2. Concept of cost
Definition and meaning of Cost
As per ICWA, India,
Cost is the price of resources used for the purpose of production
of goods or rendering of services.
As per the Institute of Cost and Management Accountants,
London,
“Cost is the amount of expenditure, actual or notional, incurred
on or attributable to a given thing.”
3. Concept of Costing
Costing is a process of determination of cost of product or
services.
It is referred to as classifying, recording and appropriate
allocation of expenditure for determination of the costs of
products or services.
It consists of rules and principles of ascertainment of
costs of a product or service.
4. Concept of Cost Accounting
Definition of Cost Accounting
Wheldon defines Cost accounting as, “classifying, recording
and appropriate allocation of expenditure for determination
of costs of products or services and for the presentation of
suitably arranged data for purposes of control and guidance
of management.”
It is the technique and process of ascertainment of costs,
which begins with recording of expenses or the basis on
which they are calculated and ends with preparation of
statistical data.
5. Objectives of Cost Accounting
1. To ascertain cost of product or services rendered
2. To provide information for planning and control
3. To analyse the data and provide suitable information to
management to take deciscions.
4. To provide data for periodical profit and loss account and balance
sheet
5. To assist management in fixation of selling price
6. To present comparative cost data for different periods
7. To provide the basis for production planning.
6. Cost classification
Cost classification is the process of grouping costs
according to their common features.
7. Classification of cost
On the basis
of time
Historical
cost
Pre-determined
cost
On the basis of
behaviour of cost
Variable
cost
Fixed
cost
On the basis of
functions
Manufacturing
cost
Administration
cost
Selling &
distribution
cost
Research &
development
cost
Pre-
production
cost
On the basis of
controllability
Other basis
Controllable
cost
Non- controllable
cost
Conversion
cost
Normal
cost
Avoidable cost Unavoidable cost
