08 Accounting Study Notes
08 Accounting Study Notes
Accounting - 1
Definitions
Cost unit/object is a unit of product or service in relation to which costs
are ascertained. Stated simply: of what are you trying to find the cost?
Composite cost unit is made up of two parts. (e.g. average cost per
patient per day)
Direct cost can be directly related to a specific product or saleable
service.
Indirect Cost/overhead cannot be economically identified or traced to a
specific product or service.
Allocate means assign a whole item of cost to single cost unit.
Apportion means spread costs over two or more cost units.
Concepts
Cost allocation and apportionment
Explanation
Tracing Costs of products A, B ad C (How do we divide the production
overheads fair/equally?)
Absorption costing
Approach to glow of overhead costs (Traditional Approach)
o Identify overhead costs and identify cost centres that accumulate
costs.
Session 8
Accounting - 3
o Steps
1. Allocate indirect costs to cost centres