Business Accounting For Non Specialists

Direct labor assembly costs are, by their nature, directly traceable to individual products. Therefore the relevant cost driver for this cost is the number of Direct Assembly Labor Hours. The other 21 cost categories are indirect costs.

Another variable cost to consider is continuing education and training for employees. Like any business, it is important for those in the health and fitness field to stay on top of current trends in the industry. From time to time it may be beneficial and necessary for full-time employees to attend seminars or training sessions to expand their knowledge in the industry. This is a good example of a cost that would not be incurred on a regular basis, but should be budgeted for at least once a quarter. Two variable costs that organizations overlook are office supplies and fuel. In every organization employees use office supplies. In many organizations fuel is needed for

Ongoing costs such as human resources (staffing needs) functions, development cost of external reporting and investors relations

Bhimani, A., Horngren, C., Datar, S., Rajan, M. et al. (2012) Management and Cost Accounting. 5th ed. Edinburgh: Prentice Hall, p.369 - 378.

Other direct costs are the expenditures that cannot be considered as a direct material cost, direct labor cost or indirect cost. These are expenditures incurred as the direct consequence of manufacturing a product and can be traced in full to the product. Examples of direct costs are:

Traditional costing is based upon three main objectives. The first process allows, management to group costs by

A direct cost can be traced to a product or service which includes: Direct labor- which is the cost of the labor that’s directly connected to a product or services. Direct labor is sometimes called touch labor, since direct labor workers typically touch the product while it is being made.( Ray H. Garrison, Eric W. Noreen and Peter C. Brewer p 39-40) An example of direct labor is an assembly line worker. Labor cost that cannot be physically traced to the creation of products, or that can be traced only at great cost and inconvenience, are considered to be indirect labot.( Ray H. Garrison, Eric W. Noreen and Peter C. Brewer p 40) Direct material are those materials that become an integral part of the finished product and whose cost can be traced to the finished product.( Ray H. Garrison, Eric W. Noreen and Peter C. Brewer p39-40) Manufacturing overhead is the third element so manufacturing cost, it includes all costs of manufacturing except direct materials and direct labor. Manufacturing overhead includes items such as indirect materials; indirect labor; maintenance and repairs on production equipment; and heat and light, property taxes, depreciation, and insurance on manufacturing facilities. Only cost associated with operating the factory are consider to be manufacturing overhead cost. A company also incurs other costs associated with its selling administive functions, but these costs are not included as part of manufacturing overhead. Only those

The decision to implement a new or change a current product costing system requires a lot of research and pre-planning. In order to determine the most effective product costing system management must decide which costs should be included in the product costs, at what level will direct costs be tracked, how indirect costs will be structured, and when to capture the indirect costs. Once all the costs have been identified and organized into fixed, variable, or overhead categories, management must then decide which product costing system would provide the output information necessary for important business decisions.

One positive aspect of adopting the variable costing system that was described in the text, is some of the staff members do not seem to understand absorption costing, the current costing method. When using absorption costing, income is affected by sales volume and production volume changes. Variable costing may be more suitable for management who do not have a financial background. Because management needs to be able to make informed decisions, it is imperative that the financial information provided to them is meaningful.

Primarily cost and management accounting is meant for providing information to the management to enable them making planning and control. Budgeting and budgetary control are tools which can be used by the management to efficiently discharge both the management functions. Budgeting is formal management plan of actions incorporating estimated qualitative and/quantitative facts and figures. Cost analysis, on the other hand, is a process of evaluating, and analysing cost data according to their nature and behaviour to changing circumstances. Effective cost analysis is a prerequisite for preparing different meaningful flexible budgets and also for making effective comparison between budgeted and actual results. The rest of the paper consists of

As alluded in the introduction, the role and effective use of costing techniques may vary depending on a certain number of contextual variables and objectives. This section explores these variables and thus provides a critical assessment of the roles and uses of the techniques.

Cost and management accounting is an integral element in preparation of an entity’s financial reports. Cost accounting consists of various branches, including; job and process costing, absorption costing, traditional costing and activity based costing. An efficient costing system allows managers and other users of financial reports to make decisions to better the company, in reducing and streamlining costs, to improve overall profits. The way in which managers achieve this can be a rigorous and time consuming task, however, if a costing system can be perfected, productivity and general cost reduction can be achieved and an overall more efficient operation of the business will ensue. This essay will critically discuss factors in which a business consider in deciding on a costing system to implement and operate when establishing a costing system. In this article I will describe the different methods of costing, explain why I believe activity based costing is the most efficient method, and provide a real world example to support my claim.

Direct costs is a cost that can be followed straightforwardly to (or related to) a particular cost

• by traceability: Manufacturing costs are classified as either direct or indirect. Indirect costs are also known as overhead or burden. indirect costs are those costs which cannot be specifically associated with a particular cost object (A cost object is any organizational or physical entity to which costs are assigned or charged. A cost object might be a completed unit of product, a subassembly, a department, a worker in the department, a product line, or en entire division of a larger corporation.) When we talk about manufacturing costs, the typical cost object is a unit of  output. Selling and administrative expenses may also be traced to products, product lines, organizational units [e.g., divisions or regions]. Such tracing MAY be useful in determining the relative profitability of the associated cost object [products or division, for example]. However, it is important to remember that S & A expenses are never inventoried and are never written off as part of cost of goods sold.

Direct costs are costs directly related to producing the products and services of a project. On the other hand, indirect costs are costs not directly related to a project’s products or services, but are indirectly related to performing the project.