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Basic Costing
Homework
Recap
Basic Costing
Lesson 2 Chapter 2- Elements of income and cost
ObjectivesExplain why bank reconciliations are
carried out
List 4 examples of items which may not appear on the cash book
List 4 examples of items which may not appear on the bank statement
Check items on a bank statement against the cash book identifying any discrepancies
Prepare a reconciliation statement
Classifying costs
Capital
Revenue
Classifying through function
Production costs
Selling and distribution costs
Administration costs
Finance costs
Direct / Indirect costs
Direct costs relate to the units produced.
Indirect costs do not relate directly to the units produced.
Classification by functionDIRECT = PRODUCTION
Can be measured in terms of cost unit
INDIRECT = PRODUCTION or NON-PRODUCTION / OTHER
Cannot be measured in terms of cost unit
Classification of costs by element
Materials
Labour
Expenses / Overheads
Production Costs
-Materials -Direct/indirect-Labour -Direct/indirect-Expenses -Direct/indirect
Materials
Direct
Indirect
Labour
Direct
Indirect
Expenses
Direct
Indirect
MaterialsAnalysing the material costs
1.Determine quantity and cost of each type of material
2.Determine cost of materials being used by each cost centre
LabourGross Pay
Basic Pay
Overtime
Bonus Payments
ERNIC (Employers National Insurance Contribution)
Expenses
Specific expenses – directly incurred by a single cost centre.
Cleaning and repair of machinery
Joint expenses – incurred by several cost centres and the costs APPORTIONED between the cost centres.
Rent
OverheadsIndirect materials
+Indirect labour
+Indirect expenses
=OVERHEADS
RecapClassification by function
Direct and Indirect costs
Material, Labour and Expenses
Apportioning expenses to cost centres