three is about data presentation analysis and interpretation and finally the

Three is about data presentation analysis and

This preview shows page 11 - 14 out of 39 pages.

three is about data presentation, analysis and interpretation and finally, the last chapter four, present summary, conclusion and recommendation. CHAPTER TWO LITERATURE REVIEW 2.1 What is cost Accounting? Cost accounting is the process of accumulating the costs of manufacturing, and other functional processes and identifying these costs with units produced or some other object. It is a unique sub filed of managerial and financial accounting. Cost accounting is applied primarily to manufacturing. Organization that combine and process raw material in to finished products. Management accounting is the process of identification measurement, accumulation, analysis, preparation, interpretation, and communication of financial information used by managements of plane, evaluate, and control
with in an organization to assure appropriate use of and accountability for its resources (Cherrington, 1998, p 5). Cost accounting provides information for management accounting and financial accounting management accounting measures and reports about financial and non financial information that helps managers make decisions to fulfill the goal of the organization and financial accounting focus on reporting to external parties. (Horngren, 2003, p2-3) Cost accounting provides mangers with relevant cost data to assist them in operating the business effectively. The management process includes developing an operating plan, implementing the plan, and evaluating the result of operation (Cherrington, 1998,p54). 2.2 Classification of costs Classification are needed for development of cost data that are useful management with regard to the following five purposes or aims these are 1. Planning profit by means of budget. 2. Controlling cost via responsibility accounting 3. Measuring annual or periodic profit including inventory costing 4. Assisting in establishing selling price and pricing policy 5. Furnishing relevant cost data for analytical processes for decision making. There for cost are classified in to broad category and some of them are listed below. 2.2.1 Cost in their relation to the production. The elements of manufacturing cost are direct material. direct labour, and factory overhead (indirect manufacturing). Direct material and direct labour costs are combined in to an other classification called primary cost, and direct labour and factory over head can be combined in to a classified called conversion cost. Representing the cost of converting direct material in to finished products (Frigo, 1986, p 10).
Direct material are all materials that forms and integral part of finished product and that can be included directly in calculating the cost of product clued all to make automobile bodies. The case and feasibility with which the material item can be traced to the final product are major consideration in their designation as direct material. Give and facts to build furniture from part of the finished product but for costing purposes such item may be classified as in direct materials for manufacturing cost (Frigo 1986 p 10).

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