CONCEPTS AND COST CLASSIFICATIO NS
INTRODUCTION The information provided by the accounting system can be summarized in one word - COST For the accounting information to be useful , it should provide information for cost determination and valuation, cost planning, cost control and cost analysis for decision making .Cost should therefore be properly classified and analysed to enable it to be useful to management
Definition of cost. Cost is the amount of expenditure incurred on , or attributable to a specific thing or activity Cost classification. Cost classification is the process of arranging cost items into groups according to the degree of similarity.
Cost can be classified in a number of different ways as follows. Elements i.e. materials, labour and expenses. Nature i.e. Direct and indirect. Function i.e. production and non production costs. Behaviour i.e. fixed, variable and semi- variable.
Classification by element. The three common elements of a product are Materials, labour and expenses. Materials represent the raw substance from which finished products are made by the addition of labour and expenses. Materials can be divided into direct and indirect material costs .
Classification by Nature. Cost can be classified into direct and indirect.
You've reached the end of your free preview.
Want to read all 18 pages?
- Spring '20
- Dr. ASRAVOR
- word cost