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Cost Accounting Quick Notes - Part 2

The document covers key concepts in cost accounting, including types of overheads, standard costing, and the differences between absorption and marginal costing. It also discusses various budgeting types, break-even analysis, job order and process costing, and activity-based costing. Important formulas related to total cost, cost of goods sold, and net profit are also provided.

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0 views2 pages

Cost Accounting Quick Notes - Part 2

The document covers key concepts in cost accounting, including types of overheads, standard costing, and the differences between absorption and marginal costing. It also discusses various budgeting types, break-even analysis, job order and process costing, and activity-based costing. Important formulas related to total cost, cost of goods sold, and net profit are also provided.

Uploaded by

lumber jack
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Cost Accounting Quick Notes - Part 2

10. Overheads

Overheads = Indirect costs not directly tied to production

Types:

- Factory Overhead – Indirect materials, wages, depreciation

- Administrative Overhead – Office salaries, rent, etc.

- Selling & Distribution Overhead – Ads, delivery, sales salaries

11. Standard Costing

- Standard Cost: Pre-set cost for material/labor

- Variance Analysis:

Variance = Standard Cost - Actual Cost

Examples:

- Material Price Variance

- Labor Efficiency Variance

12. Absorption vs Marginal Costing

Feature | Absorption Costing | Marginal Costing

----------------------|----------------------|------------------------

Fixed OH in product? | Yes | No

Use in external reports| Yes | No (used for decisions)

13. Budgeting Types

- Flexible Budget: Adjusts with activity level

- Fixed Budget: Constant regardless of activity

- Cash Budget: Forecast of cash inflow/outflow

- Production Budget: Units to be produced

14. Break-even Terms


- Margin of Safety = Actual Sales - Break-even Sales

- P/V Ratio = (Contribution / Sales) × 100

15. Job Order Costing

- Used for custom or small-batch jobs

- Each job = unique cost record

- Costs assigned: DM + DL + Applied OH

16. Process Costing

- Used in mass production

- Cost collected by process/department

- Total cost ÷ units = cost per unit

17. Activity-Based Costing (ABC)

- Overheads allocated based on activities

- More accurate for complex production

Steps:

1. Identify activities

2. Assign costs to activity pools

3. Find cost drivers

4. Allocate cost based on driver usage

18. Important Formulas

- Total Cost = Prime Cost + Overheads

- COGS = Cost of Production + Opening FG – Closing FG

- Net Profit = Sales – Total Cost

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