Discretionary fixed costs are those which are set at fixed amount for specific time periods by the management in budgeting process. These costs can, therefore, be reduced or entirely eliminated as demanded by the circumstances. The Meaning of Cost Accounting By: Maintenance and up keep of factory premise is also fixed manufacturing overhead.
Therefore, per unit cost comes down. Power and fuel to consumed in the production process varies with No. Value of the intercept a will give you the fixed cost and value of the slope b will give you the variable cost.
Allocating by labor hours distorts the financials of each product.
Without warehousing and inventory costs, Amazon avoided being stuck with costs if businesses were slow. A company is manufacturing table fans. It should be treated as purely fixed.
How much variable cost get reduced? These costs are indirect costs. If a salesman is given a salary which is partly fixed and partly variable, it is termed as semi-variable.
Examples of such costs are research and development costs, advertising and sales promotion costs, donations, management consulting fees etc. Should the company create internal production facilities?
It reduces the variable cost but increases the fixed cost. The company has the choice at higher production level to cut price and achieve still higher sales volume. The variable cost of the frame is Rs.
However, the term cost cannot be exactly defined. Due to the technological developments in all fields, cost reduction has also come within the ambit of cost accounting. The overhead allocation is therefore misaligned with actual production constraints because the opportunity cost of producing one unit of A is one unit of B, but the current allocation system prices it like the opportunity cost is 6 units of B.
Cost accounting is, thus, concerned with recording, classifying and summarizing costs for determination of costs of products or services, planning, controlling and reducing such costs and furnishing of information to management for decision making.
Indirect costs are termed as overhead. These are also termed as prime cost. Fixed costs can be further classified into: Therefore, latest administrative overhead adjusted for any known change may be taken as projected cost.
In time, due to the competitive nature of the market, it was realized that ascertaining of cost is not as important as controlling costs. On the basis of past 12 month cost data classify each of the four costs, namely, factory overhead, administrative overhead and prime costs into fixed and variable categories.
Cost accounting started to be considered more as a technique for cost control as compared to cost ascertainment. A salesman gets fixed salary plus incentive bonus on No. These costs exist in those circumstances where specific relationship exists between input and output.
Once the demand increases above the breakeven level units stated and expected to remain stable there or grow further, the company can create additional facilities. You can only make units of these combined, obviously units of A delivers more profit to the company.
For the purpose of classification of overheads into fixed and variable it is necessary to study the nature of each and every cost element. Delivery van incurs monthly maintenance as well as running cost per mile. On the basis of cost analysis carried out in Illustration 1, find the cost, sales and profit between — units of production level.
Costs are classified as per variability into three categories — variable, fixed and semi-variable. These costs are also termed as managed or programmed costs. Investment for this project is Rs. For example, raw material required per unit varies directly with the No.Cost Accounting Essay Words 5 Pages Accounting is the system of recording and summarizing business and financial transactions and analyzing, verifying, and reporting the results; (Merriam-Dictionary, ).
Meaning of Cost Accounting Previously, cost accounting was considered to be a technique for the ascertainment of costs of products or services on the basis of. Read The Meaning of Cost Accounting free essay and over 88, other research documents.
The Meaning of Cost Accounting. Meaning of Cost Accounting Previously, cost accounting was considered to be a technique for the ascertainment of costs of products. Sep 27, · Each of the cost accounting systems discussed in the articles accomplishes some management goals better than other systems, but there are tradeoffs involved with each.
Different nations approach their cost accounting systems differently due at least in part to differences within cultures. Cost Accounting Essay. Account Cost accounting is a method of accounting in which all costs incurred in carrying out an activity or accomplishing a purpose are collected, classified, and recorded.
This data is then summarized and analyzed to arrive at a selling price, or to determine where savings are possible. Read this essay to learn about: 1. Meaning of Cost 2. Cost Elements 3. Direct Costs and Indirect Costs 3. Classification. Essay # 1. Meaning of Cost: Cost is the sacrifice of resource to achieve an objective.
In relation to production, cost is sacrifice of resource to produce goods. Cost is measured in monetary term.Download