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Cost Accounting Quick Notes 2

This document covers key concepts in cost accounting, including types of overheads, standard costing, and the differences between absorption and marginal costing. It also outlines various budgeting types, break-even terms, job order costing, process costing, and activity-based costing (ABC). Additionally, it provides important formulas related to total cost, cost of goods sold (COGS), and net profit.

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lumber jack
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26 views3 pages

Cost Accounting Quick Notes 2

This document covers key concepts in cost accounting, including types of overheads, standard costing, and the differences between absorption and marginal costing. It also outlines various budgeting types, break-even terms, job order costing, process costing, and activity-based costing (ABC). Additionally, it provides important formulas related to total cost, cost of goods sold (COGS), and net profit.

Uploaded by

lumber jack
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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📌 Quick Cost Accounting Notes (Part 2)

🔹 10. Overheads

Overheads = Indirect costs not directly tied to production


Types:

 Factory Overhead – Indirect materials, wages, depreciation


 Administrative Overhead – Office salaries, rent, etc.
 Selling & Distribution Overhead – Ads, delivery, sales salaries

🔹 11. Standard Costing

 Standard Cost: Pre-set cost for material/labor


 Variance Analysis:

\text{Variance} = \text{Standard Cost} - \text{Actual Cost}

 Material Price Variance


 Labor Efficiency Variance

🔹 12. Absorption vs Marginal Costing


Absorption
Feature Marginal Costing
Costing

Fixed OH in
Yes No
product?

Use in external No (used for


Yes
reports decisions)
🔹 13. Budgeting Types

 Flexible Budget: Adjusts with activity level


 Fixed Budget: Constant regardless of activity
 Cash Budget: Forecast of cash inflow/outflow
 Production Budget: Units to be produced

🔹 14. Break-even Terms

 Margin of Safety:

\text{MOS} = \text{Actual Sales} - \text{Break-even Sales}

\text{P/V Ratio} = \frac{\text{Contribution}}{\text{Sales}} \times 100

🔹 15. Job Order Costing

 Used for custom or small-batch jobs


 Each job = unique cost record
 Costs assigned:
o DM + DL + Applied OH

🔹 16. Process Costing

 Used in mass production


 Cost collected by process/department
 Total cost ÷ units = cost per unit

🔹 17. Activity-Based Costing (ABC)

 Overheads allocated based on activities


 More accurate for complex production
Steps:

1. Identify activities
2. Assign costs to activity pools
3. Find cost drivers
4. Allocate cost based on driver usage
🔹 18. Important Formulas

 Total Cost = Prime Cost + Overheads


 COGS = Cost of Production + Opening FG – Closing FG
 Net Profit = Sales – Total Cost

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