Notesale: Turn your study into money

Document Preview

Extracts from the notes are below, to see the PDF you'll receive please use the links above

---

Cost Accounting is concerned with cost accumulation for inventory valuation to meet
the requirement of external reporting and internal profit measurement
...


It is the establishment of budgets, standard costs and actual costs of operations,
processes, activities or products and the analysis of variances, profitability or the
social use of funds
...


Cost Accounting is the ascertainment, recording, analyzing, interpreting and reporting
of cost data for stock valuation, decision making, planning and control
...
That is why Cost Accounting is
also called Internal Accounting because they are meant for internal use i
...
for the
management alone, not even for the employees
...
It can therefore be classified into two (2);



Expired cost- These are expenses and they are the cost of resources that have
been consumed in generation of revenue in a given course
...


Costs objective: It is any activity where the measurement of a cost is desired
...

Cost Unit:
services
...

a) Impersonal cost centre- cost centre that does not consist of a name
...

d) Process cost centre- consists of a specific process or continuous sequence of
operations
...

f) Profit centre- it is a revenue centre under which the manager is responsible for
costs and revenue
...


Purposes of Cost Accounting
a
...

b
...

c
...

d
...


Limitations of Cost Accounting
a
...

b
...

c
...


Requirements for the Installation of Cost Accounting System
1
...
A system in any organization can either be an integrated system or an
independent (interlocking) system
...
The Impact of Electronic Data Processing (EDP)
The impact of an EDP system should be considered in installing a cost accounting
system
...


3
...


4
...


5
...


Reasons for Cost Classification
Stock valuation: Costs are classified for the purpose of determining the cost of
manufacture of a product or rendering a service
...


Control: Costs are classified for the purpose of exercising control on these costs
...


Method of Cost Classification
1
...
MATERIAL COST
i
...
Indirect material cot
B
...
Direct labour cost
ii
...
EXPENSES
i
...
Indirect expenses

2
...
Direct cost: The cost can be easily traced to a cost
...

b
...

Example includes indirect material, indirect labour and indirect expenses
...
CLASSIFICATION BY FUNCTION
This refers to the classification of cost according to activities;
a
...

b
...

c
...
g
...

d
...


4
...
Variable costs: These are costs that change whenever production volume
changes e
...
direct cost, direct material
...
Fixed costs: These are cots that do not change with the level of production
...
Semi-variable costs: They have both elements of fixed and variable costs e
...

telephone charges, electricity charges
...
Step costs: This cost remains fixed at certain level of activity while if the level
of activities increases, it will increase
...
CLASSIFICATION BY DEPARTMENT
Cost is classified into two in an organization;
a
...

b
...

PDC
Prime cost
Factory overheads
Total production costs
SDC
Material cost
Security cost
Admin and selling

6
...
Product cost - Cost that have included in the cost of a product
...
g
...
Period cost- They are not incurred directly or indirectly on the material produced
...


7
...
e
...

Under controllable costs, a manager can only be held liable for an expense he has
power to control while uncontrollable cost, as the name implies, is the cost that the
manager does not have control
...
RELEVANT AND IRRELEVANT COSTS
Relevant Costs: Important for the decision you are about to make or the step you are
about to take e
...
opportunity cost, future cost
...
g
...


CODING
A Code is a system of symbols designed to be applied to classify set of item to give a
brief accurate reference, facilitating entry, collation and analysis (CIMA)
...

Coding therefore is a system of attaching symbols to items of materials, stocks or
expenses in other to facilitate classification, easy reference and processing
...


Reasons for Coding
i
...

ii
...
To aid processing, particularly important with computer based system
...
To reduce data storage as code is shorter than description
...
T (2007) identified the following as features of a good coding system;
1
...


2
...
For
computerized system, a numeric code would be preferred
...

Example of bad notation - 56-203/291:8

3
...
Where identical codes are used,
there could be errors e
...
if a code for raw material was 7-4624 and a code for a
bought-in component was 6-4624, confusion may occur not withstanding that the
codes are unique
...
Brevity
Codes used should not be lengthy but be as a brief as possible consistent with meeting
the requirements of the classification system
...


5
...
This
will make the discovery of easy character easy and facilitate processing
...
Non-Ambiguity
The notation used for the coding system should be meaningful, actual codes should
avoid ambiguity
...


8
...
For example, part of the code of vehicle tires
could indicate the actual size of the tire
...
Mnemonic
At times, in an alphabetic system, actual code used is derived from the item's
description or name

---