Mattingly "AI & Prompt Design: The Basics of Prompt Design"
Basic Concepts of Cost Accounting
1.
2.
3. Noun Verb
The amount of
expenditure incurred
& more.
i.e. opportunity cost,
notional cost
To ascertain
the cost of
given thing
i.e. cost for
cost unit
7. It is the application of costing ,
cost accounting principles ,
methods , techniques to the
science , art & practice of cost
control & the ascertainment of
profitability .
8. It includes the
presentation of
information derived
there from for purpose
of analysis & managerial
decision making.
9. Meaning of cost information
INFORMATION
FINANCIAL
OTHERS
RELATED TO
BUSINESS
RELATED TO
COST
RELATED TO
OTHERS
NON-
FINANCIAL
10. Financial a/c
Language of the business
Reporter
Daily food
Statutory
Many user
[i.e. all stakeholders ]
Management a/c
Tool of analysis
Analyst
Medicine
Voluntary
Single user
[i.e. management only ]
11.
12. Prior to the industrial revaluation ,
business were small & characterized by
simple market & not emphasize on cost
account but accurate BOA required.
In the 17th century , in the france , the
royal wallpaper manufactory had a cost
account system.
In 18th century , in the UK , some iron
master & potters began to produce cost
information, before industrial revaluation.
13. In the world war I & II ,
the important
of cost accounting Grew
with
Growth of expenditures
of defense
of the all countries.
14. At that time , government placed the
cost-plus contract.
In the prevailing time ,yet , GOVT has
come out with the cost-plus contract for
some such type of contract.
15. In the earlier time ,
Total cost = variable/direct cost
i.e. nobody had emphasized a fixed cost
,which has inevitable effect on the total cost,
so that some decision taken out, that might
be wrong .
However, the span of time ,people come
to know the importance of fixed cost ,
Which , now-a-days ,consider more
important than the variable cost.
Total cost = variable cost + fixed cost
18. 1.pre-costing
It is the process of
costing for cost unit
before cost incurred,
On the prediction base
Its refers to the concept
of budgeting
19. 2.Current costing
It the process of costing, where
cost has recorded as & when
cost incurred.
This involves careful estimates ,
being prepared of overheads &
others.
20. Its aimed at collecting
information about cost, as &
when the activity take place ,
so that, as soon as, a job would
be completed & the cost of
completion would be known.
For this purpose costing must
be
21. 3.Post costing
It means analysis of actual cost
information , as recorded in the
financial books.
Its accurate & useful in the case
of cost-plus contract, where the
price is determined , finally, on
the basis of actual cost.
22. What is the…
Cost control?
Cost reduction?
Cost cutting?
Cost benefit?
23. It means controlling the
cost up to the pre-
determined level of cost
i.e. well established
standard.
24. It is the process of
reducing the cost ,
permanently, without
affecting the quality of
goods.
25. Its aimed at , to reduce
the cost of unit , as well
as possible , even its spoil
or affecting the quality of
goods.
26. It is the result of any
circumstance , i.e.
temporary in nature, the
benefit of which , derived
for short span of time.
27. E.g.:- when any vendor
bankrupted ,in the
exhibition, raw material
received at the lower
price, then ever before ,
that’s way cost per unit is
reduce.
30. 2. It seeks to attain
lowest possible cost
under existing
condition.
3. It recognizes no
condition as
permanent, since , a
change will resulted in
the lower cost.
3. Emphasize on
past & present.
3. Emphasize on
present & future.
i.e. std should be
maintained in the
present.
i.e. any change
resulted lower
cost in the future.
31. 4. It’s the preventive
function.
4. It’s the corrective
function.
5. The process of cost
control ends when
the targets are
achieved.
5. The process of
cost reduction
has no visible
ends.
32.
33. It is a location , person,
or an item of
equipment
( or group of these )
For which the cost may
be ascertained &
Used for the purpose
of cost center
Ex.
Allocated to
the cost units
Ex.
Ex.
Ex.Ex.
Ex.
Ex.
Ex.
Ex.
34. Any unit of Cost Accounting selected
with a view to accumulating all cost
under that unit.
The unit may be …
This may also be a budget center.
35. Personal Impersonal
In this a person
or group of
person consider
as cost center
In this a location or
an item of
equipment or
group of these
consider as cost
center
41. Departmental level
Total hours = 30
Total production = 581700
Work done by ….
worker Dep.A Dep.B Dep.C total
P 10 - - 10
Q 5 5 - 10
R 2 3 5 10
total 17 8 5 -
Total
produc-
tion
1700 80000 500000 581700
42. Production per hour in dep. A = 1700 ÷ 17 = 100 p.h.
Production per hour in dep. B = 80000 ÷ 8 = 10000 p.h.
Production per hour in dep. C = 500000 ÷ 5 = 100000 p.h.
∴ production per worker :-
P = 10 × 100 =1000
Q = (5×100)+(5×10000) =50500
R = (2×100)+(3×10000)+(5×100000) =530200
∴ Cross subsidization :-
P = 192900 units
Q = 143400 units
R = (336300) units
43. Activity level
Where any activity of organization ,
which is essential for the conduct of
business, can be considered as a cost
center.
E.g. :- In JK shah classis , the activity
of teaching can be considered as cost
center &
All teachers as cost units.
47. Cost Unit
It is a unit of
production/ service /time
( or combination of these ) ,
in relation to which cost may
be ascertained or expressed &
on which the cost of
production being charged.
48. Cost units are usually the unit
of physical measurement.
E.g. :-
industry Cost unit
Automobile Number
Cement Tonne / per bag
power Kilo watt / unit
Hotel Room per day / hrs
hospital Patient day /bed day
i.e. no. ,weight , area , time , length .
49.
50.
51. CACS CWA
CPT IPCC FINAL
Students Students Students
Cost
Object
Cost
center
Cost
unit
E.g.
(30)
(10) (15) (5)
(6) (5) (4)
No.
Per student
1000 250 80
600 2000 5000
In the lacs
52.
53. ‘Responsibility center define
as an activity center of the
business organization
entrusted with a special
task.’
Under the modern budget &
control , financial
executives tend to develop
responsibility center for the
purpose of control.
55. Cost center :-
activity center , which is
responsible for incurrence of the cost.
Profit center :-
activity center , which is
responsible for generating &
maximizing the profits.
Investment center :-
activity center ,
which is responsible for generating
‘ROI’( i.e. return on investment )
56.
57.
58.
59.
60.
61.
62.
63.
64.
65. Reliance group of company
ltd responsible to generate
‘ROI’ to its all stakeholders.
68. Production center Service center
Re- apportionment
apportionment
Center responsible
to provide final
production output
Center responsible
to provide service
to the production
department
69.
70. Basis for classification
1.Nature of elements
2.Traceability to object
3.Cost sheet
4.Functions
5.Variability
6.Controllability
7.Normality
8.Cash outflow
9.Decision making
71. 1. Nature of elements
Material Labour Other expenses
Direct Direct DirectIndirect indirect indirect
Prime
costFOH AOH S&D R&D
72. 2. Traceability to object
DIRECT COST INDIRECT COST
WHICH CAN BE
DIRECTLY ALLOCATED
or ATRIBUTEBLE TO
THE PRODUCT
WHICH CAN’T
DIRECTLY ALLOCATED
or ATRIBUTEBLE TO
THE PRODUCT
PRODUCTION COST PRODUCTION COST
Uncertain
73. 3.COST SHEET
COST MEANING
PRIME
COST
Cost of prime important
Without it , production can’t possible
WORK
COST
Cost of work done during the period , whether
completed or not or to complete the incomplete
work .
This is purely ,the cost of current period.
FECTORY
COST
Cost up to the factory of those goods ,which are
completed during the current period , whether
begun during the current or last period.
74. COST MEANING
COST
OF
PROD.
Total cost of production , means the cost of
goods which are ready to use / sale , which
are completed during the current period.
COST OF
GOODS
SOLD
Cost of production , of those goods which are
sold during the current period .
TOTAL
COST
I.E. COS
Cost of goods sold , which included the
additional cost required for sale of goods.
75. 4. function
cost meaning Example
Prodtn.
Cost
Total cost of whole process of
production
DM , DL &
OHs
AOH Cost of formulating policy ,
controlling the organization , i.e.
cost doesn’t directly related to
production.
Research
cost
SOH Cost for creating demand of the
product produced .
Advertisem
ent
DOH Cost starting from packing of
product till reconditioning of
empty products.
Freight &
Transportat
ion staff
salary
76. cost meaning Example
COC Cost of transforming
RM finish goods
LOUBRE
& OHs
DEVELO
PMENT
COST
Development cost for trail run LOUBRE
& OHs
PRE-
PRODT.
Costs starting with
implementation of decision
&ending with the commencement
of the production process.
DM & DL
PRODCT
COST
Cost necessary for production ALL
78. A. fixed cost
These are costs , which are
incurred for a period & which
within certain output or
turnover limits , tends to be
unaffected by fluctuations in the
levels of activity
(i.e. output or turnover )
83. C. Semi – variable cost
v.c.
F.C.
Total
cost
Level of activity
84.
85. 1.Graphical method
2.Comparison by period or level of activity
method
3.High point & low point method
4.Analytical method
5.Least squared method ( liner equation )
i.e….
Level of activity Costs
100 5500
500 7500
1000 10000
E.g…..
units rupees
87. Units
100
500
Cost
5500
7500
400 2000
change in the amount of expense
Formula =
Change in level of activity
2000
400
=
= 5 Rs per unitV.C.
F.C. = T.C. – V.C.
= 5500 – ( 100 * 5 )
= 5500 – 500
F.C. = 5000
88. Units
100
1000
Cost
5500
10000
900 4500
( high – low ) of cost
Formula =
( high – low ) of units
4500
900
=
= 5 Rs per unitV.C.
F.C. = T.C – V.C.
= 10000 – ( 1000 * 5 )
= 10000 – 5000
= 5000
89. E.g. :- if the experienced variable would be 50 % of
total cost
than total cost = 10000 ,
where as V.C. = 50000 & F.C. = 50000 at 1000 units,
therefore , V.C. = 5 per unit
90. + 500V = 7500
+ 1000V = 10000
F
F
- - -
- 500V = - 2500
V = - 2500
- 500
V = 5
per unit
F + 500V = 7500
F + (500 * 5) = 7500
F = 7500 – 2500
F = 5000
98. 6. controllability
the cost , which can be
influenced by the action of a specific member of
undertaking & which can be controlled by one .
E.g. :- RM , labour , other cost etc.
the cost , which can’t
controlled by any of the action , taken over by
a specific member of undertaking.
E.g. :- fixed or period cost .
99. 7. Normality
normal cost , which is expected
to be incurred at a given level of activity & which
is acceptable by the customer of goods .
Normal = expectable + acceptable
Note :-
only normal cost can be charged to
the product & finally on the customer of
goods .
i.e. Costs brought to the WIP a/c
100. Abnormal cost is the cost , which
isn’t expected to be incurred ,at certain level of
output . Its incurred due to abnormal reason,
which is unacceptable by the customer of goods to
charge on the goods.
E.g. :-
due to , the mistake of worker , 10 liter milk
spoiled in AMUL company ,in the annad , so that
price of other milk can’t rice the amul company
,with such abnormal reason.
Note :- abnormal lost always charged to the P & L A/c.
101. E.g. :- E.g. :-
RM + LABOUR + OTHERS EXP. 1. COST OF WASTAGE
2. ABNORMAL IDLE TIME
3. ABNORMAL OT PREMIUM
ABNORMAL
GAIN ALSO
CHARGED TO
THE P & L A/C
102. 8. Cash outflow
these cost are involve immediate
payment of cash & also known as “ out of pocket
cost” .
i.e. salary , wages , postage , credit purchase etc.
these cost aren’t involve the
immediate payment of cash & also know as “
economic cost “.
i.e. any experienced & well trained manager of
company retired & vacate the company post .
{ never recorded in the BOA }
104. A. Relevant cost :-
cost which are relevant &
useful for decision making.
i.e. marginal cost, differential cost,
opportunity cost , out of pocket cost
B. Irrelevant cost :-
cost which are not
relevant & useful for decision making .
i.e. sunk cost , committed cost & fixed cost .
105. A.Pre-determined :-
A cost which is computed
in advance before production or operation
stared , on the basis of specification of all
factors affecting cost , is known as pre-
determined cost .
That covers 3 costs , so far..
C. budgeted
cost
B. Estimated
cost
D. Standard
cost
106. B. Budgeted cost :-
The expected cost of manufacturing or
acquisition , often in term of a unit of production computed on
the basis of information available in advance of actual
production / purchase .
- by kohler.
It is the prospective costs since they refers to
the prediction cost .
C. Budgeted cost :-
pre- determined cost based on
Past experience
Present condition
Future expectations.
{i.e. what the cost is expected to be}
107. D. Standard cost :-
scientifically determined costs by mgt .
i.e. expected standard of efficient operation & relevant
necessary expenditure .
Used for price fixing & cost control through “ variance
analysis”.
{ i.e. what the cost should be }
Macro not possible
Micro Not physiable
108. E. Pre-production cost :-
These costs form the part of
development cost , incurred in making a trial
production run , & preliminary to formal production .
Incurred when new factory or project in the process
of establishment & there is no formal production on
which we can charge such costs.
Such costs normally treated as deferred revenue
expenditure i.e. miscellaneous expenses .
It is type of capitalized cost .
109. F. Capitalized cost :-
These are the cost which are
Initially recorded as asset & than subsequently treated as
expenses .
i.e. deferred revenue expenditure or miscellaneous
expenditure or fictitious assets.
G. Training cost :-
These cost comprises of the trainees or learners’ all
expenses .
i.e. any expenses incurred for providing training to trainees .
H. Marginal cost :-
The amount , at any given volume of output , by
which aggregate costs are changed , if the volume of output is
increased by one unit .
110. I. Differential cost :-
[ i.e. incremental & decremental cost ]
It refers to the change in total cost
due to the change in
- level of activity
- technology
- process or method of production
or any decision related to these .
J. Imputed cost or notional cost :-
The cost do not involve any cash outlay .
[ it may similar to the implicit cost , sometime ]
111. K. Opportunity cost :-
This cost refers to the value of sacrifice made or
benefit of opportunity foregone in accepting an alternative
course of action .
[ i.e. next best alternative ]
L. Sunk cost :-
Historical costs incurred in the past are known as
sunk cost .
they paly no role I decision making in current period .
It is irrecoverable cost .
M. Shutdown cost :-
These costs , which continue to be incurred ,even
when a plant is temporarily shutdown.
i.e. rent , rates , depreciation etc.
which can’t be avoided during temporary closure of a plant .
112. N. Product costs :-
i. For merchandise inventory :-
cost associated with the purchase & sale
of goods .
ii. For production scenario :-
cost associated with the acquisition &
conversion of raw material & with sale of FG.
O. Absolute cost :-
these cost refer to the cost of any product ,
process or unit in its totality .
Depicted in absolute amount = absolute cost
113. P. Discretionary cost
Costs , that are not tied to
a clear cause & effect
relationship between
inputs & outputs .
Usually arise from
periodical decision .
e.g. :-
advertisement
public relation
executive training etc.
Costs , that are tied to a
clear cause & effect
relationship between
inputs & outputs
Relationship is personally
observable .
e.g. :-
DM , DL ,OHs.
{ INPUTS }
CAR , COMPUTERS etc.
{ outputs }
Q. Engineered cost
114.
115. 1. India opinion 2. Foreign opinion
Will be charged to
final product
i.e. on COP .
Will be charged to
sold product
i.e. on COS.
FC ******
+ AOH *******
COP ***********
COGS ******
+ AOH
+ S&D
*******
COP ***********
116. Difference arise between two , due to , only ,
valuation of FG
i.e. based on COP
1. India opinion is being used in the cost a/cing .
whereas ,
2. Foreign opinion is being used in the
financial a/cing .
i.e. AOHs charged to the P&L a/c .
Note :-
1. AOHs & S&D , given together than both
charged on COGS .
2. AOHs & S&D , given separately than ….
AOHs charged on COP
S&D charged on COGS
117.
118. Control system is a system use for the purpose of
control the cost .
It is , generally , based on the budget or well
established standard .
Process of it , as given ….
YARDSTICK PERFORMANCE
VARIANCE
ANALYSIS
119.
120. total data & effects of
alternative compare & finally decision have been
taken out .
[ i.e. relevant + irrelevant ]
here , only relevant data
have been considered , so that , no need compare
the data & finally , decision taken out .
[ i.e. relevant only ]
here , decision have been
taken out by the way of incremental &
decremental cost / revenue .
124. Statement of net relevant gain or loss
[ based on P1 ; compared with P2 & P3 ]
Particulars P2 P3
DM :-
X - 10
Y 10 20
DM :-
A 10 10
B - -
C 20 40
OHs :-
FOHs - -
AOHs 80 80
S & D 10 20
Net Relevant Loss 130 180
131. Where costs are recorded after
they have incurred .
[ i.e. post costing ]
Well established standards
i.e. standard costs are compared
with actual costs , to determine
variances.[i.e. variance analysis]
133. All costs are charged to the product
or process .
[ i.e. variable + fixed costs ]
Particulars Amount
Sales ******
- COS :-
DM *****
DL *****
OHs :-
Absorbed …….
+/- Under/over abs. ..…... ****** (×××××)
Net profit ××××××
134.
135.
136. Here , the cost of a product is
ascertained
i.e. for single unit of output
Here , the cost are collected &
accumulated according to the jobs ,
contract , work orders etc.
137. This is a form of a job costing .
Here , cost ascertained for
a specific no. of articles
i.e. A LOT
Like , bricks & invitation cards are
always produced in a lot of 100 / 200
etc.
138. In the batch costing the
most important problem is the
determination of optimum size of the
batch .
{ i.e. how much units to be produced at
lowest cost in the single batch }
It involves two types of costs :-
1. set up / preparation cost
2. carrying cost
139. Formula =
2 𝐷𝑆
𝐶𝑖
Where ,
D = annual demand of product
S = setting up cost per batch
Ci = carrying cost per unit of product
EOQ = 2 𝐴 𝐶𝑎
𝐶𝑖
T.C. = 2 𝐴 𝐶𝑎 𝐶𝑖
140. TREASURY & CASH MANAGEMENT :-
Optimum cash balance :-
Where ,
A = Annual Requirement
T = transaction cost
I = holding cost
T
I
T.C.
141. Job costing Batch costing
1. It is a method of
ascertainment of cost
for the specific order
or job to be done as
per customer’s
requirement .
1. It is a method of
ascertainment of
cost for a batch in
which units
produced are
identical .
{ i.e. fixed }
Ex. :-
In a classes of CA ,
class is of the students
have 80% or more .
Ex. :-
in the classes of CA ,
class is of 30 students
i.e. fixed .
142. 2. Each job is assigned
a job no.
2. Each batch is
assigned a serial
batch no.
3. Job = cost center &
different no. of cost
unit for a cost center .
3. Batch = cost center
& same no. of cost
unit for a cost center.
4. Work is started only
after receiving an order
from customer .
4. Production is
carried on the basis
of anticipation of
demand .
5. Sometimes , job
work is to be done at
site .
5. Batch work is
always done in the
factory premises .
143. Operating costing is the cost of
providing service.
- By ICMA ENGLAND
E.g. :-
transportation , hotel , school ,
electricity , etc.
144. Similar to the job costing , but in the
contract the job is larger than job costing.
That form of specific order costing
which applies where work is
undertaken as per customer’s
requirements & each order is of long
duration , the work is usually of
construction in nature .
- By ICAM ENGLAND
145. 1. Contract deed come
into existence
under INDIAN
CONTRACT ACT , 1872.
1. NO act applied so
far , written agreement
may be carried out as
per terms & conditions
between parties .
2. Amount of an
indirect cost is very
small proportion with
total cost of contract .
2. Amount of indirect
cost is in huge
proportion with total
cost of contract.
3. Each contract is a cost
center & cost unit .
3. An order , a batch , a
lot or a job is a cost
center & cost unit may
differ .
146. 4. Required more time
for completion of
contract .
4. Completion period of
the job is smaller .
5. Contract price is
generally higher .
6. Contract work is
always carried out at site.
7. For construction
contract , AS – 7 shall be
applied .
5. The value of job
would be small .
6. Job work is mostly
done at premises or at
the factory shade .
7. No AS shall be
applied to the job
costing .
147. Here , the cost of completion is ascertain ,
for each stage of work done .
Ex. :-
1st cost of making – pulp from wood .
2nd cost of making – paper from pulp .
Process costing is widely used in
industries of …
colors, chemicals , cloths , rubber,
soap – detergent , leather products & etc.
148. It is the refinement of process costing .
It is concerned with determination of
the cost of each operation rather than
the process.
It is used where
the long process is carried out
by the way of
various operations .
149. Combination
of two or more methods
of costing being used ,
where the nature of products is
complex & the method can not be
ascertained ,
is know as the multiple costing .
150. Coding system
4.
A system of symbols designed to be
applied to a classified set of items to
give a brief account reference ,
facilitation entry collection & analysis .
Cost can be classified on the bases of cost coding .
Like :-
Cost Codes
DIRECT MATERIAL :-
X
Y
A1
A2
DIRECT LABOUR B..
OVERHEADS C..