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Group 4 Presentation Lect - 01 - Intro To CMA

This document provides an introduction to cost and management accounting. It defines cost accounting as the application of accounting principles to ascertain and analyze costs. It outlines the purposes of cost accounting such as cost ascertainment, control, planning, and performance evaluation. It also distinguishes between financial and cost accounting. Finally, it discusses principles of cost accounting including classifying costs by function, behavior, and element as well as concepts like cost units, cost centers, cost allocation, apportionment, and cost drivers.

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Humphrey Osaigbe
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60 views11 pages

Group 4 Presentation Lect - 01 - Intro To CMA

This document provides an introduction to cost and management accounting. It defines cost accounting as the application of accounting principles to ascertain and analyze costs. It outlines the purposes of cost accounting such as cost ascertainment, control, planning, and performance evaluation. It also distinguishes between financial and cost accounting. Finally, it discusses principles of cost accounting including classifying costs by function, behavior, and element as well as concepts like cost units, cost centers, cost allocation, apportionment, and cost drivers.

Uploaded by

Humphrey Osaigbe
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Group 4

LECTURE 1

An Introduction to
Cost & Management Accounting
Cost Accounting
Cost Accounting is defined as the
application of accounting and costing
principles, methods and techniques
in the ascertainment of cost and the
analysis of savings and excesses as
compared with previous experience or
standard.

Group 4 Participants. Memba 7. Lagos Business School 2-2


Purposes of Cost Accounting
 Cost Ascertainment
 Cost Control
 Planning
 Standard Setting
 Performance Evaluation
 Inventory Management
 Setting Selling Prices
 Identifying Profitable and Unprofitable activities
 Identification of Wastage & Inefficiencies

Group 4 Participants. Memba 7. Lagos Business School 2-3


Differences Between Financial &
Cost Accounting
 Purpose
 Legal Requirements
 Users
 Time Span
 Degree Details
 Unit of Measures
 Time Focus
 Format
 Frequency of Reports
Group 4 Participants. Memba 7. Lagos Business School 2-4
Principles in Cost Accounting
 Cost:
Cost is the amount of expenditure
(notional or actual) incurred on or
attributable to a specified thing or activity.
Material Cost = Price × Quantity
Labour Cost = Rate * Hours Worked

Group 4 Participants. Memba 7. Lagos Business School 2-5


Principles in Cost Accounting Contd.
 Classification of Costs:
1. Classification by function
Production Costs

 Administrative Costs
 Selling & Distribution Costs
 Research & Development Costs
2. Classification by Behaviour
 Fixed Costs
 Variable Costs
 Semi-variable Costs
 Semi-Fixed Costs

Group 4 Participants. Memba 7. Lagos Business School 2-6


Principles in Cost Accounting Contd.
3. Classification by Nature
Direct Costs

 Indirect Costs
4. Classification by Controllability
 Controllable Costs
 Uncontrollable Costs
5. Classification by Element
 Material Cost
 Labour Costs
 Overhead Costs

Group 4 Participants. Memba 7. Lagos Business School 2-7


Principles in Cost Accounting Contd.
6. Classification by Normality
 Normal Costs
 Abnormal Costs

7. Classification by Time Focus


 Sunk Costs
 Pre-determined/Estimated Costs

8. Classification by Avoidability
 Avoidable Costs
 Unavoidable Costs

Group 4 Participants. Memba 7. Lagos Business School 2-8


Principles in Cost Accounting Contd.
 Cost Unit or Cost Object
A cost object is any activity for which a separate measurement of
costs is desired or this is a unit of a product or service in relation to
which costs are ascertained. E.g. Cost of product or service.
 Cost Centre
This is a location, a person or an item of equipment or a group of
these for which cost may be ascertained or used for the purpose of
cost control.
 Types of Cost Centres
 Personal Cost Centre
 Impersonal Cost Centre
 Production Cost Centre
 Service Cost Centre

Group 4 Participants. Memba 7. Lagos Business School 2-9


Principles in Cost Accounting Contd.
 Cost Allocation
This is the assigning of the whole item of cost or revenue to a cost
unit, cost centre account or time period.

 Cost Apportionment
This involves spreading or sharing of cost or revenue over two or
more cost centres, accounts or time of period.

 Cost Driver
A cost driver can be defined as any factor whose change causes a
change in the total cost of an activity. Examples of cost drivers
include direct labour hours, machine hours, units of output and
number of production run set-ups.

Group 4 Participants. Memba 7. Lagos Business School 2-10


Group 4

END

CHAPTER 1

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