際際滷

際際滷Share a Scribd company logo

Cost accounting and analysis

Download as PPTX, PDF
B
Berkan Ta巽脹

Cost accounting is a process that collects, records, analyzes, and evaluates costs to advise management on the most cost-efficient course of action. It originated during the Industrial Revolution to help managers understand complex business costs. Costs are classified as either variable, meaning they change with production volume, or fixed, remaining constant regardless of production levels. Key cost objects include direct materials, direct labor, and manufacturing overhead. Analyzing these cost objects allows for more accurate cost calculation and identification of inefficient activities to improve cost efficiency.

1 of 14
Downloaded 31 times
Cost Accounting and Analysis BERKAN TAI 140065 INDUSTRIAL ENGINEERING ENGL201 - GROUP 24
Cost accounting is a process of collecting, recording, classifying, analyzing, summarizing, allocating and evaluating various alternative courses of action & control of costs. Its goal is to advise the management on the most appropriate course of action based on the cost efficiency and capability. Cost accounting provides the detailed cost information that management needs to control current operations and plan for the future.
ORIGINS OF COST ACCOUNTING All types of businesses, whether service, manufacturing or trading, require cost accounting to track their activities. Cost accounting has long been used to help managers understand the costs of running a business. Modern cost accounting originated during the Industrial Revolution, when the complexities of running a large scale business led to the development of systems for recording and tracking costs to help business owners and managers make decisions. In the early industrial age, most of the costs incurred by a business were what modern accountants call variable costs because they varied directly with the amount of production. Money was spent on labor, raw materials, power to run factory, etc. in direct proportion to production. Managers could simply total variable costs for a product and use this as a rough guide for decision-making processes.
1)Variable Costs A variable cost is the most important part of cost accounting. It is an expense that changes with production volume. Variable costs are those costs that vary depending on a organization's manufacturing output; these costs rise as production increases and fall as production decreases. Why are some costs fixed and other costs variable? Think about total material costs in a company. Total material costs are variable costs because the material is bought, only when the company need it. The company needs more material, when the orders increase. So that, this also increases the production and manufacturing; and as more bicycles are produced, it costs more for the company.
2-Fixed Costs A fixed cost is a cost that remains constant even if there is a decrease or increase in the amount of goods and services sold or manufactured. Fixed costs are the ones that have to be paid by an organization, independent of any business service. They are not affected by the changes in any activity in a company
A fixed cost is an operating cost of a job that can not be prevented in any case of the volume of production. Fixed costs are generally used in break-even analysis to compute manufacturing, volume of sales and pricing even if a firm generates neither loss nor profit. Variable costs and fixed costs shapes the structure of total cost in a firm; that plays a very big role in maintaining its profitability
3-Cost Efficiency Keeping costs low and having cost efficient maintains a huge benefit if a company have a strong and ambitious work. A strong competition around the world has also made decision errors. That caused a need of cost accountants and cost efficiency. In order to make a cost efficient, prices should be kept in low levels. Many firms have become aware of the need to improve their cost accounting systems, in this way; they can manufacture more accurate cost information to calculate the cost of their services and products, pinpoint loss-making activities and analyze profits by products, sales outlets, customers, markets, and monitor trends in costs over a long period of time
Analysis of Cost Objects A cost object is any item for which costs are being separately measured. It is a key concept used in managing the costs of a business. Here are some types of cost objects: 1)Direct Materials 2)Direct Labor 3)Manufacturing Overhead
Direct Materials Costs that are assigned to cost objects are two big categories that are direct and indirect costs. Both of them can be parted into direct and indirect materials. Direct material costs indicate those material costs that can be simply and specifically defined with a special cost object. In production firms where the cost object is a product, after observing physically they can be used to measure the quantity consumed by each of the products and the cost of direct can be directly assigned to them. Shortly, direct materials become part of a normal product. For instance, iron in the production of distinct types of bicycles can be directly specified with each particular type of bicycles
Direct Labor Direct labor costs are that can be directly identified with a specific cost object. Observation of products physically is used to measure the quantity of labor used to produce a specific product or supply a service. The direct labor costs are products that covers the cost of converting the raw materials into a product or service, such as the expenses of the forklift truck drivers engaged in the manufacturing process in the production of aluminum production. Indirect labors also exist as well as direct labor exists in a company. Indirect labors are the opposite word of direct labor in analyzing cost objects. For example, an engineer is an indirect labor, because, they are not directly in contact with product.
Cost accounting and analysis
Manufacturing Overhead Costs Manufacturing overhead cost is the most simplistic and traditional costing systems. It assigns indirect costs to cost objects using only an overhead rate. These overhead rates may change according to the related department. Because, some departments or units use manufacturing overhead more than other departments. For example, electricity, rent, insurance do not cost same with the other units of the manufacturing company. It means that if a company produces an A product. This product is assembled and processed in different units of the company
All of these examples and statements are still used in the companies to calculate costs of products according to their related department. Using of accounting origins and classifying of cost objects helps the companies grow faster.. CONCLUSION
THANK YOU VERY MUCH

More Related Content

Cost accounting and analysis

  • 1. Cost Accounting and Analysis BERKAN TAI 140065 INDUSTRIAL ENGINEERING ENGL201 - GROUP 24
  • 2. Cost accounting is a process of collecting, recording, classifying, analyzing, summarizing, allocating and evaluating various alternative courses of action & control of costs. Its goal is to advise the management on the most appropriate course of action based on the cost efficiency and capability. Cost accounting provides the detailed cost information that management needs to control current operations and plan for the future.
  • 3. ORIGINS OF COST ACCOUNTING All types of businesses, whether service, manufacturing or trading, require cost accounting to track their activities. Cost accounting has long been used to help managers understand the costs of running a business. Modern cost accounting originated during the Industrial Revolution, when the complexities of running a large scale business led to the development of systems for recording and tracking costs to help business owners and managers make decisions. In the early industrial age, most of the costs incurred by a business were what modern accountants call variable costs because they varied directly with the amount of production. Money was spent on labor, raw materials, power to run factory, etc. in direct proportion to production. Managers could simply total variable costs for a product and use this as a rough guide for decision-making processes.
  • 4. 1)Variable Costs A variable cost is the most important part of cost accounting. It is an expense that changes with production volume. Variable costs are those costs that vary depending on a organization's manufacturing output; these costs rise as production increases and fall as production decreases. Why are some costs fixed and other costs variable? Think about total material costs in a company. Total material costs are variable costs because the material is bought, only when the company need it. The company needs more material, when the orders increase. So that, this also increases the production and manufacturing; and as more bicycles are produced, it costs more for the company.
  • 5. 2-Fixed Costs A fixed cost is a cost that remains constant even if there is a decrease or increase in the amount of goods and services sold or manufactured. Fixed costs are the ones that have to be paid by an organization, independent of any business service. They are not affected by the changes in any activity in a company
  • 6. A fixed cost is an operating cost of a job that can not be prevented in any case of the volume of production. Fixed costs are generally used in break-even analysis to compute manufacturing, volume of sales and pricing even if a firm generates neither loss nor profit. Variable costs and fixed costs shapes the structure of total cost in a firm; that plays a very big role in maintaining its profitability
  • 7. 3-Cost Efficiency Keeping costs low and having cost efficient maintains a huge benefit if a company have a strong and ambitious work. A strong competition around the world has also made decision errors. That caused a need of cost accountants and cost efficiency. In order to make a cost efficient, prices should be kept in low levels. Many firms have become aware of the need to improve their cost accounting systems, in this way; they can manufacture more accurate cost information to calculate the cost of their services and products, pinpoint loss-making activities and analyze profits by products, sales outlets, customers, markets, and monitor trends in costs over a long period of time
  • 8. Analysis of Cost Objects A cost object is any item for which costs are being separately measured. It is a key concept used in managing the costs of a business. Here are some types of cost objects: 1)Direct Materials 2)Direct Labor 3)Manufacturing Overhead
  • 9. Direct Materials Costs that are assigned to cost objects are two big categories that are direct and indirect costs. Both of them can be parted into direct and indirect materials. Direct material costs indicate those material costs that can be simply and specifically defined with a special cost object. In production firms where the cost object is a product, after observing physically they can be used to measure the quantity consumed by each of the products and the cost of direct can be directly assigned to them. Shortly, direct materials become part of a normal product. For instance, iron in the production of distinct types of bicycles can be directly specified with each particular type of bicycles
  • 10. Direct Labor Direct labor costs are that can be directly identified with a specific cost object. Observation of products physically is used to measure the quantity of labor used to produce a specific product or supply a service. The direct labor costs are products that covers the cost of converting the raw materials into a product or service, such as the expenses of the forklift truck drivers engaged in the manufacturing process in the production of aluminum production. Indirect labors also exist as well as direct labor exists in a company. Indirect labors are the opposite word of direct labor in analyzing cost objects. For example, an engineer is an indirect labor, because, they are not directly in contact with product.
  • 12. Manufacturing Overhead Costs Manufacturing overhead cost is the most simplistic and traditional costing systems. It assigns indirect costs to cost objects using only an overhead rate. These overhead rates may change according to the related department. Because, some departments or units use manufacturing overhead more than other departments. For example, electricity, rent, insurance do not cost same with the other units of the manufacturing company. It means that if a company produces an A product. This product is assembled and processed in different units of the company
  • 13. All of these examples and statements are still used in the companies to calculate costs of products according to their related department. Using of accounting origins and classifying of cost objects helps the companies grow faster.. CONCLUSION