Chapter 9 Cost management

--->  Cost Centre: Any unit of Cost Accounting selected with a view to accumulating all cost under that unit.

--->  Cost Allocation: Allocation is the process of charging the full amount of cost to a particular cost center.

--->  Cost Centers are divided into two types – Operation Cost Centers and Service Cost Centers.

--->  SSAs are operational cost center , while Circle office and Corporate office is Service cost center

--->  Proformas to be prepared

             Proforma A –Asset register

             Proforma B – Operational Cost information

             Proforma C –Service cost information

            Proforma D -Apportionment of Cost to Service-Products; Revenue Information

Service product wise; Margin etc

--->  Direct Cost: If expenditure can be allocated to a cost center or cost object by economically feasible way then it is called direct cost. Sum of all direct cost is called prime cost.

--->  Indirect Cost: If an expenditure can not be allocated to a cost center or cost object by economically feasible way then it is called indirect cost. Indirect Cost is also known as overhead.

--->  Fixed Cost: It refers to the cost which does not vary with the change in the volume of activity in the short run. These are also known as period costs.

--->  Variable Indirect cost are termed as Variable Overhead

--->  Shut Down Costs: Costs of idle plant.

--->  Historical Costs: These are the actual costs of acquiring assets or producing goods or services