COST ACCOUNTING:
COSTING CONCEPTS:
Raw material costs:
- Materials that go into the final product.
- Finished product of one company can be the raw materials of another
company.
Direct labour costs:
- Labour costs of the workers who are involved in the manufacturing of the
goods.
- Workers on the assembly line.
- These are all wages.
- Direct labour costs = Normal time + overtime + contributions
Direct costs:
- The cost that is directly involved in the production of finished goods.
- Also called prime costs.
- Includes raw material and direct labour costs.
Indirect material costs:
- Do not form part of the final product.
- Still necessary in the production process.
- E.g., petrol and cleaning materials.
- Indirect material cost = opening balance + Cash & credit purchases – returns
– closing balance.
- Also called consumable stores.
Indirect labour costs:
- The workers are not directly involved in the production line.
- E.g., Cleaning staff, maintenance staff, factory manager.
- These workers are very important.
- These are all salaries
- Indirect labour costs = salaries + overtime + contributions.
Factory overheads:
- Refers to all the costs that are incurred in order to run the factory other than
the direct material and direct labour costs.
- E.g., Rent, insurance, electricity, depreciation.
- Factory overheads = indirect material + indirect labour + factory expenses
Fixed costs:
, - Remain constant within a period of time.
- Irrespective of the amount of goods are produced.
- E.g., Rent will remain constant each month.
- Includes; factory overhead costs and administration costs.
Variable costs:
- Vary in proportion to the amount of products that are produced.
- Consists of raw materials.
- The more they produce the more raw materials will be used.
- Includes direct labour, direct materials and sales and distributions costs.
Total Production Cost = raw materials + direct labour + overheads.
Unit costs:
- Cost of one item.
- Total cost of production ÷ number of items produced = unit cost.
Mark-up:
- Profit that the business adds to the cost.
- Can be a percentage or a figure.
gross profit
- Calculated by ;
cost price
Selling price:
- Cost price + mark-up = selling price
- 50 + 20 = 70
BREAK EVEN POINT:
COSTING CONCEPTS:
Raw material costs:
- Materials that go into the final product.
- Finished product of one company can be the raw materials of another
company.
Direct labour costs:
- Labour costs of the workers who are involved in the manufacturing of the
goods.
- Workers on the assembly line.
- These are all wages.
- Direct labour costs = Normal time + overtime + contributions
Direct costs:
- The cost that is directly involved in the production of finished goods.
- Also called prime costs.
- Includes raw material and direct labour costs.
Indirect material costs:
- Do not form part of the final product.
- Still necessary in the production process.
- E.g., petrol and cleaning materials.
- Indirect material cost = opening balance + Cash & credit purchases – returns
– closing balance.
- Also called consumable stores.
Indirect labour costs:
- The workers are not directly involved in the production line.
- E.g., Cleaning staff, maintenance staff, factory manager.
- These workers are very important.
- These are all salaries
- Indirect labour costs = salaries + overtime + contributions.
Factory overheads:
- Refers to all the costs that are incurred in order to run the factory other than
the direct material and direct labour costs.
- E.g., Rent, insurance, electricity, depreciation.
- Factory overheads = indirect material + indirect labour + factory expenses
Fixed costs:
, - Remain constant within a period of time.
- Irrespective of the amount of goods are produced.
- E.g., Rent will remain constant each month.
- Includes; factory overhead costs and administration costs.
Variable costs:
- Vary in proportion to the amount of products that are produced.
- Consists of raw materials.
- The more they produce the more raw materials will be used.
- Includes direct labour, direct materials and sales and distributions costs.
Total Production Cost = raw materials + direct labour + overheads.
Unit costs:
- Cost of one item.
- Total cost of production ÷ number of items produced = unit cost.
Mark-up:
- Profit that the business adds to the cost.
- Can be a percentage or a figure.
gross profit
- Calculated by ;
cost price
Selling price:
- Cost price + mark-up = selling price
- 50 + 20 = 70
BREAK EVEN POINT:
