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directing and controlling the operations of an organization. Examples include audit
fees, light and office rent.
Marketing Costs: are costs incurred in selling, publicizing, distributing and product
Finance Costs: are costs incurred in financing the activities of the business.
Examples include interest, commitment fee, insurance and dividends.
Research Costs: are costs incurred in seeking new or improved ideas, materials,
methods and products. Examples include cost of laboratory maintenance, cost of
feasibility study and salaries of research staff.
Development Costs: are costs incurred in developing the new or improved ideas and
methods so that production can take place. Examples include cost of test or trial
runs, obsolescence and supplies. 5 CONTROLLABILITY
There are two categories of such costs.
a) Controllable or Managed Costs: are costs that are influenced by the decisions or
actions of a manager.
b) Uncontrollable Costs: are costs that are not influenced by the decisions or actions
of a manager.
There are two categories of such costs:
Normal Costs: These are costs that have been planned for, for example, loss due
Abnormal Costs: These are costs that have not been planned for, for example, lost
production due to plant breakdown.
The costs of a cost unit is made up of material, labour and other expenses. These three
elements are analysed into direct costs and indirect costs. Direct costs are charged
directly to a cost unit. Direct costs include direct materials, direct labour and direct
expenses. Indirect costs relate to more than one cost unit. They cannot be charged
directly to a cost unit. Indirect costs include indirect materials, indirect labour and
indirect expenses. Indirect costs are also referred to as overheads. The total of direct
materials, direct labour and direct expenses make up prime costs.
PRIME COST (DIRECT EXPENSES) OVERHEADS (INDIRECT EXPENSES) Direct materials
Direct expenses Indirect materials
Indirect expenses COST STATEMENT
The total cost of a unit is made up as follows:RM
XXX Direct Materials
Proportion of Production or Factory Overhead
Proportion of Administration
Selling and Distribution Overhead
TOTAL COST 6...
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- Fall '13
- Cost Centre