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Costs Classification

Costs are classified based on purpose for which these are to be used? Ture
Why are costs grouped into various categories, is it to done because we need to use these costs for different purposes? Yes
What are the various purposes for which costs are grouped into various categories? Decision making, planning, budgeting, forecasting, and external reporting as well. Internal reporting & external reporting
How to control costs? To control costs, first understand meaning of costs, types & grouping of costs, then control its cost driver.
What is cost ascertainment and cost estimation? Calculate actual cost is cost ascertainment. To tender if cost is estimated, is cost estimation
What is a cost object? Cost unit : Doors, kitchen cabinets, wardrobes, suits, any thing for which cost is calculated. It may be a department, one segment of a company, a branch, production, selling department, etc. etc.
Give some examples of cost object? It may be a person, department, single item or batch, any thing for which cost is calculated and assigned. It may be a project, sub-contract agreement, etc. etc. I said "Any thing for which cost is calculated & assigned.
Give some more examples of cost object? It may be a job-order. It may be a product, project, a department, person, activity, a single item or batch. Anything. Anything for which cost (estimated / actual) is calculated.
What is cost? Any sacrification to achieve anything. I sacrified leisure time and used in study to pass CMA. This time is my cost. Cost may be any resource / benefit (time, money, efforts) sacrified to achieve a specific object. CMA
Is it ture that in different professions the same term cost has different meanings? Yes. It has different meaning if used in Economics, Accounting and Finance, Engineering.
Is it ture that even within Accounting, cost term has differenct meaning? Yes, if it is used for different purposes like fixed cost, variable cost, differential cost, marginal cost. In one case like wood to make door is direct material if cost of a door is to be calculated.
Give some more examples of cost meaning differnet in different situations? In other case, same wood material is variable cost if object is to control cost. In anther case , same wood is FG cost or CGS if reported for external financial reporting.
What is cost driver? Anything which generate cost or which incurs cost is cost driver? Yes
Give some examples of cost drivers? Project, production, department, activity, business segment, branch, individual, item
How to control costs? To control costs, first understand meaning of costs, types & grouping of costs, then control its cost driver.
What is the thumb rule to control costs? Identify cost item and its cost driver, cost purpose, and control mainly big cost items. Like production salaries is cost, factory is cost driver, look at big salaries and lazy workers. Try to eliminate non-value added cost items.
Created by: maq123