basic element in cost accounting
TRANSCRIPT
![Page 1: Basic element in Cost Accounting](https://reader030.vdocument.in/reader030/viewer/2022021502/58abf0451a28ab504e8b6401/html5/thumbnails/1.jpg)
Course Learning Objectives (CLO 2)
Show correctly costing principles and cost
behaviours in manufacturing and servicing environment
(material, labour and overheads)
![Page 2: Basic element in Cost Accounting](https://reader030.vdocument.in/reader030/viewer/2022021502/58abf0451a28ab504e8b6401/html5/thumbnails/2.jpg)
THE ELEMENTS OF COST
![Page 3: Basic element in Cost Accounting](https://reader030.vdocument.in/reader030/viewer/2022021502/58abf0451a28ab504e8b6401/html5/thumbnails/3.jpg)
DIRECT MATERIAL WAGE &
LABOUR
OVERHEAD
![Page 4: Basic element in Cost Accounting](https://reader030.vdocument.in/reader030/viewer/2022021502/58abf0451a28ab504e8b6401/html5/thumbnails/4.jpg)
© 2009 McGraw-Hill Ryerson Limited
1-4
Learning Objective 1
Understand the elements of cost in accounting
![Page 5: Basic element in Cost Accounting](https://reader030.vdocument.in/reader030/viewer/2022021502/58abf0451a28ab504e8b6401/html5/thumbnails/5.jpg)
![Page 6: Basic element in Cost Accounting](https://reader030.vdocument.in/reader030/viewer/2022021502/58abf0451a28ab504e8b6401/html5/thumbnails/6.jpg)
![Page 7: Basic element in Cost Accounting](https://reader030.vdocument.in/reader030/viewer/2022021502/58abf0451a28ab504e8b6401/html5/thumbnails/7.jpg)
![Page 8: Basic element in Cost Accounting](https://reader030.vdocument.in/reader030/viewer/2022021502/58abf0451a28ab504e8b6401/html5/thumbnails/8.jpg)
![Page 9: Basic element in Cost Accounting](https://reader030.vdocument.in/reader030/viewer/2022021502/58abf0451a28ab504e8b6401/html5/thumbnails/9.jpg)
We separate manufacturing costs into three categories: Manufacturing costs relate to making a product.
![Page 10: Basic element in Cost Accounting](https://reader030.vdocument.in/reader030/viewer/2022021502/58abf0451a28ab504e8b6401/html5/thumbnails/10.jpg)
![Page 11: Basic element in Cost Accounting](https://reader030.vdocument.in/reader030/viewer/2022021502/58abf0451a28ab504e8b6401/html5/thumbnails/11.jpg)
![Page 12: Basic element in Cost Accounting](https://reader030.vdocument.in/reader030/viewer/2022021502/58abf0451a28ab504e8b6401/html5/thumbnails/12.jpg)
![Page 13: Basic element in Cost Accounting](https://reader030.vdocument.in/reader030/viewer/2022021502/58abf0451a28ab504e8b6401/html5/thumbnails/13.jpg)
![Page 14: Basic element in Cost Accounting](https://reader030.vdocument.in/reader030/viewer/2022021502/58abf0451a28ab504e8b6401/html5/thumbnails/14.jpg)
Corporate Organization Chart
Purcha sing Personnel V ice PresidentO pera tions
T reasurer C ontro ller
C hief F ina ncia lO fficer
President
B oa rd of D irectors
![Page 15: Basic element in Cost Accounting](https://reader030.vdocument.in/reader030/viewer/2022021502/58abf0451a28ab504e8b6401/html5/thumbnails/15.jpg)
![Page 16: Basic element in Cost Accounting](https://reader030.vdocument.in/reader030/viewer/2022021502/58abf0451a28ab504e8b6401/html5/thumbnails/16.jpg)
![Page 17: Basic element in Cost Accounting](https://reader030.vdocument.in/reader030/viewer/2022021502/58abf0451a28ab504e8b6401/html5/thumbnails/17.jpg)
Mixed costs contain components of both variable and fixed cost behavior patterns. Mixed costs are sometimes called semivariable or semifixed costs.
![Page 18: Basic element in Cost Accounting](https://reader030.vdocument.in/reader030/viewer/2022021502/58abf0451a28ab504e8b6401/html5/thumbnails/18.jpg)
Mixed costs contain components of both variable and fixed cost behavior patterns. Mixed costs are sometimes called semivariable or semifixed costs.
MIXED COST GRAPH
![Page 19: Basic element in Cost Accounting](https://reader030.vdocument.in/reader030/viewer/2022021502/58abf0451a28ab504e8b6401/html5/thumbnails/19.jpg)
Mixed costs contain components of both variable and fixed cost behavior patterns. Mixed costs are sometimes called semivariable or semifixed costs.
![Page 20: Basic element in Cost Accounting](https://reader030.vdocument.in/reader030/viewer/2022021502/58abf0451a28ab504e8b6401/html5/thumbnails/20.jpg)
FOR MORE INFORMATION ABOUT INTRODUCTION TO
COST ELEMENT
CLICK HEREBACK
![Page 21: Basic element in Cost Accounting](https://reader030.vdocument.in/reader030/viewer/2022021502/58abf0451a28ab504e8b6401/html5/thumbnails/21.jpg)
© 2009 McGraw-Hill Ryerson Limited
1-21
Learning Objective 2
Identify raw material and store organisation
![Page 22: Basic element in Cost Accounting](https://reader030.vdocument.in/reader030/viewer/2022021502/58abf0451a28ab504e8b6401/html5/thumbnails/22.jpg)
DIRECT MATERIAL
![Page 23: Basic element in Cost Accounting](https://reader030.vdocument.in/reader030/viewer/2022021502/58abf0451a28ab504e8b6401/html5/thumbnails/23.jpg)
The manufacture of products or goods required material as the first basic
element. These materials generally fall in to categories. These categories are direct
materials and indirect materials. The materials used in the course of
manufacture which enters into and becomes part of the product. Metals in the
manufacture of fans, boilers,
![Page 24: Basic element in Cost Accounting](https://reader030.vdocument.in/reader030/viewer/2022021502/58abf0451a28ab504e8b6401/html5/thumbnails/24.jpg)
automobiles, aeroplans; wood in manufacture of furniture, silk, ribbon and
leather band used in making a hat, cloth in tailoring garments, Clay in the
manufacturing of bricks, leather in the manufacture of shoes, wheat used in milling flour are called direct material.
![Page 25: Basic element in Cost Accounting](https://reader030.vdocument.in/reader030/viewer/2022021502/58abf0451a28ab504e8b6401/html5/thumbnails/25.jpg)
Direct material forms an integral part of the finished product and can be directly
identified or included in computing the cost of such product. In other words, it is the material which can be directly measured and charged to the cost of the order or product being manufactured without requiring excessive and uneconomical
details for such measurements and identification.
![Page 26: Basic element in Cost Accounting](https://reader030.vdocument.in/reader030/viewer/2022021502/58abf0451a28ab504e8b6401/html5/thumbnails/26.jpg)
Examples Direct Materials
Publishing company
Paper, ink, book covers
Automobile manufacturer
Tires, automobile metal parts
Computer manufacturer
Hard drives, monitors
![Page 27: Basic element in Cost Accounting](https://reader030.vdocument.in/reader030/viewer/2022021502/58abf0451a28ab504e8b6401/html5/thumbnails/27.jpg)
© 2009 McGraw-Hill Ryerson Limited
1-27
Learning Objective
Identify labour and wage analysis
![Page 28: Basic element in Cost Accounting](https://reader030.vdocument.in/reader030/viewer/2022021502/58abf0451a28ab504e8b6401/html5/thumbnails/28.jpg)
is the cost of wages to be paid to individuals who work on specific products or in other words, the cost of wages of employees who are directly involved in converting raw materials into finished goods.
Direct labor
![Page 29: Basic element in Cost Accounting](https://reader030.vdocument.in/reader030/viewer/2022021502/58abf0451a28ab504e8b6401/html5/thumbnails/29.jpg)
Almost any production plant or factory requires employees to operate equipment, move raw materials from the warehouse to equipment, and so on. These employees are directly involved in the production process and the cost of their remuneration and benefits represents direct labor:
Direct labor
![Page 30: Basic element in Cost Accounting](https://reader030.vdocument.in/reader030/viewer/2022021502/58abf0451a28ab504e8b6401/html5/thumbnails/30.jpg)
Usually direct labor is a variable cost. In most situations the amount of direct labor required is directly correlated with the amount of finished goods produced. For example, wages and related benefits of employees who operate machinery to produce valves represent direct labor costs for Friends Company.
Direct labor
![Page 31: Basic element in Cost Accounting](https://reader030.vdocument.in/reader030/viewer/2022021502/58abf0451a28ab504e8b6401/html5/thumbnails/31.jpg)
The more valves are to be produced, the more employees will be required to operate machinery, paint, assemble, etc.
Direct labor
![Page 32: Basic element in Cost Accounting](https://reader030.vdocument.in/reader030/viewer/2022021502/58abf0451a28ab504e8b6401/html5/thumbnails/32.jpg)
Idle time represents the labour cost of direct labour employees who are unable to perform their assigned duties due to machine breakdowns, material shortages, power failures, etc.The labour costs for idle time hours are charged to Mfg. Overhead at normal wage rates. regardless of when the hours were worked. Note: DL represents productive hours worked at regular pay rateIdle time represents non-productive hours at regular pay rates
Idle Time
![Page 33: Basic element in Cost Accounting](https://reader030.vdocument.in/reader030/viewer/2022021502/58abf0451a28ab504e8b6401/html5/thumbnails/33.jpg)
Any premium paid for labour time in excess of normal work times for direct labour employees is treated as part of MO. We are dealing only with the premium. The regular wage even for excess hours over and above normal work times is still charged to Direct Labour.
Overtime Premium
![Page 34: Basic element in Cost Accounting](https://reader030.vdocument.in/reader030/viewer/2022021502/58abf0451a28ab504e8b6401/html5/thumbnails/34.jpg)
Halsey Scheme
Halsey Weir
Scheme
Rowan Scheme
![Page 35: Basic element in Cost Accounting](https://reader030.vdocument.in/reader030/viewer/2022021502/58abf0451a28ab504e8b6401/html5/thumbnails/35.jpg)
© 2009 McGraw-Hill Ryerson Limited
1-35
Learning Objective 3
Identify Overhead Categories
![Page 36: Basic element in Cost Accounting](https://reader030.vdocument.in/reader030/viewer/2022021502/58abf0451a28ab504e8b6401/html5/thumbnails/36.jpg)
MORE NOTES ON THIS CLICKADDITIONAL 1ADDITIONAL 2ADDITIONAL 3
FORMULA
36
GO TO OVERHEAD
NOTES