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This category provides a comprehensive overview of cost accounting, including its definition, principles, and the different methods used to determine the cost of products and services.
You will find articles that explain the importance of cost accounting, the role it plays in decision-making, and the benefits of using cost accounting information for planning and control.
This category, among other things, contains articles relating to activity-based costing, cost volume profit analysis, allocation of overhead costs
company’s total sales revenue equals its total costs.
It is the level of sales or production volume at which a business neither incurs a profit nor a loss.
When a company reaches the break-even point, it is said to “break even” because the revenue generated from sales exactly covers all the costs incurred to produce and sell the goods or services.
Cost-volume-profit (CVP) analysis is a method of cost accounting that looks at the impact that varying levels of costs and volume have on operating profit.
It is the study of the relationships among costs, volume, and profit or loss.
Cost-volume-profit analysis is a powerful tool that allows businesses to assess the impact of changes in sales volume, costs, and prices on their profitability.
It shows the relationship between cost, volume and profit at various levels of activities.
No organization wants to have too much or too less stock.
If there is too much stock, it will result in wastage. And, if there is too less stock, the organization may not be able to fulfill its demand requirement as it will run out of stock before the next stock is delivered.
The ultimate goal of every organization is, therefore, to maintain an optimal stock level where there is neither overstock nor understock of goods.
In this post, I will explain some important concepts related to inventory management: minimum level, maximum level, average stock level, and re-order level.
These concepts help businesses to optimize their inventory and avoid overstocking or understocking.
Two important documents that are necessary for the effective management of inventory are the store bin card and store ledger.
The bin card mainly shows information about the quantity of goods available in a particular store whereas a store ledger shows information about the quantity and value of goods available.
These documents help to record the movement of goods in and out of the store, as well as their current status and value.
The high-low method is a technique for estimating the fixed and variable components of a mixed cost by analyzing data from high and low activity levels.
It is a cost estimation technique that involves selecting the highest and lowest levels of activity within a given period and using the corresponding costs associated with those activity levels to estimate fixed and variable costs.
The high-low method assumes that costs can be divided into fixed and variable components, where fixed costs remain constant regardless of the activity level, while variable costs change in proportion to the activity level.
Cost behaviour is the study of how different costs change in response to changes in the level of activity or output.
It refers to the way and manner in which different costs change as the level of production changes.
Cost behaviour shows the relationship between a cost and the level of economic activity.
There are four main cost behaviour patterns, which are fixed costs, variable costs, semi-variable costs, and step fixed costs.
While direct costs are those costs that can be economically traced and attributed directly to a specific cost unit or cost centre, indirect costs are those that cannot be traced and distributed directly to a specific cost centre.
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