# BASIC CONCEPT OF COST ACCOUNTING: ```Cost Accounting
nd
(2
session)
Prof. Amit De
BASIC CONCEPT
OF
COST ACCOUNTING:
 Cost Accounting
 Cost Accounting and Financial
Accounting
DIFFERENT TYPES OF COST
 Direct cost
 Prime cost
 Indirect cost
cost
 Variable cost
MATERIAL COSTING
STOCK LEVELS
► Maximum stock level.
Maximum level = Recording level + Recording quantity –
Min. consumption
= Recording level + Reordering quantity – { Min.
consumption per period x Min. Recording period }
► Minimum stock level.
Minimum Level = Reordering level – { Normal usage per
period x Average delivery time }
► Re-order level.
Re-order Level = maximum consumption during the period
x Maximum period required for delivery.
► Danger level.
ECONOMIC ORDER
QUANTITY. EOQ

Determination of EOQ by algebraic formula
EOQ =
2 x Annual consumption x Cost of
placing an order
Cost of carrying one unit inventory
for one year
LABOUR COSTING
 Methods of Remuneration
 Time Rate System
 Payment by Result
A. PIECE-RATE SCHEMES

Straight piece work system.
Wages = Number of units produced x
piece rate per unit
 Differential Piece Work System.
Taylor Differential rate System
80% of piece rate when below standard.
125% of piece rate when at or above standard.
MERRICK DIFFERENTIAL OR
MULTIPLE PIECE RATE SYSTEM
■ Up to 83-1/3%
Normal piece rate
applicable
■ Above 83-1/3%
10% above
normal rate
of efficiency
but up to 100%
■ Above 100%
20% above
normal rate
 Halsey Plan.
Formula for Halsey Premium Plan under 50%
Sharing Scheme
Actual hrs. worked x Rate per hr. + 50/100
(Standard hrs. – Actual hrs.) x Rate per hour.
 Rowan Plan.
 Group Bonus System.
 Indirect material cost.
 Indirect labour cost.
 Indirect services cost.
MANUFACTURING
 Allocation.
 Apportionment.
SECONDARY DISTRIBUTION
►
Methods of Redistribution.
1. Direct Redistribution Method.
2. Step Method.
3.
Reciprocal Service Method.
4. Trial and Error Method.
5. Repeated Distribution Method.
6. Simultaneous Equation Method.