Under the first-in-first-out method, the earliest costs (first costs) are assigned to the cost of goods sold, and the remaining costs (the more recent costs) are assigned to the ending inventory. The FIFO method assumes that the earliest goods purchased are sold first. But in practice, it is not followed strictly, i.e., the earliest goods…
Operating Costing is a method of ascertaining the costs of providing or operating a service. This costing method is applied by undertakings that provide services rather than the production of goods. Such undertakings, for example, are; transport concerns, gas agencies; electricity suppliers; hospitals; theatres, etc. Because of the varied nature of activities carried out by…
Standard costing compares the standard costs and revenues with the actual results of the process, finds the reasons for the variances, and provides information about deviations to management for taking steps to improve it. A standard costing system initially records the cost of production at standard. Units of inventory flow through the inventory accounts (from…
Process costing is a form of operations costing used where standardized homogeneous goods are produced. This costing method is used in industries like chemicals, textiles, steel, rubber, sugar, shoes, petrol, etc. Process costing is also used in assembly types of industries. It is assumed in process costing that the average cost presents the cost per…
Contract Costing is a special type of job costing, where the unit of cost is a single contract. The contract itself is a cost center and is executed under the customer’s specifications. What is Contract Costing? Contract costing is a variant of job costing system applicable, particularly in case of the organization’s doing construction work….
3 methods of allocating service department costs to producing departments are; Direct method The direct method is the most widely used. This method ignores any service rendered by one service department to another, and it allocates each service department’s total cost directly to the producing departments. Step Method Step method sometimes called a sequential method…
Overhead is the aggregate of indirect material, indirect labor, and indirect expenses. It refers to any cost which is not directly attributable to a cost unit. The term indirect means that it cannot be allocated but can be apportioned to or absorbed by cost centers or units. All those costs/expenses that cannot be attributed directly…
The cost sheet is a statement, which shows various components of the total cost of a product. It classifies and analyses the components of the cost of a product. The previous period’s data is given in the cost sheet for comparative study. It is a statement that shows per unit cost in addition to Total…
Cost is the monetary value that a company has spent to produce something. The cost denotes the amount of money that a company spends on the creation or production of goods or services. It does not include the mark-up for profit. Cost is a measurement in monetary terms of the number of resources used for…
Cost accounting is the process of ascertaining and accumulating the cost of a product or activity. It is a process of accounting for the classification, analysis, interpretation, and control of cost. So it is a system of accounting which provides information about the ascertainment and control of costs of products or services. It measures the…
Job-Order Costing is a cost accounting system used when jobs or projects are unique, like construction or custom manufacturing. It helps track costs for each job separately. By doing this, businesses can determine how much each job costs, see if it’s profitable, and decide on pricing and resources. It’s like keeping track of expenses for…
Labor turnover, the rate of change in the labor force within an organization, has significant implications for businesses. In this blog post, we will delve into labor turnover, its consequences on costs and productivity and explore management strategies to address this issue effectively. Understanding Labor Turnover Labor turnover refers to the movement of employees into…
In process costing, accurate measurement of units and costs is crucial for determining the true and correct results. Two essential concepts that help achieve this accuracy are equivalent units and equivalent production. Let’s delve into these concepts, provide examples to illustrate their application, and present tables highlighting their differences. Let’s explore the world of process…
In manufacturing, idle time is a concept that deserves attention. It refers to the hours workers are paid for but aren’t utilized for productive purposes. Idle time can significantly affect productivity, costs, and overall operational efficiency. This blog post’ll explore idle time, its impact on manufacturing operations, and strategies to minimize its occurrence. What is…
Organizations strive to enhance productivity and motivate employees in today’s competitive business environment. Time-based incentive schemes have emerged as effective tools to achieve these goals. This article will explore two popular schemes: the Halsey premium plan and the Rowan Plan. We will compare their similarities, differences, real-life applications, and impact on organizational performance. Background and…