Archive | Cost Accounting

7 Main Steps for Installation of a Costing System

This article throws light upon the seven main steps for installations of a costing system. The steps are: 1. Objectives to be Achieved 2. Study the Product 3. Study the Organisation 4. Deciding the Structure of Cost Accounts 5. Selecting the Cost Rates 6. Introduction of the System 7. A Follow-up. Installation of a Costing […]

Cost Types: 3 Main Types of Cost

This article throws light upon the three main types of costs. The types are: 1. Fixed Costs 2. Variable Costs 3. Semi-Variable Costs. Type # 1. Fixed Costs: Fixed Costs also referred to as non-variable costs, stand-by costs, period costs or capacity costs are those costs which do not vary with changes in volume of […]

Methods for the Segregation of Semi-Variable Costs (With Formula)

This article throws light upon the top seven methods for segregation of semi-variable costs. The methods are: 1. Comparison 2. High and Low Points 3. Equation 4. Average 5. Graphic (Scatter Diagram) 6. Least Squares 7. Analytical Approach. Segregation of Semi-Variable Costs: Method # 1. Comparison: Under this method, the quantum of output at two […]

Top 8 Problems on Break-Even Analysis (With Solution)

Here is a compilation of top eight problems on break-even analysis with their relevant solutions. Break-Even Analysis: Problem with Solution # 1.  From the following particulars, calculate: (i) Break-even point in terms of sales value and in units. (ii) Number of units that must be sold to earn a profit of Rs. 90,000. Solution:   […]

Marginal Costing: Meaning, Characteristics and Assumptions

After reading this article you will learn about Marginal Costing:- 1. Meaning of Marginal Costing 2. Basic Characteristics of Marginal Costing 3. Assumptions 4. Advantages 5. Limitations. Concept: Meaning of Marginal Costing Basic Characteristics of Marginal Costing Assumptions of Marginal Costing Advantages of Marginal Costing Limitations of Marginal Costing 1. Meaning of Marginal Costing: The […]

Break Even Analysis: Formula and Calculations

This article provides an overview on Break Even Analysis:- 1. Meaning of Break-Even Analysis 2. Assumptions of Break-Even Analysis 3. Break Even Point 4. Types of Break-Even Point 5. Graphic Method 6. Assumptions Underlying Break-Even Charts 7. Advantages of Break-Even Charts 8. Limitations of Break-Even Charts 9. Margin of Safety 10. Angle of Incidence 11. […]

Income Determination under Absorption and Marginal Costing

After reading this article you will learn about Income Determination under Absorption and Marginal Costing. Under absorption costing, fixed costs are treated as product costs while marginal costing excludes fixed costs from product costs. The example given here illustrates the method of income determination under absorption and marginal costing: Example: In the two income statements […]

Differential Cost: Meaning, Features and Applications

After reading this article you will learn about Differential Cost:- 1. Meaning of Differential Cost 2. Determination of Differential Cost 3. Essential Features 4. Managerial Applications. Meaning of Differential Cost: Differential costs are the increase or decrease in total costs that result from producing additional or fewer units or from the adoption of an alternative […]

Calculating Contribution and Marginal Costing

Contribution is the difference between sales and variable cost or marginal cost of sales. It may also be defined as the excess of selling price over variable cost per unit. Contribution is also known as Contribution Margin or Gross Margin. Contribution being the excess of sales over variable cost is the amount that is contributed […]

Managerial Problems and Marginal Costing

This article throws light upon the ten major managerial problems in application of marginal costing. The problems are: 1. Pricing Decisions 2. Profit Planning and Maintaining a Desired Level of Profit 3. Make or Buy Decisions 4. Problem of Key 5. Selection of a Suitable or Profitable Sales Mix 6. Effect of Changes in Sales […]

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