Cost & Management Accounting – Attributable/ Traceability/Identification point of view
This article is presented & organized by Takshila Learning,who is engaged in providing online courses to learners pan-India.Among our major portfolios, we are specialized in CS online classes.For CS Foundation, Executive & Professional online classes, click on link for CS Executive video lectures for free download.In continuation to our earlier post, today we are going to discuss the ‘Classification of Cost’.
Cost is resources sacrificed to sell a product or render a service but it can be classified from a different point of view:
Attributable/ Traceability/Identification point of view:
Direct Cost: Cost directly attributes to a specific cost center, i.e. specific Timber for a chair.
Indirect Cost:Cost which is not specifically attributable to a Cost Center, which is a common cost for a number of cost centers, E.g. Fevicol for multiple types of furniture’s.
Elements point of view:
Materials Cost: The raw inputs being consumed for manufacturing a final product. It can be of two types: Direct & Indirect Material.
Direct material is the starting point of production. It is part of Prime Cost. Direct Material is directly attributable to a specific cost center.For example:Timber for furniture.
Indirect Material is a common material being used for more than one product. Fevicol for several types of furniture.
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Labor Cost:Cost for human resources engaged in the organization.
This is also of two types: Direct & Indirect labor.
Direct labor is part of thePrime cost, labor specifically engaged in a product.
Indirect labor is part of overheads engaged in factory,office & sales of a product.
It is an Indirect Cost, which is not specifically attributable to any specific cost center.
These are the common costs incurred for multiple products/departments, i.e.rent, salary,electricity,etc.
Overheads can be of three Types:
Factory, office &selling overheads depending on the department which it is being incurred.
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