Introduction To Cost ing f451m
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Fundamentals
PARAMJIT SHARMA
ing
Financial ing
The art of Recording, Classifying, And summarizing in of money ,transactions and events which are of financial Nature, and interpreting the results thereof
Cost ing PARAMJIT SHARMA
Management ing
Manufacturing & Marketing Cars
What Would Be The Role Of Financial ing ? What Would Be The role Of Cost ing ? What Would Be Role Of Management ing ?
PARAMJIT SHARMA
Manufacturing & Marketing Cars
Reducing Cost of the car by INR 10,000
PARAMJIT SHARMA
Financial ingmeaning & limitations
FA is concerned with RECORDING, CLASSIFYING AND SUMMARISING financial transactions in accordance with the generally accepted ing Principles PARAMJIT SHARMA
Fundamentals
Journal
Ledger Trial Balance Final Statements
Financial Statements
PROFIT & LOSS
BALANCE-SHEET
STATEMENT OF SOURCES & APPLICATIONS OF FUNDS PARAMJIT SHARMA
Fundamentals
Financial ing- limitations
HISTORICAL
Fundamentals
ONLY NET RESULTS
NO CONTROL ON COST
NO DISTINCTION Direct & Indirect
Inadequate Information For PRICE FIXATION
NO COMPARISON OF COSTS
NO STANDARDS TO Assess Performance PARAMJIT SHARMA
Man age me nt Acc ou nting
PARAMJIT SHARMA
Management ing • A field of ing that provides economic and financial information for managers and other internal s.
PARAMJIT SHARMA
MAN AGEM EN T ACC OUNTI NG BASICS
Activities include:
• • • •
Explaining manufacturing and non manufacturing costs and how they are reported in the financial statements Computing the cost of providing a service or manufacturing a product Determining the behavior of costs and expenses as activity levels change Analyzing cost-volume profit relationships within a company
PARAMJIT SHARMA
MANAGEMENT ING BASICS Activities include (continued):
• Assisting management in profit planning and budgeting • Providing a basis for controlling costs and expenses by comparing actual results with planned objectives and standard costs • Accumulating and presenting relevant data for management decision making
PARAMJIT SHARMA
COMPARING MANAGEMENT AND FINANCIAL ING FINANCIAL ING
MANAGEMENT ING
External s; Stockholders, Creditors Regulators
Primary s Of Reports
Internal s: Managers Directors
Financial Statements Quarterly & Annually
Types & Frequency Of Reports
Internal Reports As Frequently Required
Purpose of Reports
Special Purpose for Specific Decisions
General Purpose
Pertains to Business as Whole Limited to Double Entry Acct, Contents of Reports Pertains To some sub unit of Business Cost Data Very Detailed GAAP/IAS
Extend beyond DE ing Standard is relevance to Decision
Audit By CA
Verification Process No independent Audits PARAMJIT SHARMA
Few - clarification
COST ANCY COSTING COST ING
PARAMJIT SHARMA
Fundamentals
Few - clarification
Fundamentals
COST ANCY It is the application of Costing and Cost ing Principles, Methods and Techniques to the science, art and practice of Cost Control and the ascertainment of profitability. It includes the presentation of information derived there from for the purpose of Managerial Decision Making
PARAMJIT SHARMA
COST ING- introduction
Fundamentals
The Process of ing for costs from the Point at which expenditure is incurred or committed to the establishment of its ultimate relationship with cost centers and cost units
Books Of Cost s
Cost Centers PARAMJIT SHARMA
Few - clarification
Fundamentals
COSTING •Technique and process of ascertaining costs •Classifying, recording and appropriate allocation of Expenditure for determination of costs of products ( Watch, TV, Computers) or services (Electricity, telephone, Transport Etc)
PARAMJIT SHARMA
Costing Objectives
Ascertaining Setting cost Price
Cost Control
Operating Decisions
PARAMJIT SHARMA
Cost Review
decision making
CAPACITY
Fundamentals
MAKE OR BUY
PROFIT
PRICE
EXPORT PRICE
SALES VOLUME
NEW MODEL PARAMJIT SHARMA
OPERATE OR SHUT
Cost ing- principles
Fundamentals
•
A cost is related to cause- rent of factory charged to factory
•
A cost is charged after it has been Incurred-no selling cost to unsold stock
•
Abnormal costs are excluded – loss due to fire accident
•
Conservatism Concept ignored in Cost ing- stock valued at cost only
5 Principle of Double entry applied to cost ing too
PARAMJIT SHARMA
Cost/Financial ing- differences
Factor
Fundamentals
CA
FA
Need
Compulsory
Obligatory
Purpose
Final Results to stake Holders
Cost Information
Recording
Subjective Recording
Objective Recording
Profit Analysis
Total Profit/Loss
Product wise
Contents
External Transactions
Internal
PARAMJIT SHARMA
Cost/Financial ing- differences
Factor
Fundamentals
CA
FA
Periodicity
Once/twice
Daily/weekly/monthly
Control
Inadequate
System at Place
Nature
Historical
Historical/Predetermined
Valuation
Cost or market
Cost Price
PARAMJIT SHARMA
Management/Cost ing- differences
factor
MA
Fundamentals
CA
Derivation Of Data
•Cost/Financial Acct
Data From CA
Information Provided
•Cost/Fin. Information CVP/Fin Ratios •Decision Making
Only Cost Inf.
•Planning, Decision M & Control •Short/Long Term
Reporting Cost
Emphasis Purpose Planning Techniques Installation
Cost Ascertainment & Control
Short Term
•RA,FF, C Flow
Variable Costing, Budgetary Control etc
•Not possible without CA system
Can Be Installed Without CA
PARAMJIT SHARMA
Cost ing- advantages
Fundamentals
Supplies Detailed Cost Information Helps in Price Fixation Reveals UN (Profitable) Activities Reveals idle capacity Assist in Controlling Costs Helps in decision Making Facilitates Cost Comparison Helps in Inventory Control PARAMJIT SHARMA
Cost ing- Objections
It is Unnecessary It is Inapplicable It is a failure Mere matter of Forms and Ruling It is Expensive
PARAMJIT SHARMA
Fundamentals
Price …..Quality ….Strategies Price High
Product Quality
H
1 Strategy
4 Overcharging M strategy
L
7 Rip off Strategy
Med
low
2 High value strategy
3 Super value strategy
5 Medium Value Stg.
6 Good value Strategy
8 False Econ. Strategy
9 Economy Strategy
PARAMJIT SHARMA
Costing Methods
Job Costing Batch Costing Contract Costing Process Costing Unit Costing Operation Costing Operating Costing Multiple Costing PARAMJIT SHARMA
Fundamentals
Costing Techniques
Historical Costing Standard Costing Marginal Costing Absorption Costing Direct Costing Uniform Costing PARAMJIT SHARMA
Fundamentals
Installation Of Costing System
•Nature Of Business •Structure of Organization •Objectives and Expectations •Cooperation and Of staff •Standardization of Forms •Prompt Reporting •Flexibility •Reconciliation of FA & CA •Current Practices •Simplicity
PARAMJIT SHARMA
Fundamentals
Installation Of Costing System-difficulties
Fundamentals
•Lack Of Management •Resistance Of Staff •Non Cooperation From Other Levels •Shortage Of Trained Staff •Heavy Cost Of Operating The System
PARAMJIT SHARMA
Fundamentals
Time for Questions
PARAMJIT SHARMA
PARAMJIT SHARMA
ing
Financial ing
The art of Recording, Classifying, And summarizing in of money ,transactions and events which are of financial Nature, and interpreting the results thereof
Cost ing PARAMJIT SHARMA
Management ing
Manufacturing & Marketing Cars
What Would Be The Role Of Financial ing ? What Would Be The role Of Cost ing ? What Would Be Role Of Management ing ?
PARAMJIT SHARMA
Manufacturing & Marketing Cars
Reducing Cost of the car by INR 10,000
PARAMJIT SHARMA
Financial ingmeaning & limitations
FA is concerned with RECORDING, CLASSIFYING AND SUMMARISING financial transactions in accordance with the generally accepted ing Principles PARAMJIT SHARMA
Fundamentals
Journal
Ledger Trial Balance Final Statements
Financial Statements
PROFIT & LOSS
BALANCE-SHEET
STATEMENT OF SOURCES & APPLICATIONS OF FUNDS PARAMJIT SHARMA
Fundamentals
Financial ing- limitations
HISTORICAL
Fundamentals
ONLY NET RESULTS
NO CONTROL ON COST
NO DISTINCTION Direct & Indirect
Inadequate Information For PRICE FIXATION
NO COMPARISON OF COSTS
NO STANDARDS TO Assess Performance PARAMJIT SHARMA
Man age me nt Acc ou nting
PARAMJIT SHARMA
Management ing • A field of ing that provides economic and financial information for managers and other internal s.
PARAMJIT SHARMA
MAN AGEM EN T ACC OUNTI NG BASICS
Activities include:
• • • •
Explaining manufacturing and non manufacturing costs and how they are reported in the financial statements Computing the cost of providing a service or manufacturing a product Determining the behavior of costs and expenses as activity levels change Analyzing cost-volume profit relationships within a company
PARAMJIT SHARMA
MANAGEMENT ING BASICS Activities include (continued):
• Assisting management in profit planning and budgeting • Providing a basis for controlling costs and expenses by comparing actual results with planned objectives and standard costs • Accumulating and presenting relevant data for management decision making
PARAMJIT SHARMA
COMPARING MANAGEMENT AND FINANCIAL ING FINANCIAL ING
MANAGEMENT ING
External s; Stockholders, Creditors Regulators
Primary s Of Reports
Internal s: Managers Directors
Financial Statements Quarterly & Annually
Types & Frequency Of Reports
Internal Reports As Frequently Required
Purpose of Reports
Special Purpose for Specific Decisions
General Purpose
Pertains to Business as Whole Limited to Double Entry Acct, Contents of Reports Pertains To some sub unit of Business Cost Data Very Detailed GAAP/IAS
Extend beyond DE ing Standard is relevance to Decision
Audit By CA
Verification Process No independent Audits PARAMJIT SHARMA
Few - clarification
COST ANCY COSTING COST ING
PARAMJIT SHARMA
Fundamentals
Few - clarification
Fundamentals
COST ANCY It is the application of Costing and Cost ing Principles, Methods and Techniques to the science, art and practice of Cost Control and the ascertainment of profitability. It includes the presentation of information derived there from for the purpose of Managerial Decision Making
PARAMJIT SHARMA
COST ING- introduction
Fundamentals
The Process of ing for costs from the Point at which expenditure is incurred or committed to the establishment of its ultimate relationship with cost centers and cost units
Books Of Cost s
Cost Centers PARAMJIT SHARMA
Few - clarification
Fundamentals
COSTING •Technique and process of ascertaining costs •Classifying, recording and appropriate allocation of Expenditure for determination of costs of products ( Watch, TV, Computers) or services (Electricity, telephone, Transport Etc)
PARAMJIT SHARMA
Costing Objectives
Ascertaining Setting cost Price
Cost Control
Operating Decisions
PARAMJIT SHARMA
Cost Review
decision making
CAPACITY
Fundamentals
MAKE OR BUY
PROFIT
PRICE
EXPORT PRICE
SALES VOLUME
NEW MODEL PARAMJIT SHARMA
OPERATE OR SHUT
Cost ing- principles
Fundamentals
•
A cost is related to cause- rent of factory charged to factory
•
A cost is charged after it has been Incurred-no selling cost to unsold stock
•
Abnormal costs are excluded – loss due to fire accident
•
Conservatism Concept ignored in Cost ing- stock valued at cost only
5 Principle of Double entry applied to cost ing too
PARAMJIT SHARMA
Cost/Financial ing- differences
Factor
Fundamentals
CA
FA
Need
Compulsory
Obligatory
Purpose
Final Results to stake Holders
Cost Information
Recording
Subjective Recording
Objective Recording
Profit Analysis
Total Profit/Loss
Product wise
Contents
External Transactions
Internal
PARAMJIT SHARMA
Cost/Financial ing- differences
Factor
Fundamentals
CA
FA
Periodicity
Once/twice
Daily/weekly/monthly
Control
Inadequate
System at Place
Nature
Historical
Historical/Predetermined
Valuation
Cost or market
Cost Price
PARAMJIT SHARMA
Management/Cost ing- differences
factor
MA
Fundamentals
CA
Derivation Of Data
•Cost/Financial Acct
Data From CA
Information Provided
•Cost/Fin. Information CVP/Fin Ratios •Decision Making
Only Cost Inf.
•Planning, Decision M & Control •Short/Long Term
Reporting Cost
Emphasis Purpose Planning Techniques Installation
Cost Ascertainment & Control
Short Term
•RA,FF, C Flow
Variable Costing, Budgetary Control etc
•Not possible without CA system
Can Be Installed Without CA
PARAMJIT SHARMA
Cost ing- advantages
Fundamentals
Supplies Detailed Cost Information Helps in Price Fixation Reveals UN (Profitable) Activities Reveals idle capacity Assist in Controlling Costs Helps in decision Making Facilitates Cost Comparison Helps in Inventory Control PARAMJIT SHARMA
Cost ing- Objections
It is Unnecessary It is Inapplicable It is a failure Mere matter of Forms and Ruling It is Expensive
PARAMJIT SHARMA
Fundamentals
Price …..Quality ….Strategies Price High
Product Quality
H
1 Strategy
4 Overcharging M strategy
L
7 Rip off Strategy
Med
low
2 High value strategy
3 Super value strategy
5 Medium Value Stg.
6 Good value Strategy
8 False Econ. Strategy
9 Economy Strategy
PARAMJIT SHARMA
Costing Methods
Job Costing Batch Costing Contract Costing Process Costing Unit Costing Operation Costing Operating Costing Multiple Costing PARAMJIT SHARMA
Fundamentals
Costing Techniques
Historical Costing Standard Costing Marginal Costing Absorption Costing Direct Costing Uniform Costing PARAMJIT SHARMA
Fundamentals
Installation Of Costing System
•Nature Of Business •Structure of Organization •Objectives and Expectations •Cooperation and Of staff •Standardization of Forms •Prompt Reporting •Flexibility •Reconciliation of FA & CA •Current Practices •Simplicity
PARAMJIT SHARMA
Fundamentals
Installation Of Costing System-difficulties
Fundamentals
•Lack Of Management •Resistance Of Staff •Non Cooperation From Other Levels •Shortage Of Trained Staff •Heavy Cost Of Operating The System
PARAMJIT SHARMA
Fundamentals
Time for Questions
PARAMJIT SHARMA
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