Cost
Accounting is a sub discipline of accountancy. That field of accountancy
supports the other two sub disciplines finance and managerial accountancy.
Manufacturing and Non-Manufacturing costs are the two main concerns of
accountancy. Manufacturing cost directly relates to the manufacturing or
production activities. It further divides in three main parts, Direct Material
Cost, Direct Labor Cost and Manufacturing Overhead Cost. Let I explain all these
costs one-by-one.
Direct Material Cost:
Direct
Material Cost is that cost which is available to consume over raw materials for
that purpose per unit cost is the sub terminology use for manufacturing goods
from raw material.
Direct Labor Cost:
Direct
Labor Cost is that cost which is use by the producers to manufacture the goods
form available raw materials. The terminology use for direct labor cost is
labor per hour cost.
Manufacturing
Overhead:
Manufacturing
Over head is the cost which is available to use to give the complete the
products. It is not linking with the direct material, it is use when producer
giving the products are produced form the raw material but they are not
complete and they need some more indirect material, indirect labor or some
factory operating costs.
Indirect Material means that support which is provided by the
producer to production process in
shape of supportive materials and that are tangible.
Indirect Labor means that support which provided by the producer to
the reduce the per labor cost and support the production for mean time and delivery
examples are Water, Lubricants and other
supports.
The building rent, insurance,
electricity charges and all other charges which can affect the production process
cost are known as factory overhead cost.
The Other terminologies of manufacturing and
non-manufacturing in cost accounting are prime cost, conversion cost, selling
or marketing cost, administration cost, Product Cost, Period Cost, Direct Cost,
Indirect cost, common cost, relevant range cost and variable cost.
Prime Cost is the
cost which is directly link with the product that is known as prime cost
example is direct material and direct labor costs.
Conversion Cost
is the cost through which direct labor and manufacturing costs convert the raw
materials in manufactured goods.
Selling and marketing
expenses are manufacturing overhead cost that helps the production units to
deliver their manufactured product to the end users or consumers.
Administration costs
are those costs through which company provide administration support to its
production departments or units.
Product Cost
means the finished goods cost when the goods has been manufactured the total
conversion and raw material cost is call product cost.
Period Cost are
expensed as incurred they are not capitalized in the final manufactured goods
but always excluded from the statement of Cost of goods sold.
Here two main things need to keep in mind and that are
direct and indirect. The question is here arising when a person knows that is
indirect cost and that is direct cost?
The answer is when a producer planning for production he knows what cost
will be need to produce the product and which kind of cost is not directly in
link with the production.
Common cost is
the last terminology use in the manufacturing concern that cost is the notable
type of indirect cost and normally shared by two or more than two users. The most
appropriate example is the depreciation of the factory building during the
costing each single department calculate its own section deprecation and the accumulated
depreciation of all department is in last calculate as common deprecation cost.
Non-Manufacturing Costs are those cost which are reporting
in the Income Statement in the concerned manufacturing period. The examples of
the non-manufacturing costs are general administration expenses, Sales and
marketing expenses, accounting expenses, salaries are also a part of it.
That are the Some Common terminologies using in the cost
accounting in manufacturing and non-manufacturing concerns.
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