Standard Cost

Standard cost means what the cost should be. Standard cost is predetermined cost of a unit of product, or an operation or a department or a process. Standard cost is the cost target to be achieved. Such cost targets are scientifically … Continue reading

Opportunity Cost

Opportunity cost is a concept used for evaluation of alternative uses of resources. Decision makers select that alternative use of resources from which they expect the maximum net return. Opportunity cost is the net return that could be obtained from … Continue reading

Differential Costs or Incremental cost

Differential costs assist decision makers while making a choice between different alternatives. Differential costs are those items of total costs of two or more alternatives which have different magnitude under each alternative. Items of differential costs may be variable cost … Continue reading

Controllable and Uncontrollable Costs

This cost concept is designed to fix responsibility of cost control for various levels of management. Therefore, it is always associated with a designated level in organizational hierarchy. Controllability of a cost means the degree of influence that a specific manager … Continue reading

Fixed Cost and Variable Cost

This classification is based on cost behaviour. It is one of the most useful classifications f.r the purpose of cost planning and control. Cost behaviour means how a cost will react or respond to changes in the level of business … Continue reading

Period Cost or Non manufacturig Cost

Cost which is not related to production and is matched against revenues on a time period basis is called period cost, non manufacturing cost or non-inventoriable cost. Period cost includes marketing or selling cost and administrative cost. Marketing or Selling … Continue reading

Product Cost or Manufacturing Cost

Product cost -includes costs incurred- for manufacturing or for purchasing goods. In case of manufacturing business product cost consists of direct materials, direct labour and factory overhead. In case of trading business, product cost involves purchase price plus transportation in … Continue reading

Classification of Cost

There are different measures of costs for different purposes. Therefore, costs are classified in a number of ways. An organization does not record costs by all possible classifications. However, in this modern age, computers have made it possible to record … Continue reading

Cost in cost accounting meaning

Generally speaking by cost we mean total amount of money or other resources foregone or sacrificed to procure something or to achieve some objective. Word expense is also used to denote almost the same meaning. The difference between these two … Continue reading

Difference between Financial Accounting and Cost Accounting

Following is the difference between Financial Accounting and Cost Accounting Financial Accounting  Cost Accounting 1.Provides information to external 1.Provides information to internal users. 2. Provides general purpose financial statementsand reports 2. Provides special purpose statements 3. Must conform to generally … Continue reading

Contribution of Cost Accounting to Management

Cost accounting is now used not only by manufacturing organizations but by service and trading organizations as well, both in profit and non profit sectors of economy. It is used as an aid for planning and control of ongoing operations, … Continue reading

Limitations of Financial Accounting

Limitations from which financial accounting suffers may be summarized as follow: 1. Historical And Monetary Nature. Emphasis of financial accounting is on recording transactions revenues only after they have occurred, then summarizing and reporting this information at the end of accounting … Continue reading

Management Needs and Accounting

Original financial accounting model based on double entry system of book keeping, developed by an Italian merchant named Lucas Pacioli, is basically to fulfil managerial requirements of a trading business. Financial accounting can measure results of a merchandising business on … Continue reading

Management accounting uses

Management accounting uses both cost and financial info to advise management in planning and controlling the organization. Management accounting is used for providing information  the organization people. Management accountants design specific purpose reports to serve needs of decision makers. Because internal decision makers … Continue reading

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