Introduction Acc 116 Costing The ascertainment of cost by applying accounting and costing principles, methods and techniques

s Cost accounting A method of ascertaining costs with the ultimate aim to plan and control the operation of a business . Management accounting A method of providing information to management in order to assist in planning and control activities Financial accounting A method of analysing, classification and recording financial transactions for the purpose of finding out the financial position of the business Cost The amount spent on a thing or activity Cost unit The quantitative unit of product or service in relation to which cost can be ascertained. Examples of cost units include jobs, contracts, kilogram of material, kilowatt hours, passenger miles and cost per patient day. Cost centers A method by which costs are gathered together.Examples The plating shop, The works office, The 1000 ton power press, The milling machine 9consisting of 20 similar machines), Sale representatives, invoice section, Inspection section Classification of cost *Behavior -fixed cost -variable cost -semi-variable or semi fixed cost -step cost *Nature -material -labour -expenses *Function -production cost -administration cost -marketing cost -finance cost -research cost -development cost *Controllability -controllable cost -uncontrollable cost *Normality -normal cost -abnormal cost *Time when computed -historical cost -future cost Types of cost The costs of a cost units are made up of material, labour and other expenses.These three costs are analysed into direct cost and indirect cost Direct cost are charged directly to a cost unit. Direct cost include direct material, ditrect labour and direct expenses Indirect cost relate to more than one cost unit. They cannot charged directly to a cost unit, Indirect cost include indirect material, indirect labour and indirect expenses. Indirect costs are also referred to as overhead The total of direct material, direct labour and direct expenses make up prime cost