MUSINGS

The term ‘cost’ means the amount of expenses [actual or notional] incurred on or attributable to specified thing or activity. As per Institute of Cost and Work Accounts (ICWA) India, Cost is ‘measurement in monetary terms of the amount of resources used for the purpose of production of goods or rendering services.' ELEMENTS OF COST Cost of production/manufacturing consists of various expenses incurred on production/manufacturing of goods or services. These are the elements of cost which can be divided into three groups : Material, Labour and Expenses Material For production of goods and even in some cases rendering of services, material is needed. This material can be in the form of Raw material or finished goods. As discussed in class a majority of the products in the world that you see are a result of assembly- from the ball point pen in your hand to the expensive handset. This in turn can be classified as direct material or indirect material As the name indicates direc

IMPORTANCE OF COST ACCOUNTING For Management Helps in determination of cost Aids price fixing Reduction in cost Eliminates wastage Helps in finding unprofitable activities Helps cross check accuracy of financial accounts Helps in determining selling price Aids Inventory management Helps in Estimating for tenders For  Employees Incentive Plans Control of Turnover

Cost Accounting is the process of determining and accumulating the cost of any activity performed by a firm. It is the start of the process for control of costs. It covers classification, analysis and interpretation of costs. It is an internal document that aids managerial decision making. ICMA London defines it as"The process of accounting from the point at which expenditure is incurred or committed... to the establishment of the ultimate relationship with the cost centres and cost units." OBJECTIVES OF COST ACCOUNTING Determine selling price Cost Control Provide information for decision making Determine costing profit Aids preparation of financial statements DIFFERENCE BETWEEN FINANCIAL ACCOUNTING AND COST ACCOUNTING There are a number of differences between cost accounting and financial accounting, which are as follows: Audience . Financial accounting involves the preparation of a standard set of reports for an outside audience, which may include investors

Illustration 1: The expenses for the production of 5,000 units in a factory are given as follows: Illustration 2: The following information at 50% capacity is given. Prepare a flexible budget and forecast the profit or loss at 60%, 70% and 90% capacity. Illustration 3: The following information relates to a flexible budget at 60% capacity. Find out the overhead costs at 50% and 70% capacity and also determine the overhead rates:    

The following points highlight the three types of budgets Prepared in budgetary control, i.e, (A)    Classification According to Time, (B) Classification on the Basis of Functions, and (C) Classification on the Basis of Flexibility. (A) Classification According to Time: 1.  Long Term Budget: The budgets are prepared to depict long term planning of the business. The period of long term budgets varies between five to ten years. The long term planning is done by the top level management; it is not generally known to lower levels of management. Long time budgets are prepared for some sectors of the concern such as capital expenditure, research and development, long term finances, etc. These budgets are useful for those industries where gestation period is long i.e., machinery, electricity, engineering, etc. 2.  Short-Term Budget: These budgets are generally for one or two years and are in the form of monetary terms. The consumers goods industries like sugar, cotton, textile, et

What is Budgetary control? Budgetary control   is the process by which budgets are prepared for the future period and are compared with the actual performance for finding out variances, if any. The comparison of budgeted figures with actual figures will help the management to find out variances and take corrective actions without any delay. Objectives of Budgetary Control The  main objectives of budgetary control  are given below: 1. Defining the objectives of the enterprise. 2. Providing plans for achieving the objectives so defined. 3. Coordinating the activities of various departments. 4. Operating various departments and cost centres economically and efficiently. :5. Increasing the profitability by eliminating waste. 6. Centralizing the control system. 7. Correcting variances from sit standards. 8. Fixing the responsibility of various individuals in the enterprise. Refer this article for other objectives of budgetary control:  General objectives of bud

A basic product classification can be made based on  consumer  and  business products . The  consumer  products are afterwards divided based on preference for shopping habits or durability and tangibility. The  business products  are the industrial goods. Classification of products on the basis of Shopping habits. Based on the first variable, the shopping habits, the products can be classified into convenience goods, shopping goods and unsought goods. when you go to the supermarket to complete the necessary shopping for the next week, you probably buy condiments, soap, etc. This kind of product, which has become a habit and for which you don’t think too much before buying are part of the convenience goods category. Common examples are FMCG products. Another example would be when you enter into a shop, and when going to the cash machine you see some umbrellas and take one just because outside was raining and you went out unprepared. This is also an excellent example of impuls

Advertising can be defined as a non-personal presentation and promotion of ideas, goods or services paid by an identified sponsor. It is non-personal mass communication which has become a potent means of education and mass selling. It consists of all the achievements involved in presenting product information targeting audiences through media such as newspapers, magazines, catalogs, booklets, posters, radio, television, calendars, cards, transport, etc. According to  W.J. Stanton , “Advertising consists of all the activities involved in presenting to an audience a non-personal, sponsor- identified, paid for a message about a product or organization.” According to  American Marketing Association , “Advertising is any paid form of non-personal presentation and promotion of ideas, goods, and services of an identified sponsor.” From the above definitions, we can conclude that advertising is the sales message directed to mass on behalf of the paying sponsor. Features of Advertis

Product is anything that can be able to meet the needs and wants of target customers. A product is anything offered for sale for the purpose of satisfying a want or need on both side of the exchange process. A product is a set of tangible and intangible attributes including packaging, color, price, quality and brand, plus the services and reputation of the seller. Levels of Product : A customer not only purchases a product but also various attributes of a product. Specially, packaging, color, price, quality, brand, etc. So marketer has to take proper planning before introducing product in the market. Marketer mainly considers three levels of product. These are given below: §   Core product : Core product consists of the core problem solving benefit. A warm coat will protect you from cold winds. The core product of a book is information. It is not the book itself. The book is selling the information in it. The core product of a restaurant is offering food. It is not the buildin