Slide 1

COST ACCOUNTING

what is cost accounting?

Cost accounting is the process of classifying, recording and appropriate allocation of expenditure for the determination of thecosts of products or services, and for the presentation of suitably arrange thedata for the purposeof controlandguidance of management.

Objective of cost accountingThere is direct relationship among information needs of management , cost accounting objectives, and techniques and tools used for analyses in the cost accounting . Cost accounting has the following three important objectives:1 . To determine product cost.2.To faceplate planning and control of regular business activities.3. To supply information for short- and long run decision

3Vim son paints & chemicals pvt. LTD Shed No. W-20, chemical zone, old bhendi pada, M.I.D.C., Kalyan ambernath (w) dist. thane introductionName of the companyVimson paints and chemicals pvt. ltdEstablished bySuresh bhirudEstablish in1993Managing directorSantosh bhirudWorker

product3 skilled worker, 1 qualified engineers, 1 lab chemist and 2 in back office

Paint driers, alkyd resins, polyester resins, adhesives , FRP accessories.

Which product do you produce in your company?Alkyd resinsPolyester resinsPhenolic resinsCNSL resinsCobalt octoatePaint driesIndustrial and decorative paints

PRODUCTION PROCESSfeedingCommercial oilRosinPhenolic acidMaleic acidGlycolsSolvents

TRIPLE ROLE MILLING MILL FOR PAINTS MANUFACTURING

HEATING & BOILING PROCESS

STIRRING & MIXING PROCESS

FILTERING PROCESSSAMPLING AND TESTING MACHINE15 HOURS TO 18 HOURS

Methods of costingJob costingJob costing is used in those business concern where production is carried out as per specific order and customers specification .

Each job is separate and distinct from other job and product.

For eg: the method is popular in enterprises engaged in house-building, ship-building, machinery production and repair Process costingThis costing is used in those industries where production is done continuously, such as chemicals, oil, gas, paper, etc.

It is difficult to trace the costs to specific units and the total cost is averaged for the number of units manufactured.

Sometimes , total cost and per unit cost is calculated at each stage of production for control process.Method followed by Company

Vimson paints and chemical Private Limited follows the method of process costing.This method is used: When production is done continuously,The product is homogeneous The process is standardizedProcess costing includes operations costing which aims at ascertaining the costs of each operation in the place of each process.

The output of the last process is transferred to finished stock

Costs are collected process-wise

Both direct and indirect costs are accumulated in each process

If there is a stock of semi-finished goods, it is expressed in terms of equivalent units

The total cost of each process is divided by the normal output of that process to find out cost per unit of that process.

Cost Control techniques by Company

Cost Control does not mean reducing the cost but it aims is to have maximum utility of the cost incurred .

In other words the objective of cost control is the performance of the same job at the lower cost or a better performance for the same cost

cost reduction technique by company

Cost Reduction is an attempt to bring costs down.New technical method is used for cost reduction, selection on raw material, regular maintains of factory They increase efficiency of the productivity by eliminating the wastages Waste Material is recycledAnd they are not compromising with quality.

Variable costRaw material, power cost, wages, electrical bill, fuel.

Fixed costDepreciation

Semi variable costworkers salary (overtime), telephone bill.

Inventory control technique by companyThey follow Eyeball system, the supervisor stands in the middle of the store or manufacturing area and looks around. If he noticed that some items are out of stock, they reordered.

Costing techniqueTechniques or Types followed by Company

The Company follows the technique of standard costing.

In this Company first Pre- determined the cost & then compare with the actual cost.

If actual costs are greater than standard costs the variance is unfavorable

-the company's actual profit will be less than planned & Vice versa.

PARTICULARSAMT RSAMT RSDirect material consumedopening stock of raw of ,material(+ ) purchase of raw materail( -) closing stock of raw material10000Direct labour2000Direct expensesPRIME COST12000( + ) FACTORY OVERHEADfuel consumed1000Electricity cost2000(-) scrap value (10% of raw material)10002000WORK COST14000(+) OFFICE OVERHEADTransport cost5000other overhead10006000COST OF PRODUCTION20000(+) SELLING & DISTRIBUTION OVERHEADPacking cost5000COST OF GOODS SOLD25000(+) PROFIT (10% OF cost of goods sold)2500SALES27500