Tag: Introduction to cost accounting

Cost Accounting

High-Low Method in Accounting

Written by Joshua

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.

Accounting

Difference Between Financial Accounting and Cost Accounting

Written by Joshua

One major difference between cost accounting and financial accounting is the use of Generally Accepted Accounting Principles (GAAP).

Financial accounting follows GAAP to ensure consistency in reporting financial statements for external stakeholders such as investors, creditors, and regulators.

Cost accounting, on the other hand, does not follow GAAP since its primary focus is to provide internal decision-makers with relevant cost data for decision-making purposes.

Cost Accounting

Definition of Cost Terms

Written by Emmanuel Ojo

1. Cost centre: This is a section, unit or department within an organisation where costs may be attributed and tracked separately.

A cost centre is a collection of activities that a manager wishes to track as a group to better understand the expenses necessary to support an organisation.

Cost centres do not directly generate revenue or profit, instead, their main goal is to minimize or eliminate loss.

Examples of cost centres within an organization include the accounting department, research and development, human resource department, and others.

2. Cost unit: Costs are always related to some object, function, service or good.

For example, we can say the cost of a car, a ton of coal, a haircut etc.

Such units are known as cost units.

A cost unit can be defined as a product or service or activity in relation to which cost is estimated and ascertained.

Cost unit is cost expressed or measured in terms of a specific commodity.

It refers to a unit of measurement for costs incurred by an organization.

For example, the cost unit of the university would be a student, a course and a degree program.

Accounting

Cost accounting – Meaning, Benefits, Disadvantages and Cost Terminologies

Written by Emmanuel Ojo

Cost Accounting is a form of managerial accounting that is concerned with determining the costs of doing something, manufacturing products, rendering services or conducting any activity or function.

It is the process of collecting, recording, classifying, coding, analyzing, and processing cost information that will help managers plan, control and make decision in the organization.

Cost accounting may also be defined as applying principles, methods and techniques in determining the total cost of production by assessing the fixed cost and variable cost of a product, department or organisation.

It may also be defined as the accumulation, classification, summarizing, and interpretation of cost information for the purpose of operational planning. controlling and making cost decisions.

Cost accounting provides managers with detailed information that management needs to control costs of operations and plan for the future.