Are costs incurred in the general administration

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Unformatted text preview: ding 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 servicing. 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. NORMALITY There are two categories of such costs: a) Normal Costs: These are costs that have been planned for, for example, loss due to evaporation. b) Abnormal Costs: These are costs that have not been planned for, for example, lost production due to plant breakdown. COST UNITS 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 labour Direct expenses Indirect materials Indirect labour Indirect expenses COST STATEMENT COST STATEMENT The total cost of a unit is made up as follows:RM XX XX XX XXX XX XXX XX XX XXX Direct Materials Direct Labour Direct Expenses PRIME COSTS Proportion of Production or Factory Overhead PRODUCTION COST Proportion of Administration Selling and Distribution Overhead TOTAL COST 6...
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This document was uploaded on 09/30/2013.

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