20-08-2012, 11:32 AM
Cost Accounting
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Indirect material
Indirect material is one which cannot be easily identified in the product
Examples of Indirect material At factory level – lubricants, oil, consumables, etc. At office level – Printing & stationery, Brooms, Dusters, etc. At selling & dist. level – Packing materials, printing & stationery, etc.
Labour :
LABOUR: The human effort required to convert the materials into finished product is called labour.
DIRECT LABOUR is one which can be conveniently identified or attributed wholly to a particular job, product or process.
Eg:wages paid to carpenter, fees paid to tailor,etc.
INDIRECT LABOUR is one which cannot be conveniently identified or attributed wholly to a particular job, product or process. :
OTHER EXPENSES
OTHER EXPENSES are those expenses other than materials and labour.
DIRECT EXPENSES are those expenses which can be directly allocated to particular job, process or product.
Eg : Excise duty, royalty, special hire charges,etc.
INDIRECT EXPENSES
INDIRECT EXPENSES are those expenses which cannot be directly allocated to particular job, process or product :
Examples of other expenses At factory level – factory rent, factory insurance, lighting, etc. At office level – office rent, office insurance, office lighting, etc. At sales & dist.level – advertising, show room expenses like rent, insurance, etc.
Production and Service Cost Centres
Production cost centres are engaged in production activity by conversion of raw material into finished production.
Service cost centres are those, which are anciliary to and render service to other production and service cost centres.
For example, maintenance department is a service department provides service to other cost centres, which include both production cost centres and service cost centres.
A power house is a service cost centre generates and supplies power not only to production cost centres but also to other service cost centres.
Profit Centre
A profit centre is any sub‑unit of an organization to which both revenues and costs are assigned, so that the responsibility of a sub‑unit may be measured profit centre is a segment of the business entity by which both revenues are received and expenditures are caused are controlled, such revenues and expenditure being used to evaluate segmental performance. In profit centre, both inputs and outputs are capable of measurement in financial terms and it provides more effective assessment of the managers performance since both costs and revenues are measured in monetary terms
Goals of management accounting
To provide information for internal decision making primarily planning and controlling purpose.
To make decisions pricing products, dropping a product or process. Replace the old with new.
Directing and controlling operations
Measuring performance.
Sources of cost information
Invoices and documents of purchases, consumed and transferred.
Reports of time study-actual time
Bills of material
Capacity studies- machine tool requirements
Statistics regarding floor spacing, power and capacities.