of 11 /11
COST & COST ELEMENTS Presentation by Nithin Easo George MACFAST

Cost and cost Elements

Embed Size (px)


concepts And elements of cost

Text of Cost and cost Elements

  • 1.COST&COST ELEMENTS Presentation byNithin Easo George MACFAST

2. Basic Concept of CostCost: Amount of expenditure incurred on agiven thing.An expenditure made to secure an economicbenefit, generally resources that promise toproduce revenue. The sources may havetangible substance(material) or they may takethe form of labour and services.-Crowning shield 3. The amount of expenditure incurred orattributed to a given thing-ICMA Cost Accounting- the application of costingand cost accounting principles , methods andtechniques to the science, art and practice ofa cost control. It includes the presentation ofinformation derived there from the purposeof managerial decision making 4. Elements of cost1.Material2.Labour3.Expenses1(a)Direct material: All type of raw material issued Raw material purchased Transferred from one cost centre to another costcentre Primary packing material 5. 1(b) Indirect material cost: Stores used in maintenance of machinery,building etc Stores used by service departments Material which have very low cost2(a) Direct labour: Engaged on the actual production of theproduct 6. Supervision, maintenance and tool setting Inspectors , analysts etc2(b) Indirect labour: Apportioned or absorbed by cost centres or costunits3(a) Direct or chargeable expense: Incurred on a particular product or job Eg :Excise duty, royalty 7. 3(b) Indirect expenses:Eg: Rent, insurance, municipal taxes, salary ofmanager , welfare expenses , power and fuel etc4.Overhead:Cost of indirect material and indirect labour &other expensesa) Factory or works overheadsEg: Dep on P,M&B, insurance charges on fixedassets 8. b) Office &administrative overhead:Expenses in direction, control andadministrationEg :Office rent, light, heat, salaries,investigation , experiments etcc) Selling and Distribution overhead:Eg: Sales and office expenses, packing and freegift, warehouse rent, warehouse staff salariesetc 9. Nature and variability Fixed cost-building rent, salaries to officestaff, salary to manager , factory rent,insurance of building , plant and machineryetc Semi-variable cost-partly affected byfluctuations in the volume of output orturnover variable cost-Materials , depreciation andrepairs of machine, salesmen commission ,fuel &packing expenses etc 10. Controllable cost- cost of raw material iscontrolled by purchasing in larger quantities Non-controllable cost-factory rent ,managerial salaries , light charges etc Opportunity cost-Value of benefit sacrificed infavor of an alternative course of action 11. THANK YOU