to determine the actual cost of products, identify inefficiencies, provide cost comparisons, and analyze trends to help set production policies and programs. Maintaining an effective cost accounting system provides businesses with valuable information for activities like profitability analysis, inventory valuation, budgeting, and financial reporting.
Cost accounting is the process of determining and accumulating the cost of a product or activity. It provides information about the ascertainment and control of costs for products, services, and decision making. The objectives of cost accounting are determining selling prices, controlling costs, providing information for decisions, ascertaining profitability, and facilitating financial statements. Cost accounting differs from financial accounting in its objectives, nature, data recording, users, analysis, and presentation. It is important for management, employees, creditors, and the national economy by aiding price fixation, cost reduction, eliminating waste, and identifying unprofitable activities. Limitations include being expensive, increasing workload, and being unnecessary for cost control in some cases.
This document provides an overview of cost accounting. It begins with definitions of cost and cost accounting, noting that cost accounting is concerned with recording, classifying, summarizing, and analyzing costs to determine the costs of products or services and provide information to management for decision making. The document then discusses objectives of cost accounting like cost ascertainment and control, methods like job and process costing, techniques including standard and absorption costing, classifications of costs by nature, function, variability, and controllability, and purposes of cost accounting like price determination and profitability analysis. It provides examples throughout and concludes by listing references used.
Management accounting provides information to management for planning, controlling, and decision making. It involves identifying, measuring, accumulating, analyzing, preparing, interpreting and communicating financial information. Management accounting also includes preparing financial reports for external stakeholders. Cost accounting is a key part of management accounting and involves determining and tracking the costs of products, services, activities or resources.
Meaning & Definition
Objectives of Cost Accounting
Advantages of Cost Accounting
Difference between Cost Accounting and Financial Accounting
Cost concepts and classifications
Elements of cost
Chapter 10Cost Estimation and Cost- Volume-Profit Relati.docxketurahhazelhurst
Chapter 10
Cost Estimation and Cost-
Volume-Profit Relationships
Learning Objectives
• Understand the significance of cost behavior to decision making and control.
• Identify the interacting elements of cost-volume-profit analysis.
• Explain the break-even formula and its underlying assumptions.
• Calculate the effect on profits of changes in selling prices, variable costs, or fixed costs.
• Calculate operating leverage, determine its effects on changes in profit, and under-
stand how margin of safety relates to operating leverage.
• Find break-even points and volumes that attain desired profit levels when multiple
products are sold in combination.
• Obtain cost functions by account analysis and the high-low method.
James Forte/National Geographic/Getty Images
eps81189_10_c10.indd 207 12/20/13 9:45 AM
CHAPTER 10Introduction
Chapter Outline
Introduction
10.1 Significance of Cost Behavior to Decision Making and Control
Decision Making
Planning and Control
Trends in Fixed Costs
10.2 Cost-Volume-Profit (CVP) Analysis
Basics of CVP Analysis
A Desired Pretax Profit
A Desired Aftertax Profit
10.3 Graphical Analysis
The Break-Even Chart
Curvature of Revenue and Cost Lines
The Profit-Volume Graph
10.4 Analysis of Changes in CVP Variables
Sales Volume
Variable Costs
Price Policy
Fixed Costs
Ethical Considerations When Changing CVP Variables
10.5 Measures of Relationship Between Operating Levels and Break-Even Points
Operating Leverage
Margin of Safety
10.6 The Sales Mix
10.7 Cost Estimation
Account Analysis
High-Low Method
Ethical Considerations in Estimating Costs
Other Issues for Cost Estimation
Introduction
Managers need to understand cost behavior and cost estimation to be in a better posi-tion to plan, make decisions, and control costs. As we discussed in Chapter 9, cost
behavior describes the relationship between costs and an activity as the level of activ-
ity increases or decreases. Determining cost behavior is important to management’s
eps81189_10_c10.indd 208 12/20/13 9:45 AM
CHAPTER 10Section 10.1 Significance of Cost Behavior to Decision Making and Control
understanding of overhead costs, marketing costs, and general and administrative
expenses, as well as for proper implementation of budgets and budgetary controls. With
knowledge of cost behavior, managers can also estimate how costs are affected as future
activity levels change, which can lead to better decisions. In addition, knowledge of cost
behavior can assist managers in analyzing the interactions among revenues, costs, and
volume for profit-planning purposes. These interactions are covered later in this chapter.
10.1 Significance of Cost Behavior to Decision Making and Control
To understand more fully the significance of a manager’s analysis of cost behavior, we look at three areas: decision making, planning and control, and trends in fixed costs.
Decision Making
Cost behav ...
The document discusses cost analysis and control with reference to Hero Motocorp Pvt Ltd. It defines key terms like cost, cost-benefit analysis, and the need for cost reduction strategies.
The scope of the study is restricted to analyzing Hero Motocorp's cost systems and evaluating ways to modify the current system. Data will be collected from Hero Motocorp officers, journals, accounting records, books, and statistical records.
The objectives are to provide a framework for cost and cost control analysis, examine Hero Motocorp's cost system and objectives, and evaluate and propose modifications to the existing cost system with regards to different cost types and performance cost formulation.
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Cost and management accounting are formal systems used to record and analyze financial data related to the costs of producing goods or services. Cost accounting tracks costs to help control expenses, while management accounting provides financial information to assist management in decision making, planning, and performance evaluation. Some key differences are that cost accounting focuses on historical costs, while management accounting also considers future forecasts and budgets. Both systems have merits like aiding management, but also demands like increased expenses.
PENGEKOSAN PRODUCTION OPERATION topic2 types of costEwan Raf II
This document discusses types of production costs and cost behavior. It begins by introducing direct materials, direct labor, and manufacturing overhead as the three main types of manufacturing costs. It then differentiates between product costs, which include these manufacturing costs, and period costs like selling and administrative expenses. The document goes on to explain different patterns of cost behavior like variable, fixed, step, and mixed costs. It also discusses how management decisions around capacity, commitments, and discretion can influence cost behavior.
Costing is the process of determining the cost of manufacturing a product or providing a service. Cost accounting is the formal process of recording costs and preparing financial statements to ascertain and control costs. Cost accountancy applies costing and cost accounting principles to control costs and determine profitability. The main objectives of cost accounting are determining selling prices, controlling costs, providing information for decision making, ascertaining costs and profits, and preparing financial statements. Cost accounting provides useful information to management, employees, consumers, creditors, and benefits the national economy. It helps classify and analyze costs, formulate business policies, enable budgeting, and ensure best use of limited resources.
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2. CONTENTS
1. Measurement of Cost Behaviour
2. Cost Drivers and Cost Behaviour
3. Management Influence on Cost Behaviour
4. Cost Functions
5. Methods of Measuring Cost Functions
6. Cost Management System
7. ABC System (Concept and Principles)
8. Various Basis of Overhead Distribution
9. Different Cost for Different Decisions
4. .
Measurement of cost behavior is a crucial aspect of managerial
accounting and financial analysis. It includes how expenses alter
as activity levels inside an organisation change. To make
educated judgements, create budgets, set pricing, and analyse
profitability, cost behaviour is primarily measured.
6. The cost driver is that variable or factor which has an
effect and causes the relationship with the total cost. It is
the cause and the cost incurred in its effect. Its analysis
means identifying all the possible cost drivers for a
particular type of activity or cost etc., and explains their
cause and effect relationship with the event. It should be
understood that correlation is just a way to prove the
relationship.
7. Types of Cost Drivers
There are many types of cost drivers in cost accounting. As per traditional accounting,
the manufacturing and indirect costs are allocated on the predefined rate based on the
activity performed.
● Activity-based Cost Drivers
● Volume-based Cost Drivers
● Time-based Cost Drivers
● Transaction-based Cost Drivers
● Complexity-based Cost Drivers
● Resource-based Cost Drivers
● Quality or Defect-based Cost Drivers
● Location-based Cost Drivers
● Technology-based Cost Drivers
● Employee-based Cost Drivers
● Maintenance-based Cost Drivers
● Environmental or Sustainability-based Cost Drivers
● Customer-based Cost Drivers
8. Cost behavior is the manner in which expenses are impacted by changes in business activity.
A business manager should be aware of cost behaviors when constructing the annual
budget, to anticipate whether any costs will spike or decline. For example, if the usage of a
production line is approaching its maximum capacity, the relevant cost behavior would be to
expect a large cost increase (to pay for an equipment expansion) if the incremental demand
level increases by a small additional amount. Understanding cost behavior is a critical aspect
of cost-volume-profit analysis.
● Types of Cost Behavior
1. Variable costs:-
Variable cost vary directly with changes in business activity.
1. Fixed costs:-
Fixed costs do not change in response to business activity levels.
1. Mixed costs:-
Mixed costs contain fixed and variable elements.
10. ● Management has a significant influence on cost behavior in an organization.
Decisions made by management regarding cost structure, production and capacity
planning, product mix, pricing, cost control measures, outsourcing, technology
adoption, sales, and marketing strategies all impact how costs change in response
to business activity. Understanding cost behavior helps management make
informed decisions, set prices, and achieve financial goals.
● Additionally, management's efforts to control costs and improve efficiency through
process improvements and waste reduction programs can positively affect cost
behavior patterns. Moreover, the adoption of technology and automation can
impact cost behavior by altering the proportions of fixed and variable costs. By
analyzing cost behavior, management can create accurate financial projections,
optimize operations, and make strategic business choices that align with the
organization's objectives.
12. Cost functions are mathematical representations that describe the relationship between the
cost of production and the level of business activity or output. They are a fundamental
concept in economics, accounting, and managerial decision-making. Cost functions help
organizations understand how their costs vary with changes in production volume, which is
crucial for making informed business decisions, setting prices, and assessing profitability.
There are various types of cost functions, depending on the nature of costs and how they
behave:
● Total Cost Function: This function represents the total cost incurred by a company at
different levels of production. It is the sum of all fixed and variable costs for a given
output level. Mathematically, it can be expressed as TC = FC + VC(Q), where TC is
total cost, FC is fixed cost, VC is variable cost, and Q is the quantity of output.
● Average Cost Function: The average cost function calculates the average cost per unit
of output. It is derived by dividing the total cost by the level of production.
Mathematically, it can be expressed as AC = TC / Q, where AC is average cost, TC is
total cost, and Q is the quantity of output.
13. ● Marginal Cost Function: The marginal cost function represents the change in total
cost resulting from producing one additional unit of output. It helps companies
determine the most cost-effective level of production. Mathematically, it can be
expressed as MC = ∆TC / ∆Q, where MC is marginal cost, ∆TC is the change in total
cost, and ∆Q is the change in quantity of output.
● Long-Run and Short-Run Cost Functions: Cost functions can also be classified based
on the time horizon. Long-run cost functions consider all costs to be variable,
allowing the company to adjust its production capacity and change the scale of
operations. Short-run cost functions, on the other hand, have some fixed costs that
cannot be immediately adjusted.
● Step Cost Function: A step cost function represents costs that remain constant within
a specific range of output but jump to a higher level when a certain production
threshold is reached. This results in cost step-ups rather than a continuous cost
curve.
15. Measuring cost functions and cost behavior can be accomplished through various
methods. Some of the common methods of measuring and analyzing costs include:
● Historical Data Analysis: One of the simplest methods is to analyze historical cost
data. By examining past financial records and cost reports, managers can identify
patterns and trends in cost behavior.
● Cost-Volume-Profit (CVP) Analysis: CVP analysis is a powerful tool for
understanding cost behavior and its impact on profits. It involves studying the
relationship between sales volume, costs, and profits to determine the breakeven
point and assess the sensitivity of profits to changes in activity levels.
● Regression Analysis: Regression analysis is a statistical method that helps
determine the relationship between a dependent variable (e.g., total cost) and one
or more independent variables (e.g., production volume, time, or other relevant
factors). It is useful for estimating cost functions and predicting costs at different
activity levels.
● High-Low Method: The high-low method is a simple cost estimation technique that
uses the highest and lowest activity levels and corresponding costs to calculate
the variable cost per unit and the fixed cost component of a cost function.
16. ● Scatter Diagrams: Scatter diagrams plot cost data against activity levels to visualize
any potential relationships or patterns between costs and production volume. These
diagrams can provide insights into cost behavior.
● Engineering Studies: In some cases, engineering studies can be conducted to analyze
the physical relationship between input factors and costs. This approach is
particularly useful in manufacturing and engineering-intensive industries.
● Contribution Margin Analysis: Contribution margin analysis focuses on the
contribution of each product or service to cover fixed costs and generate profits. It
helps identify profitable products and assess the cost structure of different offerings.
● Activity-Based Costing (ABC): ABC is a more sophisticated cost allocation method
that assigns costs to specific activities and then to products or services based on their
consumption of those activities. It provides a more accurate understanding of cost
drivers and cost behavior.
● Simulation Modeling: Simulation modeling uses computer simulations to evaluate
different scenarios and assess their impact on costs and profitability. It can be
especially useful when complex interactions between various cost drivers are
involved.
18. A cost-management system (CMS) is a collection of tools and techniques that identifies
how management's decisions affect costs.
Key features of a cost management system may include:
● Cost Classification: Categorizing costs into various groups (e.g., direct costs, indirect
costs, fixed costs, variable costs) to understand their behavior and impact on business
operations.
● Budgeting and Variance Analysis: Creating budgets to plan for future expenses and
comparing actual costs against budgeted amounts to identify discrepancies
(variances).
● Cost Allocation: Assigning indirect costs to products, services, or projects using
suitable allocation methods, ensuring accurate cost assignment.
● Cost Control Measures: Implementing strategies and initiatives to manage and reduce
costs effectively without compromising product or service quality.
● Performance Measurement: Evaluating the performance of departments, products, or
projects based on their cost efficiency and profitability.
19. Activity-Based Costing is a cost allocation method that aims to allocate indirect costs to products,
services, or projects based on their actual consumption of activities. Traditional cost allocation
methods often use volume-based allocation, which may not accurately reflect the true cost drivers
of different products or services. ABC, on the other hand, identifies and traces costs to specific
activities, providing a more accurate picture of cost behavior.
Key components of ABC include:
● Identifying Cost Drivers: Identifying the activities that cause costs to be incurred within the
organization.
● Cost Pools: Grouping costs into cost pools based on common activities.
● Cost Allocation: Allocating the costs in each cost pool to specific products, services, or
projects based on their consumption of the corresponding activities.
● Better Cost Visibility: ABC provides better cost visibility, allowing managers to identify
which activities contribute most to overall costs and make informed decisions about resource
allocation.
● Enhanced Decision-Making: By understanding the true costs of products and services, ABC
helps managers make more accurate pricing decisions and identify areas for cost reduction or
process improvement.
21. Overhead distribution, also known as overhead allocation or overhead apportionment, refers to
the process of allocating indirect costs to products, services, or cost centers. Overhead costs
cannot be directly traced to specific units of output or activities and are instead spread over
multiple cost objects based on certain allocation bases. Various bases are used for overhead
distribution, and the choice of allocation base depends on the nature of the business and the type
of costs involved. Some common bases of overhead distribution include:
● Direct Labor Hours: Overhead costs are allocated based on the number of direct labor
hours worked on each product or job. This method assumes that overhead costs are
incurred in proportion to the amount of direct labor used.
● Direct Labor Costs: Overhead costs are allocated based on the direct labor costs associated
with each product or job. This method assumes that overhead costs are related to the
labor-intensive nature of certain products.
● Machine Hours: Overhead costs are allocated based on the number of machine hours used
by each product or job. This method is suitable for industries where machine usage is a
significant driver of overhead costs.
● Direct Material Costs: Overhead costs are allocated based on the direct material costs
incurred for each product. This method assumes that overhead costs are influenced by the
complexity of the materials used.
22. ● Units Produced or Sold: Overhead costs are allocated based on the number of units
produced or sold. This method assumes that overhead costs vary with the level of
production or sales.
● Number of Employees: Overhead costs are allocated based on the number of
employees in each department or cost center. This method is common in service-
based industries where labor is a primary cost driver.
● Square Footage/Area: Overhead costs are allocated based on the amount of space
occupied by each cost center or department. This method is useful when overhead
costs are related to the use of space.
● Number of Orders or Setups: Overhead costs are allocated based on the number of
production orders or setups required for each product or job. This method is relevant
for industries with high setup costs.
● Activity-Based Costing (ABC): Unlike traditional overhead allocation, ABC identifies
specific activities as cost drivers and allocates overhead costs based on the actual
consumption of these activities by each product or service.
24. Different types of costs are relevant for different types of decisions within an organization.
Understanding the various cost classifications helps managers make informed choices based on the
specific objectives and context of each decision. Some common types of costs and their relevance to
different decisions include:
● Fixed Costs:
Fixed costs do not vary with changes in the level of production or business activity. They
remain constant within a specific period. These costs are relevant for decisions related to long-
term planning and capacity management. For example, fixed costs are crucial in determining
break even points, evaluating the financial viability of new projects, and assessing the impact
of changes in production volume on overall profitability.
● Variable Costs:
Variable costs fluctuate directly with changes in the level of production or business activity.
They rise as production increases and decrease with lower production levels. Variable costs
are essential for short-term decision-making, such as setting prices for products and services,
determining the optimal production level, and evaluating the profitability of individual product
lines.
● Semi-Variable Costs (Mixed Costs):
Semi-variable costs consist of both fixed and variable elements. They remain fixed up to a
certain activity level, beyond which they become variable and increase with higher production
levels. Understanding semi-variable costs is important for decisions related to cost control and
capacity planning. Managers need to identify the fixed and variable components to better
manage these costs.
25. ● Direct Costs:
Direct costs are specifically traceable to a particular cost object, such as a product, project, or
department. They can be directly attributed to a specific activity or output. For product pricing
decisions and project budgeting, direct costs are crucial for accurate cost estimation.
● Indirect Costs (Overhead Costs):
Indirect costs cannot be directly attributed to a specific cost object and are instead allocated across
multiple cost objects using an appropriate allocation method. These costs are relevant for decisions
related to cost allocation and cost control strategies. Activity-Based Costing (ABC) is a method used
to allocate indirect costs more accurately based on cost drivers.
● Sunk Costs:
Sunk costs are costs that have already been incurred and cannot be recovered regardless of the
decision made. These costs should be irrelevant for future decision-making, as they cannot influence
the outcomes of the decision.
● Opportunity Costs:
Opportunity costs represent the benefits foregone by choosing one alternative over another. They
are essential for assessing the potential benefits of alternative courses of action. Managers need to
consider opportunity costs when evaluating investment decisions or choosing between mutually
exclusive projects.
● Differential Costs:
Differential costs are the changes in costs between two or more alternatives. These costs are critical
for making decisions involving trade-offs or choosing the most cost-effective option among
alternatives.