Advanced
Advanced
Cost Accounting
Dr. K. Senthilkumar
M.Com., MBA., M.Phil., Ph.D. Faculty of Commerce,
Laxminaray na Arts
&
Science College for Women, Dharmapuri, TamilnaduDr. K. Maruthamuthu
M.Com., M.Phil., Ph.D. Senior Professor in Commerce,
Periyar University, Salem-11
Dr. Desti Kannaiah
Faculty of School of Business James Cook University,
Singapore
�
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We are happy to bring out the first edition of this book on 'Advanced Cost Accounting' as needed for the UG and PG level students. All the chapters of this book have been thoroughly packed with advanced problems and up-to-date theory. The book has been divided into five chapters to fully cover the syllabus of B.Com, B.Com (CA), B. Com (FA), BBA, BBA (CA), M.Com, M.Com (CA) students. This book presents the subject in a simple, clear and systematic manner. The book meets all requirements of Periyar, Thiruvalluvar, Madras and various other Indian Universities' syllabi. Several new problems have been taken from the latest examination questions and incorporated as illustrations or practical problems in the chapters. Short answer and long answer type of questions have also been added.
We are thankful to the professors of Periyar University for their input and Vikas Publishing House for the untiring efforts to publish the book in time with a new style and attractive format for the students. We are deeply indebted to all our students and friends who have helped us to bring out this book.
Further suggestions for improvements are welcome from professors as well as students.
Preface
vii
CHAPTER 1 Introduction of Cost Accounting
Introduction Cost Accounting
Objectives of Cost Accounting Advantages of cost accounting
Distinction between Financial Accounting and Cost Accounting Distinction between Cost Accounting and Management Accounting Functions of Cost Accounting
Methods of Costing Types of Costing
Elements of Cost Classification of Costs Cost Sheet
Specimen of Simple Cost Sheet (or) Statement of Cost Illustrations
Theory Questions
Exercises
CHAPTER 2 Materials
1
1
2
2
4
5
6
6
8
8
10
15
15
19
50
52
Material Control
59
Introduction
Essentials and Objectives of Material Control Advantages of Material Control
Techniques of Inventory Material Control Determination of Various Levels of Materials Economic order Quantity (EOQ)
Need for Economic Order Quantity (EOQ) ABC Analysis
A'.dvantages of ABC Analysis Purchase Control
A SpeCimen Purchase Requisition Form The Purchase Order Form (POF)
A Specimen Purchase Order Form The Goods Receiving Department A Specimen Goods Received Note
The Accounts Department
x
Contents
Materials planning and control
Documents for Material Planning and Control Material Requisition
Materials Return Note
(MRN)
Bin Card (BC)A Specimen Bin Card
Advantages and disadvantages of using Bin cards Stores Ledger Card (SLC)
Differences between Bin Card and Store Ledger Methods of Pricing Material Issues
Illustrations
Theory Questions
Exercises
CHAPTER 3 Labour
70
70
7 1
7 1
72
72
72
73
73
73
78
134
135
Labour Cost
14 7
Types of Labour
14 7
Important Factors for Controlling Labour Cost Labour turnover
Methods of Labour Turnover Causes of Labour Turnover
Department of Engineering and Work Study Work Measurement
Purpose ofWork Measurement Uses of Work Measurement Techniques of work measurement Job Analysis
Key Factors in Job Analysis Advantages of Job Analysis Disadvantages of Job Analysis Methods of Time Keeping Idle Time
Types of idle Time Wage payment
Advantages of time wage system Advantages of piece wage system Disadvantages of piece wage system Remuneration And Incentives
Methods of Remuneration
Advantages of Piece Rate System Disadvantages of Piece Rate System
Incentive Plans (Bonus or Premium Schemes) Types of Incentives
Contents
xiMethods Of Remuneraton And Incentive Systems
178
Theory Questions
209
Exercise
210
CHAPTER
4
Overheads
Meaning and Definition of Overhead Classification of overhead Costs Departmentalisation of overheads
Advantages of departmentalizing manufacturing overhead costs Allocated and Apportionment of Overheads
Guidelines of Apportionment Primary Distribution of Overheads
Principles of Apportionment of Overhead Costs Bases for Apportionment
Secondary Distribution of Overheads Absorption of Overhead
Methods of absorption of Overheads Administrative Overhead
Methods to treat Administrative overhead Selling and Distribution Overheads
Features of Selling
&
Distribution Overhead Absorption of Selling&
distribution overhead Primary Apportionment of Overhead Expenses Trial and Error MethodAbsorption of Overhead
Direct Wages Percentage Method Direct Wages Percentage Method Prime Cost Percentage Method
Rate Per Unit of Production Method Labour hour rate method
Machine Hour Rate Method
Computation of Two or More Rates Computation Of Machine Hour Rate
Theory Questions
Exercises
Secondary Distribution Overhead
Step Distribution Method
Repeated Distribution Me.thod
Absorption of Overhead
CHAPTER
5
Process Costing
Meaning and Definition of Process Costing Characteristics
I
Features of Process Costing Importance o�
process costingxii
Contents
Inter-:Process Profit
Joint Products and By-Products By-Products
Abnormal Loss And Gain
Joint Products And By- Products By Product Only
Theory Questions
Exercises