This document defines cost and different types of costs such as fixed, variable, direct, and indirect costs. It also discusses the importance and advantages of cost accounting, which includes revealing unprofitable activities, aiding in decision making, and helping with price fixation. Cost accounting is important for financial projections, projected income statements, and forecasting profit, as costs directly impact profit calculations.
This document defines cost and different types of costs such as fixed, variable, direct, and indirect costs. It also discusses the importance and advantages of cost accounting, which includes revealing unprofitable activities, aiding in decision making, and helping with price fixation. Cost accounting is important for financial projections, projected income statements, and forecasting profit, as costs directly impact profit calculations.
to the amount of expenditure (actual or notional) incurred on or attributed to a given thing Costing refers to the technique and process of ascertaining costs
Kinds of Cost Notional
Cost Opportunity Cost Sunk Cost Relevant Cost
Two Important Classification Of Cost Fixed Cost and Variable Cost Direct Cost and Indirect Cost
Fixed Cost The total FC does not change with change with change volume Per unit Fixed cost changes with volume
Should not commit for more fixed cost to achieve
Economies of scale.
Variable cost Total Variable cost changes with change in volume Per unit variable cost does not changes with the change in volume
Advantages of Cost Accounting
Reveals unprofitable activities
locates exact causes of increase in decrease in p & L helps in decision making price fixation optimum level of efficiency cost control value of stock
Why Cost is being discussed ??????
Clients give Projected Statements
Financial Projections Projected Income and Expenditure statement Forecasted profit etc cost of goods sold changes.. Selling price - Cost of goods sold = Profit. If Cost of Goods Sold = Opening stock + direct exp + Purchases Closing Stock . If Closing stock is valued at marginal cost what happens and fi valued at full cost what happens
