# Archive | Introduction to Cost Accounting

## What is Semi-variable Cost?

Semi-variable costs are also known as semi-fixed costs. Such costs contain partly fixed and partly variable elements. They exhibit a step-ladder pattern when presented graphically. Eg: (i) Telephone Charges, (ii) Professional Tax, (iii) Electricity Expenses, (iv) Repairs and Maintenance, (v) Depreciation of Plant and Machinery, (vi) Supervisors Salary, etc.

## What is Fixed Cost?

A fixed cost is that cost which remains unaffected by fluctuations in the levels of output. Fixed cost is that portion of the total cost which remains constant irrespective of output. Eg: (i) Rent of Warehouse, (ii) Salary of Permanent Employees, (iii) Depreciation of Assets, etc.

## What is a Cost Sheet?

Cost sheet is a statement showing total cost (Cost of sales) and profit. It includes only two incomes i.e. sale of scrap etc. and sale of finished goods.

## What are the Items to be completely ignored while preparing Cost Sheet?

Items to be “Completely Ignored” while Preparing Cost Sheet : I. *Gains / Incomes / Profits: All * to be completely ignored Except Sale of scrap etc. and Sale of finished goods. II. Expenses / Losses: a. Financial Expenses a. Int. on borrowed funds: e.g. Debenture Interest Interest on bank loan, etc. b. Bad debts [...]

## What is the formula of Cost of Sales?

COST OF SALES : = COST OF GOODS SOLD + SELLING AND DISTRIBUTION OVERHEADS

## What is the formula of Cost of Goods sold?

COST OF GOODS SOLD : = COST OF PRODUCTION + OPENING STOCK OF FINISHED GOODS – CLOSING STOCK OF FINISHED GOODS

## What is the formula of Production Cost?

COST OF PRODUCTION : = FACTORY COST + OFFICE & ADMINISTRATION OVERHEADS

## What is the formula of Works/Factory Cost?

FACTORY / WORKS COST : = PRIME COST + FACTORY OVERHEADS

## What is the formula of Prime Cost?

PRIME COST : = DIRECT MATERIALS + DIRECT WAGES + DIRECT EXPENSES

## Define Costing

It is the amount of expenditure actual or notional “incurred on” or “attributable” “Actual” refers to expenses paid in Cash / Cheque. “Notional” refers to expenses not to be settled in cash. eg. Depreciation, Salary to owner, Rent for owned Premises. “Incurred on” refers to expenses which are directly related to the product. “attributable” refers [...]