MANAGEMENT ACCOUNTING SHORT NOTES

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