BAC 202: Cost Accounting I Notes

TABLE OF CONTENTS
LESSON ONE…………………………………………………………………………………………………….. 1
1.0 INTRODUCTION TO COST ACCOUNTING ………………………………………………….. 1
1.1 Cost Concepts………………………………………………………………………………………………… 3
1.2 Cost Classification ………………………………………………………………………………………….. 3
1.3 Cost Behavior ………………………………………………………………………………………………… 5
1.4 Costs for Decision Making and Planning …………………………………………………………… 9
1.5 Cost Control and Cost Reduction ……………………………………………………………………. 10
LESSON TWO ………………………………………………………………………………………………….. 12
2.0 COST ESTIMATION……………………………………………………………………………………. 12
2.1 Account Analysis………………………………………………………………………………………….. 13
2.2 Engineering Estimates …………………………………………………………………………………… 14
2.3 The Scattergraph Method……………………………………………………………………………….. 15
2.4 High-Low Method ………………………………………………………………………………………… 16
2.5 Statistical Cost Estimation (Regression Analysis)……………………………………………… 17
LESSON THREE ………………………………………………………………………………………………. 23
3.0 MATERIAL COSTING ………………………………………………………………………………… 23
3.1 The Material Control Process…………………………………………………………………………. 24
3.2 Stocktaking ………………………………………………………………………………………………….. 27
3.3 Changes in Production and Purchasing Systems……………………………………………….. 28
3.4 Stock Recording And Inventory Control………………………………………………………….. 30
3.5 Pricing Issues And Stocks………………………………………………………………………………. 35
LESSON FOUR…………………………………………………………………………………………………. 46
4.0 LABOR COSTING……………………………………………………………………………………….. 46
4.1 Remuneration Methods………………………………………………………………………………….. 46
4.2 General Features of Incentive Schemes……………………………………………………………. 49
4.3 Incentive Schemes in Practice ………………………………………………………………………… 52
4.4 Trends in Labor Costing ………………………………………………………………………………… 53
4.5 Labor Recording, Costing and Allied Procedures……………………………………………… 53
LESSON FIVE ………………………………………………………………………………………………….. 62
5.0 OVERHEAD COSTING ……………………………………………………………………………….. 62
5.1 Overhead Absorption…………………………………………………………………………………….. 62
5.2 Bases of Absorption………………………………………………………………………………………. 63
5.3 Service Departmental Costs……………………………………………………………………………. 73
5.4 Overheads and Activity Based Costing ……………………………………………………………. 78
LESSON SIX…………………………………………………………………………………………………….. 86
6.0 COSTING TECHNIQUES…………………………………………………………………………….. 86
6.1 Marginal (Variable) Costing…………………………………………………………………………… 86
6.2 Absorption Costing……………………………………………………………………………………….. 86
6.3 Income Statement Under Marginal Costing and Absorption Costing …………………… 87

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