Basic cost concepts pdf

For you, the mashed potatoes have a greater value than dessert. The branch of accounting that deals with calculation of cost per unit, management of cost per unit and control of cost per unit is called cost accounting 3. These concepts constitute the very basis of accounting. An accounting information system is a system consisting of interrelated manual and computer parts, using processes such as collecting, recording, classifying, summarizing, analyzing, and managing data to provide output information to users. Thus, cost control ends when targets are achieved whereas cost reduction has no visible end.

It is used for analyzing the cost of a project in short and long run. This book was only used for about 34 months and from what i saw from the textbook. Chapter 2 basic cost management concepts and accounting for mass customization operations 21 chapter 2 basic cost management concepts answer key true false questions 1. Introduction to cost accounting cost sheet with format. All the concepts have been developed over the years from experience and thus they are universally accepted rules. Transaction involves transfer of money or moneys worth. Similarly, according to anthony and wilsch cost is a measurement in. Distinguish between product costs and period costs and give examples of each. Social cost is the cost of damage caused by a business firmindividual to society at large. Before taking any actions relating to your business, always consult your accountant or a business lawtax attorney. Pdf on aug 6, 2018, ebele stella nwokoye and others published chapter five theory of costs.

Matching of costs and revenues concept is explained below in the international accounting standards expenses are recognized in the income statement on the basis of a direct association between. Basic cost management concepts free download as powerpoint presentation. Define cost, costing, cost accounting and cost accountancy. It represents the cost that was objectively agreed upon the buyer and the seller. Chapter 02 basic cost management concepts and accounting for mass customization operations 23 exercise 235 10 minutes 1. Scarcity scarcity, a concept we already implicitly discussed in the introduction to this tutorial, refers to the tension between our limited resources and our unlimited wants and needs. Some accounting principles come from longused accounting practices where as others come from ruling making bodies like the fasb. They are several assumptions concerned with the recording of transactions in the books. Here are several basic ways in which to use cost accounting. Chapter 2 basic cost management concepts answer key. Opportunity cost opportunity cost is the value of what is foregone in order to have something else. Determine just the variable costs associated with a product and aggregate. Revenue is recognized when earned, and expenses are recognized when assets are consumed. Business entity, money measurement, going concern, accounting period, cost concept, duality aspect concept, realisation concept, accrual concept and matching concept.

According to the committee on cost concepts and standards of the. Cost control is achieving the cost target as its objective whereas cost reduction is directed to explore the possibilities of improving the targets. Chapter 2 basic cost management concepts and accounting for. Cost accounting is the art of translating the costs incurred by a business into actionable analyses that can improve operations and profits. It is defined as the amount of expenditure incurred on,or attributable to a given thing. Chapter 2 basic cost management concepts and accounting for mass customization operations chapter 2 basic cost management concepts answer key true false questions. A cost object is any item for which costs are measured and assigned, including such things as products, plants, projects, departments, and activities. Accounting concepts basic accounting 18 the main objective is to maintain uniformity and consistency in accounting records.

There are a number of conceptual issues that one must understand in order to develop a firm foundation of how accounting works. Costs that can be easily and conveniently traced to a unit of product or other cost object. Basic accounting principles business environment 60 5 basic accounting principles 5. Basic concepts of economics in simple language clear ias. Basic economics concepts macroeconomics khan academy. How costs respond to a change in activity level within the relevant range relevant range. Doc cost concept and classifications jelissa gayrama. Cost terms, concepts and classifications bangladesh open. The term cost is most widely used as the money cost of production which relates to the money expenditure of a firm on. Managerial accounting tasks are inwardly focused and more complex than financial accounting techniques, creating insightful reports for managerial decisionmaking. Activity levels within which a given total fixed cost or unit variable cost will be unchanged 223. Intro accounting intermediate accounting cost accounting govtnonprofit accounting managerial accounting tax accounting advanced accounting intro economics intermediate macroeconomics intermediate microeconomics intro finance business law principles of management auditing basic concepts list for all available subjects.

I needed this book for one of my college classes and the amazon price was almost 34 cheaper then in the schools book store. Cost reduction and cost control are two different concepts. There are widely recognised cost concepts but understood and applied. You may, for instance, forgo ice cream in order to have an extra helping of mashed potatoes.

Cost terms, concepts, and classifications mcgrawhill canada. Managerial and cost accounting kenyatta university. In this unit, youll learn fundamental economic concepts like scarcity, opportunity cost, and supply and demand. Audience this tutorial has been designed to help beginners pursuing education in financial accounting or business management. Accounting basics important disclaimer important note. Identify and give examples of each of the three basic manufacturing cost categories. All of the concepts and standards in gaap can be traced back to the underlying accounting principles. It is not intended nor can it replace formal legal advice. But if the concepts are properly understood economics is fun. Financial accounting i about the tutorial this tutorial will help you understand the basics of financial accounting and its associated terminologies. An important first step in studying managerial accounting is to create a framework for. Basic concepts of health insurance page 5 of 6 part of the cost of any healthcare services, he is likely to request care only when he really needs it.

Managerial accounting cost concepts flashcards quizlet. Learn vocabulary, terms, and more with flashcards, games, and other study tools. First, the most basic nation is that cost measures the use of resources. The most important is that the financial statements known as the final accounts must be drafted in the same way. Cost control as the cost of healthcare rose in the late 20th century, causing health insurance premiums to go up, insurers took various steps to contain costs and hold down a.

An accountant is a person who does the basic job of maintaining accounts as he is the man who is engaged in book keeping. For example opportunity cost is the return involved in the next best alternative. You will learn things like the distinction between absolute and comparative advantage, how to identify comparative advantage from differences in opportunity costs, and how to apply the principle of comparative advantage to determine the basis on which mutually advantageous trade can. Full file at dynamicbusinessenvironment11theditionhiltonsolutionsman chapter 2. From the above definition, it will be clear that three ideas are included in the concept of cost. Total fixed costs tfc average fixed costs afc total variable costs tvc average variable cost avc total cost tc average total cost atc marginal cost. An activity is a basic unit of work performed within an organization. The iso 9000 concept represents an international consensus on good management practices for a systematic and generic application of principles and practices based on quality iso 9000 is a written standard that defines the basic elements of a qms that organizations should use to. Earned value management 3 7232015 earned value management is a project management technique for measuring performance and progress. Financial statement issues that are unique to manufacturers 5. According to the chartered institute of management accountants, cost is the amount of expenditure actual or notional incurred on or attributable to a specified thing or activity. Cost concept of accounting play accounting explanation. Examples include material handling, inspection, purchasing, billing, and maintenance. Because something is limited, we need to make decisions regarding how we use and allocate our resources.

Hence the basic objective of the cost concept is the measurement of accurate and reliable profits and losses for a business over a period of time. The text in this chapter is intended to clarify business related concepts. Pdf chapter 2 basic cost management concepts hg7d4k. Total fixed costs tfc average fixed costs afc total variable costs tvc average variable cost avc total cost tc average total cost atc marginal cost mc 4. An accounting information system is a system consisting of interrelated manual and computer parts, using processes such as collecting, recording, classifying, summarizing, analyzing, and managing data to pro. Its important to have a basic understanding of these main accounting principles as you learn accounting. It combines measurements of the project management. Basic cost concepts free download as powerpoint presentation. Estimation of cost is one of the basic tasks of management. Economics is the study of scarcity and choice scarcity means that there is a finite amount of a good or service basically they are limited. Most of the times, it has been believed that the readers, who are using the ebooks for first. This module also looks at manufacturing and nonmanufacturing costs.