Scribd
Upload
42 views

Cost Concepts

Management accounting refers to a system that helps managers with planning, controlling, and decision-making by providing relevant financial and non-financial information. It involves identifying, measuring, accumulating, interpreting, and communicating information to assist managers in fulfilling organizational objectives. Cost accounting is mainly concerned with product costing techniques and deals only with cost and price information, while management accounting has a wider scope.

Uploaded by

Ankit Batra
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
42 views

Cost Concepts

Management accounting refers to a system that helps managers with planning, controlling, and decision-making by providing relevant financial and non-financial information. It involves identifying, measuring, accumulating, interpreting, and communicating information to assist managers in fulfilling organizational objectives. Cost accounting is mainly concerned with product costing techniques and deals only with cost and price information, while management accounting has a wider scope.

Uploaded by

Ankit Batra
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 12

Management Accounting

• It refers to a system of collection and presentation of


relevant information, financial as well as other,
relating to an enterprise for helping managers in
planning, controlling and decision making.
• Management accounting may be defined as the
process of identification, measurement,
accumulation, interpretation and communication of
information that assists managers in specific
decision- making with in the framework of fulfilling
the organizational objectives.
Comparison between Financial and
Management Accounting
• Internal and External uses
• Emphasis on the future
• Generally accepted accounting standards
• Relevance and Flexibility of information
• Emphasis on precision
• Organizational focus
• Freedom of choice
• Use of other disciplines
Cost Accounting and Management
Accounting
• Sometimes these two terms are used
interchangeably.
• But these two are quite different from each
other.
• Cost accounting is mainly concerned with the
techniques of product costing and deals with
only cost and price information.
• The scope of management accounting is wider
than cost accounting
Cost Concepts
• Cost Unit – A unit of quantity of product ,
service or time , in relation to which cost may
be ascertained or expressed
• Examples

Industry Cost Unit


Building House or Square Foot area
Cement Tonne
Cables Meter
Power Kilowatt Hour
Automobiles Number
Cost Centre
• For the purpose of ascertaining costs, the
whole organization is divided into small parts
or sections. Each small section is treated as
cost centre of which cost is ascertained.
• Technically cost centre is defined as ‘ a
location, person or item of equipment for
which costs may be ascertained and used for
the purpose of cost control’
Mini Case
• Bakoya is a japanese company that makes
packages which hold the silicon chip in electronic
computers. The packages or containers are made
from alumina powder
• The powder is first made into sheets and wiring
patterns are then screen printed on the sheets.
The sheets are next converted into interconnected
stacks and the stacks are baked in ovens. The final
step is quality control.
• Identify the main cost centers of Bakoya Factory
Following are the various cost centres of bakoya
factory

 Sheet making department


 Screen Printing Department
 Stack making department
 Baking department
 Quality Control department
Classification of the cost
• Basic Classification:
 Direct Material
 Direct Labor
 Overheads
• Factory overheads
• Office overheads
• Selling and distribution overheads
On the basis of Cost Behavior

 Fixed Cost
 Variable Cost
 Semi Variable cost
Fixed Cost – Fixed costs are those which remain
fixed in total with increase or decrease in the
volume of output or activity for a given period of
time or for a given range of output.

Fixed cost per unit vary inversely with the volume


of production
Variable Cost - Variable costs are those costs
that vary directly and proportionately with the
output. There is a constant ratio between the
change in the cost and the change in the level
of output.

However it should be noted that it is only the


total variable costs that change as more units
are produced; the per unit variable cost
remains constant.
• Semi Variable – These costs are made up of
fixed and variable elements.
Because of the variable component, they
fluctuate with volume; because of the fixed
component, they do not change in direct
proportion to output.

You might also like