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MANAGEMENT ACCOUNTING SHORT NOTES

MANAGEMENT ACCOUNTING SHORT NOTES . 1. Cost Classification. 1. Cost Classification. Direct Cost. Indirect Cost (Overheads). i s a cost unit that can be traced in full to the product, service or department that is being cost. Includes Direct Material

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MANAGEMENT ACCOUNTING SHORT NOTES

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  1. MANAGEMENT ACCOUNTINGSHORT NOTES By Bright Minds Academy International

  2. 1. Cost Classification By Bright Minds Academy International

  3. 1. Cost Classification Direct Cost Indirect Cost (Overheads) • is a cost unit that can be traced in full to the product, service or department that is being cost. • Includes • Direct Material • Ex- wood for table, plastic for bottles etc • Direct Labour • Carpenter making table • Direct expenses • Cost of special designs, drawings and hiring of tools or equipment. • This is also known as prime cost • is a cost that is incurred while making a product but which cannot be traced directly to the product, service or department. • Includes • Indirect materials • Glue used, staple pins used and lubricant used • Indirect labour • Supervisor’s Salary, accountant’s salary in manufacturing company • Indirect expenses • rent of a factory and Insurance etc. • Administration expenses • Selling & distribution overheads By Bright Minds Academy International

  4. 1. Cost Classification Fixed Cost Variable Cost • is a cost which is unaffected by changes in the level of activity. • Includes • Salary of an accountant • Rent of a building • Business rates • is a cost which tends to vary with the level of activity. • Includes • Direct materials • Direct labour • Sales commission (Varies with volume of sales) Costs may also be semi-fixed or semi-variable or mixed costs. For example, a telephone bill has a fixed standing charge and a variable cost per unit of call. By Bright Minds Academy International

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