Archive | Introduction to Cost Accounting

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.

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.

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.

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 [...]

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

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

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

FACTORY / WORKS COST : = PRIME COST + FACTORY OVERHEADS

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

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 [...]