ManagementaccountingCostAccountinge.doc

1、1JOINT PRODUCT AND BY PRODUCT COSTINGMethods of apportioning joint cost over joint products :1) Physical unit method = Physical base to measure (i.e.) output quantity is used to separate joint cost. Joint cost can be separated on the basis of ratio of output quantity. While doing this wastage is als

2、o to be added back to find total quantity.2) Average unit cost method = In this method joint cost is divided by total units Produced of all products and average cost per unit is arrived and is multiplied With number of units produced in each product.3) Survey method or point value method = Product u

3、nits are multiplied by points or weights and the point is divide on that basis.4) Standard cost method = Joint costs are separated on the basis of standard cost set for respective joint products.5) Contribution margin method = Cost are divided into two categories (i.e.) variable and fixed. Variable

4、costs are separated on unit produced. Fixed on the basis of contribution ratios made by different products.6) Market value method:-a) Market value at the point of separation: Joint cost to sales revenue percentageis found which is called as multiplying factor = Joint cost * 100 Sales Revenue? Joint

5、cost for each product is apportioned by applying this % on sales revenue of each product.? Sales revenue = Sales Revenue at the point of separation.? This method cannot be done till the sales revenue at the separation point is given.b) Market value after processing: Joint cost is apportioned on the

6、basis of total sales Value of each product after further processing.c) Net Realizable value method = Form sales value following items are deductedi) Estimated profit marginii) Selling and distribution expenses if any included.iii) Post split off costThe resultant amount is net realizable value. Join

7、t cost is apportioned on this basis.2Bi- product Method of accounting? Treat as other income in profit and loss a/c? Net Realizable value of Bi-product is reduced from cost of main product.? Instead of standard process, Standard cost or comparative price or re-use price is credited to joint process

8、a/c.3OPERATION COSTINGService costing is“ A cost accounting method concerned with establishing the costsof services rendered” . Service costing is also applied within a manufacturing setting.The Differences Between Product Costing and Service Costing? There may be very few, if any, materials to worr

9、y about? Overheads will comprise the most significant portion of any costs of which, labour costs may well comprise as much as 70%No.EnterpriseCost per unit1.Railways or bus companiesPer passenger-kilometer2.HospitalPer patient/day, per bed/day3.CanteenMeals served , cups of tea4.Water supply servic

10、ePer 1000 gallons5.Boiler House1000 kg of steam6.Goods TransportPer tonne km, quintal km7.Electricity BoardsPer kilowatt hours8.Road maintenancePer mile or road maintenancedepartment9.BricksOne thousand10.HotelPer room/dayIn this various terms such as passenger km, quintal km, tonne km, these are al

11、l known as composite units and are computed in 2 ways:a) Absolute (weighted average): (e.g.) tones km - Multiplying total distance by respective load quantity.b) Commercial (simple average): (e.g.) tonne KmMultiplying total distance by average load quantityAll accumulated cost is classified into 3 c

12、ategories:1) Standing charges (or) fixed cost2) Running cost (or) variable cost3) Maintenance charges (or) semi variable costRunning charges = Fuel, Driver Wages, Depreciation, oil etc.Maintenance charges = Supervision salary, Repairs and Maintenance4Note:-? % of factory overheads on direct wages? %

13、 of administration overheads on works cost? % of selling & distribution overheads on works cost? % of profit on salesOperating cost sheet :-ParticularsTotal costCost per kmA Standing charges :-License fees Insurance Premium Road taxGarage rentDriver s wagesAttendant-cum-cleaner s wagesSalaries and w

14、ages of other staffTotalBRunning charges :-Repairs and maintenanceCost of fuel (diesel, petrol etc.)Lubricants, grease and oilCost of tires, tubes and other spare partsDepreciationTotalCTotal charges (A) + (B) 5CONTRACT COSTINGContract costing isform“Aofspecific order costing; attribution of costs t

15、oindividual contracts” .A contract cost is “ Aggregated costs of a single contract; usually applies to major long term contracts rather than short term jobs ”.Features of long term contracts:? By contract costing situations, we tend to mean long term and large contracts: such as civil engineering co

16、ntracts for building houses, roads, bridges and so on. We could also include contracts for building ships, and for providing goods and services under a long term contractual agreement.? With contract costing, every contract and each development will beaccounted for separately; and does, in many resp

17、ects, contain the features of a job costing situation.? Work is frequently site based.We might have problems with contract costing in the following areas? Identifying direct costs? Low levels of indirect costs? Difficulties of cost control? Profit and multi period projectsThe source of the following

18、 has eluded me: my sincere gratitude for whoever the author might be.Contract Costing such jobs take a long time to complete & may spread over two ormore of the contractors accounting years” .Features of a Contract? The end product? The period of the contract? The specification? The location of the

19、work? The price? Completion by a stipulated date? The performance of the product6Collection of Costs :Desirable to open up one or more internal job accounts for the collection of costs. If the contract not obtained, preliminary costs be written off as abortive contract costs in P&L In some cases a s

20、eries of job accounts for the contract will be necessary:? to collect the cost of different aspects? to identify different stages in the contractSpecial features? Materials delivered direct to site.? Direct expenses? Stores transactions.? Use of plant on siteTwo possible accounting methods :Where a

21、plant is purchased for a particular contract & has little further value to the business at the end of the contractWhere a plant is bought for or used on a contract, but on completion of the contract it has further useful life to the businessAlternatively the plant may be capitalised with Maintenance

22、 and running costs charged to the contract.Format:-ParticularsRs.ParticularsRs.To MaterialsBy materials returned*a. Purchased directly*By Material sold (costb. Issue from site*price)*c. Supplied by contractee*To Wages and salaries*By WIPTo Other direct Expenses*Work certified*To Sub-contractor fees*

23、Work Uncertified*To Plant & Machinery (purchaseBy Materials at site*price/Book value)*To Indirect expenditure (apportioned share*By Plant andof overheads)machinery(WDV)*To Notional profit (Surplus)*TotalTotal*7Profit of Incomplete contract :-1) When % of completion is less than or equal to 25% then

24、full Notional profit is transferred to reserve.2) When % of completion is above 25% but less than 50% following amount should be credited to profit & loss a/c = 1/3 * Notional Profit * Cash received / Workcertified3) When % of completion is more than or equal to 50% then the amount transferred to pr

25、ofit is = 2/3 * Notional Profit * Cash received / Work certifiedBalance is transferred to reserve a/c?% of completion = Work certified/Contract price * 1004) When the contract is almost complete the amount credited to profit & loss a/c isa) Estimated total profit * Work certified / Contract priceb) Estimated total profit * Cash received / Contra