Cost

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COST

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COSTDEFINITION

Cost is defined as a total of all the expenses incurred, whether paid or unpaid, in manufacture and sale of a product.

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S.Kacker, IHM Mumbai

COSTINGDEFINITION

Costing is referred as classifying, recording and appropriate allocation of expenditure for determination of cost of products and services.

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Costing is done under the various heads and sub heads of cost.

Costing is done on routine basis to ascertain day to day costs.

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COMMON FEATURES OF SUCCESSFUL OPERATIONS

Plan for profit. (Return on Investment)Product to satisfy Consumer.Quality control.They make sales happen.

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COMMON FEATURES OF SUCCESSFUL OPERATIONS

Plan to increase Consumer’s spending power.They focus on people. (Staff)They control inventory.Satisfactory returns of the assets.


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1. Historical Accounting

2. Cost Accounting

3. Financial Accounting

TYPES OF ACCOUNTING

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TYPES OF ACCOUNTING

4. Decision Accounting

5. Control Accounting

6. Managerial Accounting

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HISTORICAL ACCOUNTING

• Backward looking approach

• Past transactions

• Checking on history


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COST ACCOUNTING

• Concerned with internal processes of business.

• Records Expenditure, Supply and Cost information.

• Systematic cost recording and control system.

• MIS


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FINANCIAL ACCOUNTING

• Concerned with external processes of business ( Outside World).

• Prepares Final Accounts ( information for Bankers, Shareholders, Government).

• Calculating tax liabilities.


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FINANCIAL ACCOUNTING

• Company formation, issue of shares/debentures , Sources of Capital.

• Financial Resources.


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DECISION ACCOUNTING• Sums up total of Accounting Techniques• Helps in Decision making.• Helps in Marginal Costing.• Helps in Breakeven Analysis.• Helps in Ratio Analysis.• It’s of Non- Routine nature.


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CONTROL ACCOUNTING• To Control (Actions).• Make Policies.• Make Budgets & Budgetary Control.• Formulating procedures.• It’s of routine nature.• Controlling Costing and Calculating

Statistics.


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MANAGEMENT ACCOUNTING• Helps in Management Functions.• Interpreting Accounting Systems.• Making Decisions for maximizing

profits and minimizing losses.• Future planning and expansions.


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Means such an analysis of accounting and other information as to enable management to know the COST involved in each activity in order to arrive at proper decisions.


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It provides management with COST data relating to product, processes job and operations in order to control cost and maximize the profits.


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OBJECTIVES OF COST ACCOUNTING

Ascertainment of Cost.Fixation of Selling Price.Cost control.Comparing Costs with Revenue.Special Cost studies and investigations.


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OBJECTIVES OF COST ACCOUNTING

Preparation of Financial Statements.Disclose sources of wastage.To provide effective control system.To measure degree of efficiency.Methods of economizing Costs.


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ELEMENTS OF COST

MATERIAL

• DIRECT• INDIREC

T

LABOUR

• DIRECT• INDIREC

T

OTHER EXPENS

ES• DIRECT• INDIREC

T


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ELEMENTS OF COST

All Indirect Costs Are Termed As OVERHEADS


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COSTS CONCEPTS

Cost Defined As :

• FIXED COSTS.

• VARIABLE COSTS.

• SEMI VARIABLE COSTS.


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COSTS CONCEPTS

Cost Defined As :

• CONTROLLABLE COSTS.

• NON CONTROLLABLE COSTS.


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COSTS CONCEPTSCost Defined As :• CONTROLLABLE COSTS.

GROUP I

1. Operating Cost. 2. Maintenance And Housekeeping.3. Linen, Laundry And Uniforms.


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COSTS CONCEPTSCost Defined As :• CONTROLLABLE COSTS.

GROUP II1. Public Relations And Advertisement Cost. 2. Security.3. Miscellaneous Expenses.


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Cost Defined As :

NON CONTROLLABLE COSTS.1. Interest .2. Depreciation.3. Insurance.4. Government Charges.5. Rent.


COSTS CONCEPTS

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COSTS CONCEPTS

Cost Defined As :

• UNIT COST.

• TOTAL COST

» AVERAGE UNIT COST.

» ACTUAL UNIT COST.


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COSTS CONCEPTS

Cost Defined As :• PRIME COSTS.

»FOOD COST

»BEVERAGE COST

»LABOUR COST


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COST DEFINED IN FORM OF PRECENTAGE

1. COST/SALES = COST PER RUPEE OF SALE

COSTS CONCEPTS


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COST DEFINED IN FORM OF PERCENTAGE (%)

1. FOOD COST/FOOD SALES X 100 = FOOD COST PERCENTAGE

COSTS CONCEPTS


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2. BEVERAGE COST/BEVRAGE SALES X 100 = BEVERAGE COST PERCENTAGE

COSTS CONCEPTS


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COSTS CONCEPTS


3. LABOUR COST/TOTAL SALES X 100 = LABOUR COST PERCENTAGE


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4. COST/COST % = SALES

COSTS CONCEPTS


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5. SALES X COST % = COST

COSTS CONCEPTS


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VARIOUS TYPES COSTS

• Material Cost.• Payroll Cost.• Interest.• Repair And Maintenance Of

Equipments.


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VARIOUS TYPES COSTS

• Disposables.• Laundry.• Energy (Electricity, Fuel).• Insurance.


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VARIOUS TYPES COSTS

• Transportation Cost.• Advertisement And Other Promotions.• Entertainment.


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VARIOUS TYPES COSTS

• License Fees.• Legal Fees.• Taxes.• Rent


VARIOUS OTHER COSTS CONCEPTS

• Differential Cost.• Out Of Pocket Cost.• Opportunity Cost.



• Shut Down Cost.• Sunk Cost.• Hypothetical Cost.



• TRACEABLE COST.• UNTRACEABLE COST.• JOINT COST.• CONVERSION COST.



• ESTIMATED COST / BUDGETED COST

• STANDARD COST.• AVERAGE COST.• MARGINAL COST.


COST FLUCTUATES

Food Cost Change Seasonally.

Inflation.

Labor.


VARIATIONS IN COST %

• LOW MARGIN OF PROFIT.

• HIGH MARGIN OF PROFIT

Date post:	11-Aug-2015
Category:	Economy & Finance
Upload:	rohit-mohan
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Cost

Economy & Finance