COST ACCOUNTING

PGDM – Trimester : I
 Branches of Accounting
Accounting
Accounting

Financial
Financial Cost
Cost Management
Management
Accounting
Accounting Accounting
Accounting Accounting
Accounting
Primarily for the Concerned with the Primarily
Primarily for
for the
the
External Decision Costs of Business Internal
Internal Decision
Decision
Maker or Activities, Products, Maker
Maker or
or to
to
External Services, Assist
Assist
Reporting Departments etc. Management
Management
 Cost
It may be defined as the monetary value of all
sacrifices made to achieve an objective. (i.e. to produce
goods and services).
 Cost Accounting
 The process of identifying and evaluating production
costs.
 A branch of accounting dealing with the
classification, recording, allocation, summarization
and reporting of current and prospective costs and
analyzing their behaviors.
Difference between Cost Accounting
and Financial Accounting
Products Total (Rs.)
Sales 3,00,000
Costs 2,20,000
Profit/(Loss) 80,000
% of Profit /(Loss) to sales 26.67%

Financial records of a particular year show a total profit

of Rs.80,000 that is 26.67 % of sales i.e., Rs.3,00,000. It
is good performance.
 But the cost records revealed the
following facts
Products A (Rs.) B (Rs.) C (Rs.) Total (Rs.)
Sales 1,25,000 75,000 1,00,000 3,00,000

Costs 1,30,000 50,000 40,000 2,20,000

Profit/(Loss) (5,000) 25,000 60,000 80,000

% of Profit (4%) 33.33% 60% 26.67%

/(Loss) to sales
 Classification of Costs

Traceabilit
Behavior Functions
y
Manufacturing
Variable Costs
Direct Costs Costs

Administration
Fixed Costs
Costs

Indirect Costs Semi-Variable Marketing

Costs Costs
Graphical Presentation
 Job
Costing

Absorption Process
Costing Costing
Methods
of
Budgetary
Costing Standard
Costing Costing

Marginal
Costing
 Absorption Costing
 A managerial accounting cost method of expensing all
costs associated with manufacturing a particular product.
 Absorption costing uses the total direct costs and
overhead costs associated with manufacturing a product
as the cost base.
 Some of the direct costs associated with manufacturing a
product include wages for workers physically
manufacturing a product, the raw materials used in
producing a product etc. and the overhead costs includes
all utility costs used in producing the goods.
 Cost Sheet
 Cost Sheet is a statement showing the various
elements of cost for the purpose of ascertainment of
cost of production.
 The Statement summarises the cost of manufacturing
a particular list of products and discloses:
 The Prime Cost
 The Works Cost
 The Cost of Production, and
 The Total Cost
 PARTICULARS
Direct Material Consumed
Specimen of Cost Sheet
Direct Wages (Labour)
Direct Expenses
PRIME COST
Add: Factory Overheads
Less: Sale of Scrap
Add: Opening Work-in-Progress
Less: Closing Work-in-Progress
FACTORY /WORKS COST
Add: Administrative (Office) Overheads
COST OF PRODUCTION
Add: Opening Stock of Finished Goods
Less: Closing Stock of Finished Goods
COST OF PRODUCTION Of GOODS SOLD
Add: Selling and Distribution Overhead
COST OF SALES/TOTAL COST/COST OF GOODS SOLD
Add: Profit/(Loss)
SALES
 Marginal Costing
 Additional, difference
 In Marginal Costing only variable costs are relevant
to decision-making.
 It is a costing system which treats only the variable
manufacturing costs as product costs. The fixed
manufacturing overheads are regarded as period
cost
 Marginal cost is amount at any given volume of
output by which aggregate costs are changed, if
volume of output is increased or decreased by one
unit.
Thank
You