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Mahesh gowda
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Types of cost
Direct cost
Direct Raw material consume
Indirect cost
Factory overheads
Direct labour
Administration overheads
Direct expness
I. Direct cost
Direct cost is an cost related to direct production activity. Generally direct cost come in to picture in case of manufacturing activity. It is also known as prime cost
It involves 3 things
1. Direct raw martial consume. 2. Direct labour. 3. Direct expness.
For example:
Wood in case of furniture. Cotton in case of cloths Leather in case of shoes. Gold in case of jewellary. Steel in case of whistles. Paper in case of note book. Plastic in case of pen. Fuel in case of car. Continue
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Opening stock of raw material. Purchase of raw material. Purchase return of raw material. Buying expenses (inward expenses) related to raw material. Closing stock or raw material.
=Direct Raw material consume
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Primary packing
All the expness which are incurred to save the product (protect and preserve the product in the some conditions For example: jute bag used to protect wheat, rice etc in the transport or in case of ration. Note: Primary packing can be taken either in raw material consumed or factory overheads.
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2.Direct labour
It is also known as direct wages/productive labour /productive wages It is a remuneration paid to the workers for productive activity directly related to the production. For example: any work or any manufacturing will stop in the worker goes for strike or lack outs. It is part of direct cost.
3.Direct expness
Direct expness is a part of direct cost. Direct expness are also known as chargeable expness. Direct expness are the expenses incurred in the manufacturing process to meet the specific requirement of specific customer. The product has to be carried on as per the specification given by the special customers. The manufacturer has to incurred addition expness regard labour and material to meet the specific requirement.
II.Indirect cost
Indirect cost is an cost which is incurred and is not directly related to the production activity. Indirect cost are also known as overhead/cost burden Indirect cost includes, a)Factory overheads. b)Administration overheads. c) Selling and distribution overheads.
a) Factory overheads.
Supervisor salary Indirect wages Indirect labour Unproductive wages Unproductive labour Factory manager salary Worker manger salary Salary of watchman Indirect material Indirect expness Factory insurance Repairs and maintenance of machinery Factory lighting and heating Machinery upkeep Oil/ grease/ coal/ crude oil. Depreciation on factory assets Depreciation on plant and machinery Manufacturing expness Production expenses Power / fuel/ motive power Consumables Factory cleaning Excise duty Research and laboratory expness Employees state insurance corporation. Continue
Factory expness are expness which are incurred indirectly to help the production inside the factory. Factory overheads is generally calculated as a percentage of direct wages.
Administration overheads
Office overheads Office on cost General expenses Legal expenses Audit charges/ bank charges Salary on staff Administration manager salary Director fees / remuneration Printing and stationary Depreciation on office building Depreciation on office computer Rent and rates of offices Estimation expenses Stationary and consumables Postage / fax / telex office upkeep General office manager salary
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This are amount of expenditure incurred for managing and controlling business. It is being calculated as percentage of factory expenses cost.
For example: Factory cost 5000 Administration overheads 25%on factory cost. Administration overheads=5000*25 100 Administration overheads=1250
These are the expenses which are incurred to induce the customer to buy our product and making product available to the customer. These are calculated at time as a percentage of sales an as a percentage of cost of sales. Any expenses related to warehouse and showroom will come in the sales and distribution expenses.
For example:
Sales is 5000 Sales overheads 25%on factory cost. Sales overheads=5000*25 100 Sales overheads=1250
Written off
Good will written off Preliminary expenses written off Underwriters expenses written off Miscellaneous expenses written off
Dividends
Interim dividend proposed dividend Equity dividend
Transfer
Transfer to general reserve Transfer to sinking funds Transfer to capital reserve
Loses
Losses on scrap of plant and machinery Loses on sales of fixed assets