BUSINESS APPLICATION

SOFTWARE II
ASSIGNMENT I

PRESENTED BY
D.Vasanth
3rd B.Com
 COST
The term cost has to be studied in relation to its
purpose and conditions. As per the definition by Institute of
management Accountants(I. C. M. A) , now known as
chartered of cost and management
accountants(C.I.M.A),London, cost is the amount of:
 Actual expenditure incurred on a given thing
 National expenditure attributable to a given thing
 COSTING

the I.C.M.A London has defined costing as the

ascertainment of costs. “It refers to the techniques and
processess of ascertaining costs and studies the
principles and rules concerning the determination of
costs of products and services”.
 COST ACCOUNTING

It is the method of accounting for cost. The

process of recording and accounting for all the
elements of cost is called ‘cost accounting’.
 COST ACCOUNTANCY

“The application of costing and cost accounting

principles ,method and techniques to the science , art
and practice of cost control and the ascertainment of
profitability. it includes the presentation of information
derived therefrom for the purpose of managerial
decision making".
 METHODS OF COSTING

 Job Costing
 Contract Costing
 Batch Costing
 Process Costing
 One Operation Costing
 Service (or Operating) Costing
 Farm Costing
 Operation Costing:
 TYPES OF COSTING

i. historical costing
ii. standard costing
iii. marginal costing uniform costing
 COST OF PRODUCTION

3 Series 1
Series 2
2
Series 3
1

0
Category 1 Category 2 Category 3 Category 4
 NEED FOR COST ACCONTING

a) fixation of selling prices.

b) Control of cost
c) Decision making from alternative choices.
 AIMS OF COST ACCOUNTING

 Cost finding or cost ascertainment.

 Control of cost.
 Reduction of cost.
 fixation of selling price
 providing information for framing business policy
Advantages of cost Accounting

To the management
 effective decision making
 measuring efficiency
 cost reduction
 fixation of selling price
 effective cost control
 reduction of wastage
 help in effective budgeting
 effective utilisation of resources
 effective inventory control
 increase in efficiency
To the employees
 stability of tenure
 fair wage policy
 reward for higher efficiency through incentive schemes

To the creator
 understand the progress and profitability of the firm and
future prospect of the firm
To the government
 Granting of subsidies
 planning of resources
 utilisation of scarce resources.

To the public
 Removal of wastage
 fair price for products
 Employment opportunities
 CLASSIFICATIONS OF COST

I. According to element
II. According to function
III. According to nature or behavior
IV. According to controllability
V. According to normality
VI. According to relevance to decision making and
control
MEANING OF COST CONTROL

Cost control is the practice of identifying and

reducing business expenses to increase profits, and it
starts with the budgeting process. A business owner
compares actual results with the budgeted
expectations, and if actual costs are higher than
planned, management takes action
COST CONTROL TECHNIQUES

(a) Material Control

(b) Labour Control,
(c) Overhead Control,
(d) Budgetary Control,
(e) Standard Costing,
(f) Control of Capital Expenditure,
(g) Responsibility Accounting,
(h) Productivity and Accounting Ratios.
ELEMENTS OF COST CONTROL

 setting up of standard
 Recording of actual performance
 comparison of standard with actual performance to
arrive at deviations\variance
 Analyzing variance and fixing responsibility for
variance.
 Initiation of corrective action to eliminate causes of
variance and ensure effective future performance.
 COST REDUCTION

Cost reduction is the process used by companies

to reduce their costs and increase their profits.
Depending on a company's services or product, the
strategies can vary. Every decision in the product
development process affects cost.
FEATURES OF COST REDUCTION

i. The cost is a permanent one. The reduction should

be through improvements in methods of
production from research.
ii. The reduction in cost is real one in the course of
manufacture or service rendered.
iii. The reduction should not be at the cost of essential
characteristics, such as quality of the products or
services rendered.
ADVANTAGES OF COST REDUCTION

1. Cost reduction will help in making goods available

to the consumers at cheaper rates.
2. Cost reduction increases profit.
3. As a result of reduction in cost, export price may be
lowered which may increase total export.
4. Higher profit will provide more revenue to the
government by way of taxation.
METHODS OF COST REDUCTION

1. Simplification and variety reduction.

2. Budgetary control.
3. Standard costing.
4. Overheads control.
5. Planning & control of finance.
6. Automation.
7. Market research.
8. Operations research.
9. Value analysis.
10. Standardizations of products and tools & equipments.
11. Improvement in design.
12. Simplification and variety reduction.
13. Labour control.
14. Materials control.