UNIT 3 OPERATING COSTING.pptx
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This document discusses operating costing, which is used to ascertain and control costs for service industries. It provides examples of cost units like passenger-kilometers and room-days that are used in industries like transport, hospitals, lodging houses, and cinemas. For transport specifically, operating costs are expressed in terms of running kilometers, passenger kilometers, or ton-kilometers carried. The document outlines the costing process and types of problems encountered in transport costing.
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- Non-statutory audits are voluntary and terms are agreed upon between the auditor and proprietor.
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Chapter 01 introduction OF Cost Accounting
1.1 identify the type of accounting
1.2 difference between Cost Accounting , Cost Accountancy and Costing
1.3 understand the Management information needs
1.4 identify the objectives of cost accounting
1.5 difference between Cost Accounting Vs. Financial Accounting
1.6 identify the role of cost accountant
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Labour cost accounting
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The document discusses different types of audits:
- Statutory audits are legally required reviews of a company's or government's financial records to determine if they provide an accurate representation of their financial position.
- Non-statutory audits are voluntary and terms are agreed upon between the auditor and proprietor.
- Internal audits are independent reviews conducted within an organization to evaluate risk management, controls, and governance processes.
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Like if it proves to be useful for you.
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This document discusses transfer pricing, which refers to the price at which divisions within a company transact with each other. It provides definitions of transfer pricing and outlines some key issues like how transfer prices impact revenue and influence whether managers prefer customers or suppliers that are internal or external to the company. The document then describes several methods that can be used to determine transfer prices, such as using market rates, negotiated prices, or cost-plus models. It provides an example of calculating an optimal transfer price between wood and paper divisions of a company. The summary concludes by noting how transfer prices can be manipulated for tax purposes in multinational companies.
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Chapter 01 introduction OF Cost Accounting
1.1 identify the type of accounting
1.2 difference between Cost Accounting , Cost Accountancy and Costing
1.3 understand the Management information needs
1.4 identify the objectives of cost accounting
1.5 difference between Cost Accounting Vs. Financial Accounting
1.6 identify the role of cost accountant
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01.Understand the concept of ‘Overheads’.
02.Understand classification, allocation, apportionment and absorption of overheads.
03. Understand the Primary and Secondary Distribution of Overheads.
04. Understand the Traditional & Activity Based Costing methods
05. Identify the value added & non value added activity
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This document provides an overview of transfer pricing. It defines transfer pricing as the price at which divisions of a company transact with each other. The document outlines several purposes of transfer pricing, including evaluating division performance and shifting profits between tax jurisdictions. It also discusses transfer pricing methods, influences on companies, disadvantages, and provides an example to illustrate how transfer pricing can benefit a company.
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This document provides an introduction to cost accounting, including definitions of key terms like cost, cost accounting, cost unit, and cost center. It describes the objectives of cost accounting and classifications of costs such as direct vs indirect costs, fixed vs variable costs, and normal vs abnormal costs. It also outlines common cost accounting methods like job costing, process costing, and operating costing and provides examples of basic and advanced cost sheets.
Marginal costing
Marginal costing is an accounting technique that separates total costs into fixed and variable components. It only includes variable costs when determining the cost of producing an additional unit. This helps management compare costs between time periods and determine profitability. CVP (cost-volume-profit) analysis studies the relationships between selling price, costs, volume, and profits. It shows how costs and profits change with volume and can help with decision making, budgeting, and performance evaluation. While useful for short-term analysis, marginal costing has limitations such as difficulty separating fixed and variable costs.
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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.
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A power point presentation describing some basic definitions, father of cost accounting, Indian aspect of cost accounting and Various Methods and Techniques of costing.
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at the Bhopal School of Social Sciences(BSSS) on 6 September, 2017
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Ppt on Cost accounting and its classifications
Cost accounting involves classifying costs according to their nature, function, variability, and controllability. There are several types of costs:
- Direct costs like materials and labor that are clearly traceable to production. Indirect costs like utilities that are not directly traceable.
- Fixed costs that do not vary with production like rent. Variable costs that vary with production like materials. Semi-variable costs that vary but not proportionately.
- Controllable costs a manager can influence like direct labor. Uncontrollable costs outside a manager's control like depreciation.
- Normal costs incurred during regular operations. Abnormal costs from unexpected events like fires.
Marginal costing
This document provides an overview of marginal costing and cost-volume-profit (CVP) analysis. It defines key terms like marginal cost, contribution, fixed and variable costs. It explains the differences between marginal and absorption costing approaches. The objectives and concepts of CVP analysis are outlined, including break-even point, margin of safety, contribution ratio and angle of incidence. Formulas for calculating items like break-even sales, break-even point and composite break-even point are presented. Advantages and limitations of marginal costing are listed.
Classification of cost
* Beginning raw materials inventory: $32,000
* Raw materials purchased: $276,000
* Ending raw materials inventory: $28,000
* Raw materials available for use: $32,000 + $276,000 = $308,000
* Raw materials used: Raw materials available - Ending inventory = $308,000 - $28,000 = $280,000
The cost of direct material used is $280,000.
The answer is C.
material was still present. What is the cost of
direct material used?
A. $276,000
B. $272,000
C. $280,000
D. $ 2
Batch costing
This document discusses different types of costing methods used in manufacturing including job costing, batch costing, contract costing, and process costing. Job costing is used to determine the costs of specific jobs or orders. Batch costing is a variant of job costing where similar products are manufactured in batches. Contract costing is a variant of job costing applied to construction projects. Process costing is used for mass production of standardized goods and tracks costs at each stage of production. The document outlines key features, advantages, and disadvantages of each costing method.
Activity-Based Costing System
Here are the steps to solve this problem:
2. The activity rates are computed as:
Assembling units: AED. 280,000/1,000 units = AED. 280 per unit
Processing orders: AED. 310,000/250 orders = AED. 1,240 per order
Supporting customers: AED. 100,000/100 customers = AED. 1,000 per customer
Activity-Based Costing System 26
3. The table showing overhead costs for VB's 80 units and 4 orders is:
Description Amount (AED.)
Direct materials cost (80 units x AED. 180) 14,400
Direct labor cost
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This document discusses the reconciliation of cost accounts and financial accounts. When these two sets of accounts are maintained separately, the profits or losses reported may differ. A reconciliation statement is prepared to identify reasons for any differences. Common reasons for differences include items recorded in one set of accounts but not the other, different valuation methods for inventory, and over- or under-absorption of overhead costs. The reconciliation statement calculates the adjustments needed to make the profit/loss figures reported by the two sets of accounts agree.
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This document discusses service costing and transportation costing. Service costing is used to determine the total cost of rendering standardized services to customers. Transportation costing is used by transport services to calculate the cost of providing passenger or freight transportation. Key steps include determining cost units like passenger-kilometers or tonne-kilometers, compiling all costs, and preparing an operating cost sheet that categorizes costs as fixed, semi-variable maintenance costs, or variable operating costs. An example operating cost sheet format is also provided.
Job and batch costing
The document discusses job costing and batch costing. It defines job costing as a method where cost is compiled for specific jobs or work orders, rather than for stock. Cost is charged directly to jobs for materials, labor, and expenses. Overhead is apportioned to jobs based on department rates. Batch costing determines cost per unit by dividing total batch costs by the number of units in a batch. The document also discusses determining economic batch quantity to minimize setup and carrying costs, and provides examples of job and batch costing applications.
Operation costing
1. Operating costing is used to calculate the cost of providing services rather than producing goods. It is used by transportation, utility, and hospitality industries like hotels and hospitals.
2. The document provides examples of cost units used in different service industries like per passenger-kilometer for transportation, per kilowatt-hour for electricity, and per room-day for hotels. It also outlines the classification of costs and cost sheet formats.
3. Transportation costing is discussed in detail including operating, ownership, and estimation of changes in costs from projects. Hotel costing is also summarized including cost centers like restaurant and laundry, and key cost elements like provisions, labor, and overheads.
Sneha
This document provides an introduction to operating costing. Operating costing is a method of costing used to ascertain the cost of providing services rather than manufacturing products. It is used by service organizations like transportation companies, utilities, hospitals, and schools. The key aspects of operating costing covered include:
- Costs are classified into fixed, variable, and semi-variable categories.
- A double unit or composite cost unit is typically used, such as cost per passenger-kilometer.
- Examples of applications include transportation, utilities like electricity and water, and welfare services like canteens and hospitals.
- Cost sheets are prepared to track operating costs by cost center or vehicle.
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Marginal costing
Marginal costing is a technique that differentiates between fixed and variable costs. It assigns only variable costs to cost units and writes off fixed costs for the period against total contribution. Contribution is calculated as sales revenue minus variable costs. Marginal costing is useful for decision making as it shows the effect on profit of changes in volume or product mix. Key aspects include classifying costs, calculating contribution, and using contribution to determine the break-even point where total revenues equal total costs. Marginal costing provides information on product and segment profitability without needing to allocate fixed overhead costs.
Chapter 05 Overhead Costs
01.Understand the concept of ‘Overheads’.
02.Understand classification, allocation, apportionment and absorption of overheads.
03. Understand the Primary and Secondary Distribution of Overheads.
04. Understand the Traditional & Activity Based Costing methods
05. Identify the value added & non value added activity
Transfer pricing
This document provides an overview of transfer pricing. It defines transfer pricing as the price at which divisions of a company transact with each other. The document outlines several purposes of transfer pricing, including evaluating division performance and shifting profits between tax jurisdictions. It also discusses transfer pricing methods, influences on companies, disadvantages, and provides an example to illustrate how transfer pricing can benefit a company.
Operations and Services Costing
This presentation covers Accounting of Services and Operations like - Cinema Hall, Canteen, Hospital, Transport, Costing etc.
an important part in MBA Financce
APPLICATION OF MARGINAL COSTING
This presentation discusses the application of marginal costing techniques in decision making. It begins by defining marginal costing as the ascertainment of marginal costs and the effect on profit of changes in output volumes or types by differentiating between fixed and variable costs. Only variable costs are assigned to products, while fixed costs are written off against profits. The presentation then provides examples of how marginal costing can be applied to problems like key factor analysis, price fixation, make-or-buy decisions, product mix selection, and more. It also discusses a case study on applying marginal costing to analyze an agro-tourism business model and the impacts of COVID-19 on the tourism industry.
Cost accounting
This document provides an introduction to cost accounting, including definitions of key terms like cost, cost accounting, cost unit, and cost center. It describes the objectives of cost accounting and classifications of costs such as direct vs indirect costs, fixed vs variable costs, and normal vs abnormal costs. It also outlines common cost accounting methods like job costing, process costing, and operating costing and provides examples of basic and advanced cost sheets.
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Marginal costing is an accounting technique that separates total costs into fixed and variable components. It only includes variable costs when determining the cost of producing an additional unit. This helps management compare costs between time periods and determine profitability. CVP (cost-volume-profit) analysis studies the relationships between selling price, costs, volume, and profits. It shows how costs and profits change with volume and can help with decision making, budgeting, and performance evaluation. While useful for short-term analysis, marginal costing has limitations such as difficulty separating fixed and variable costs.
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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.
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A power point presentation describing some basic definitions, father of cost accounting, Indian aspect of cost accounting and Various Methods and Techniques of costing.
Presented by: Aquib Ali, Ajay Gupta and Ashwin Showi. (M.Com students)
at the Bhopal School of Social Sciences(BSSS) on 6 September, 2017
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This document defines and explains the concept of marginal costing. It begins by defining marginal costing as the change in aggregate costs from increasing or decreasing output by one unit. It then explains that marginal costing classifies costs into fixed and variable costs. Fixed costs remain constant regardless of output, while variable costs change directly with output. Marginal costing only considers variable costs to calculate the cost per unit of a product. It is useful for cost control, pricing decisions, determining profits, and other analyses. The document provides examples and formulas to illustrate key aspects of marginal costing.
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Cost accounting involves classifying costs according to their nature, function, variability, and controllability. There are several types of costs:
- Direct costs like materials and labor that are clearly traceable to production. Indirect costs like utilities that are not directly traceable.
- Fixed costs that do not vary with production like rent. Variable costs that vary with production like materials. Semi-variable costs that vary but not proportionately.
- Controllable costs a manager can influence like direct labor. Uncontrollable costs outside a manager's control like depreciation.
- Normal costs incurred during regular operations. Abnormal costs from unexpected events like fires.
Marginal costing
This document provides an overview of marginal costing and cost-volume-profit (CVP) analysis. It defines key terms like marginal cost, contribution, fixed and variable costs. It explains the differences between marginal and absorption costing approaches. The objectives and concepts of CVP analysis are outlined, including break-even point, margin of safety, contribution ratio and angle of incidence. Formulas for calculating items like break-even sales, break-even point and composite break-even point are presented. Advantages and limitations of marginal costing are listed.
Classification of cost
* Beginning raw materials inventory: $32,000
* Raw materials purchased: $276,000
* Ending raw materials inventory: $28,000
* Raw materials available for use: $32,000 + $276,000 = $308,000
* Raw materials used: Raw materials available - Ending inventory = $308,000 - $28,000 = $280,000
The cost of direct material used is $280,000.
The answer is C.
material was still present. What is the cost of
direct material used?
A. $276,000
B. $272,000
C. $280,000
D. $ 2
Batch costing
This document discusses different types of costing methods used in manufacturing including job costing, batch costing, contract costing, and process costing. Job costing is used to determine the costs of specific jobs or orders. Batch costing is a variant of job costing where similar products are manufactured in batches. Contract costing is a variant of job costing applied to construction projects. Process costing is used for mass production of standardized goods and tracks costs at each stage of production. The document outlines key features, advantages, and disadvantages of each costing method.
Activity-Based Costing System
Here are the steps to solve this problem:
2. The activity rates are computed as:
Assembling units: AED. 280,000/1,000 units = AED. 280 per unit
Processing orders: AED. 310,000/250 orders = AED. 1,240 per order
Supporting customers: AED. 100,000/100 customers = AED. 1,000 per customer
Activity-Based Costing System 26
3. The table showing overhead costs for VB's 80 units and 4 orders is:
Description Amount (AED.)
Direct materials cost (80 units x AED. 180) 14,400
Direct labor cost
Cost accounting ppt
Cost accounting is a formal system used to ascertain and control costs of products and services. The objectives of cost accounting include ascertaining costs, controlling costs, and guiding business policies. Cost accounting differs from financial accounting in its purpose, statutory requirements, cost analysis, periodicity of reporting, and control aspects. Cost centers, cost units, and methods of costing like job costing and process costing are used to allocate costs. Elements of cost include direct and indirect materials, direct and indirect labor, and expenses like production, administration, selling and distribution overheads. Total cost is made up of prime cost, works cost, cost of production and total cost or cost of sales.
The operating costing on hotel,hospital & transport
This document is a project report submitted by Hemant Dhanraj Sonawane for his Masters in Commerce degree. It discusses operating costing in various service industries such as hotels, hospitals, and transport. The report covers topics like the meaning and definition of operating costing, its applications and cost units, the procedure for determining operating costs, limitations of operating costing, and provides examples of cost analysis for staff canteens, hotels, hospitals, and transport.
Reconciliation of cost and financial accounts
This document discusses the reconciliation of cost accounts and financial accounts. When these two sets of accounts are maintained separately, the profits or losses reported may differ. A reconciliation statement is prepared to identify reasons for any differences. Common reasons for differences include items recorded in one set of accounts but not the other, different valuation methods for inventory, and over- or under-absorption of overhead costs. The reconciliation statement calculates the adjustments needed to make the profit/loss figures reported by the two sets of accounts agree.
Operating costing & service costing
This document discusses service costing and transportation costing. Service costing is used to determine the total cost of rendering standardized services to customers. Transportation costing is used by transport services to calculate the cost of providing passenger or freight transportation. Key steps include determining cost units like passenger-kilometers or tonne-kilometers, compiling all costs, and preparing an operating cost sheet that categorizes costs as fixed, semi-variable maintenance costs, or variable operating costs. An example operating cost sheet format is also provided.
Job and batch costing
The document discusses job costing and batch costing. It defines job costing as a method where cost is compiled for specific jobs or work orders, rather than for stock. Cost is charged directly to jobs for materials, labor, and expenses. Overhead is apportioned to jobs based on department rates. Batch costing determines cost per unit by dividing total batch costs by the number of units in a batch. The document also discusses determining economic batch quantity to minimize setup and carrying costs, and provides examples of job and batch costing applications.
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The operating costing on hotel,hospital & transport
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1. Operating costing is used to calculate the cost of providing services rather than producing goods. It is used by transportation, utility, and hospitality industries like hotels and hospitals.
2. The document provides examples of cost units used in different service industries like per passenger-kilometer for transportation, per kilowatt-hour for electricity, and per room-day for hotels. It also outlines the classification of costs and cost sheet formats.
3. Transportation costing is discussed in detail including operating, ownership, and estimation of changes in costs from projects. Hotel costing is also summarized including cost centers like restaurant and laundry, and key cost elements like provisions, labor, and overheads.
Sneha
This document provides an introduction to operating costing. Operating costing is a method of costing used to ascertain the cost of providing services rather than manufacturing products. It is used by service organizations like transportation companies, utilities, hospitals, and schools. The key aspects of operating costing covered include:
- Costs are classified into fixed, variable, and semi-variable categories.
- A double unit or composite cost unit is typically used, such as cost per passenger-kilometer.
- Examples of applications include transportation, utilities like electricity and water, and welfare services like canteens and hospitals.
- Cost sheets are prepared to track operating costs by cost center or vehicle.
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- Examples of cost units provided include cost per ton-kilometer for goods transport, cost per passenger-kilometer for public transit, and cost per meal for hotels/canteens.
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1. Operating costing is a method used to ascertain the costs of services or operations that do not produce goods. It involves determining the costs of running activities like transportation, hospitality, insurance, and more.
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Driven from within
Enterprise Holdings
The Commission on Travel Demand is an expert group established as part of CREDS (Centre for Research into Energy Demand Solutions) to explore how to reduce the energy and carbon emissions associated with transport.
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Lars Winkelbauer Defines How Autonomous Drones Are Revolutionizing Last-Mile ...
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Transportation
The document discusses various aspects of transportation and distribution management. It covers key topics such as:
- The importance of transportation in logistics and how it adds value by moving goods across distances.
- The different modes of transportation including road, rail, water, air, and pipeline. It discusses factors that affect the cost, speed, and consistency of transportation performance.
- The objectives of transportation in minimizing costs and transit time while fulfilling continuous demand.
- Recent trends in transportation and how different modes are adapting to changes in the economy and technology.
Freight transport systems
Freight transport systems can be summarized as follows:
1) Freight transport involves the movement of goods via various modes including rail, road, water, air and pipeline. Infrastructure such as roads, railways, ports and terminals enable the movement of goods.
2) Key economic factors that influence transportation costs are distance, volume, density, stowability, handling requirements, liability and market conditions. Transportation costs are also impacted by variable costs, fixed costs and common costs.
3) Rates and pricing strategies aim to determine the most cost-effective way to transport goods considering classification of products, commodity specific rates, and exceptions. Documentation such as bills of lading are also used to track shipments and
Intelligent Transportation System
The document discusses Intelligent Transportation Systems (ITS). ITS uses advanced technologies like electronics, computers, communications and sensors to improve transportation safety and efficiency. It describes several ITS technologies like wireless communications, computational technologies, and sensing technologies. It also discusses ITS applications such as electronic toll collection, emergency notification, congestion pricing, automatic enforcement, collision avoidance and traveler information. Finally, it outlines benefits of ITS such as time savings, improved safety, reduced costs and emissions.
Economic impact of ground handling industry
Ground service providers (GSPs) play an important role in aviation by handling operations on the ground from aircraft turnaround to baggage and cargo handling. GSPs are a major industry that provides jobs and contributes to airport operations worldwide. New technologies are helping GSPs improve efficiency and record keeping. The future of the industry remains promising as air travel continues to grow globally and GSPs adapt to meet the increasing demands and standards of airlines and airports.
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Job costing involves tracking costs for individual jobs or orders. Costs are accumulated for each unique job and the total cost is determined after completion. Job costing is used when production is made to customer order rather than for stock. It allows for analyzing costs and profits on a per-job basis. Batch costing is used when items are produced in batches and held as stock for assembly. Costs are collected by batch and the cost per unit is calculated by dividing total batch costs by the number of units. Economic batch quantity balances set-up costs and carrying costs of inventory to determine the optimal batch size. Contract costing is a specialized type of job costing used for long-term contracts like construction projects, where costs are
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UNIT 3 OPERATING COSTING.pptx
- 1. SRM INSTITUTE OF SCIENCE & TECHNOLOGY DEPARTMENT OF COMMERCE UCM18601 COST ACCOUNTING II UNIT III OPERATING COSTING
- 2. OPERATING COSTING MEANING Operating costing is a method of costing designed to ascertain and control the costs of services. Those industries or organisations which do not produce any product but render some service to customers can use this method. DEFINITION: According to Wheldon, "operating costing actually is unit costing as applied to the cost of services."
- 3. RANGE OF APPLICATION OF OPERATING COSTING METHOD INTERNAL SERVICES: Services rendered by time keeping, canteen, boiler, etc., to other departments within the same firm. EXTERNAL SERVICES: Services to outside customers at a charge or even freely to the members of the general public. (a) Consumer supply services like electricity, water and gas. (b) Transport services like Air, Sea, Rail and Road. (c) Recreational services like cinemas, sport clubs, libraries. (a) Public welfare services like hospitals, street lamps, garbage clearing (e) Miscellaneous commercial services like lodging houses, banks insurance, etc.
- 4. OPERATING COST UNITS The cost units in service costing are not as tangible or obvious as in unit or job costing. Selecting appropriate cost unit depends on the nature of service. The cost units can be 'single units' like Hours, Running miles, or "composite units” which are combinations of two or more units like “passenger mile” “room-day”. The following are some of the cost units normally used in different service (a) Passenger transport - Passenger-k.m./mile. (b) Goods transport - Ton-mile/k.m. (c) Hospitals (in-patient) - Patient-bed-day d) Lodging Houses - Room-day (e) Cinema theatres - Man-show (f) Power generation - Kilowatt-hour (g) Road-lighting - Per lamp post
- 5. OPERATING COSTING IN SOME SERVICE INDUSTRIES I. TRANSPORT COSTING - Operating costing as applicable to transport services The term Transport' includes all modes of transport like Air, Water, Rail and Road. However, the present discussion is confined to Road transport only. Road transport includes both passenger transport and goods transport. It may be carried out by Trucks, Buses, Tempos, Taxis etc. OBJECTIVES: (a) Cost ascertainment (b) Price fixation (c) Quotations (d) Decision data (e) Control over maintenance (f) Operational efficiency
- 6. BENEFITS OR ADVANTAGES OF OPERATING COSTING IN TRANSPORT ORGANISATIONS: (a) Reliable prices (b) Cost recovery (c) Cost control (d) Policy decisions (e) Logistics COSTING PROCEDURE IN TRANSPORT COSTING : I. Classification of costs A) Fixed or Standing charges B) Semi Variable or Maintanence Charges C) Variable or Running or Operating charges II. Accumulation or Collection of costs III. Presentation of costs
- 7. Computation of ‘cost unit' in Road Transport business Operating costs are expressed in terms of running kilometres or passenger kilometres or Ton-kilometres. 1. A running kilometre is one kilometre distance travelled by a vehicle, irrespective of the load carried. 2. A passenger kilometre is 'carrying one passenger over a distance of one kilometre’. 3. A Ton-kilometre is 'carrying a load of one ton over a distance of one Kilometre’.
- 9. TYPES OF PROBLEMS Problems on road transport costing can be sub-divided into seven broad varieties. A, Computation of cost unit B, Running distance cost C, Passenger transport cost D, Goods transport costs E, Comprehensive Costs F, Journey contracts and quotations G, Transport cost decisions involving alternative choices
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