What is cost?

Cost means the amount of expenditure (actual or notional) incurred on, or attributable to, a given thing

What is cost accounting?

Cost accounting is concerned with recording, classifying and summarizing costs for determination of costs of products or services, planning, controlling and reducing such costs and furnishing of information to management for decision making.

A/c to CIMA

The application of costing and cost accounting principles, methods and techniques to the art science and practice of cost control and ascertainment of profitability.

Why cost accounting?

To calculate cost of each product. Job, process.

Data to calculate SP

Data to send quotations

Comparative cost statement

Analysis and classification of various operations

To disclose wastage and inefficiencies

Relative study of various operations

Inventory of stores

HOW COST ACCOUNTING IS DIFFER FROM FINANCIAL ACCOUNTING?

1. Cost accounting is job undertaken by firm. Financial accounting is concerned with recording of business transaction in the books accounts.

2. Cost accounting helps in finding out cost of a product and control of cost. Where as financial accounting helps in knowing the financial position of the business i.e. is profit or loss in a financial year.

3. The Difference between financial and cost is that in financial accounting all business transaction between debtor and creditor are determined. Cost accounting is used for managerial decision making, how much cost is spent in all production as well as admin department. What amount of budget is required in future and all receipt forecasting.

4. Financial accounting covers accounts of the whole business Relating to all the commercial transactions. Cost accounting directs its attention only to the transactions vices concerning, manufacturing and sale of Products and services.

COST OF RUNING OF ADMINISTRATION AT J K BUSINESS SCHOOL

1. OPERATING COSTING

It applies where standardized services are provided by an undertaking or by a service cost centre within an undertaking.

CIMA Defines the method Operating costing applies where standardized services are provided by an undertaking.

Operating costing is used by concern running diverse nature of activities, the cost system is obviously different from that for manufacturing concerns.

CLASSIFICATION OF COST

Fixed or Standing Charges. (Depreciation, insurance, taxes etc…)

Maintenance Charges: (repairs, tyros, tubes, spares, maintenance, etc…

Running or Operating Charges. (Petrol, diesel, lubricating oil, etc….)

DEFINITION OF VARIABLE COST

Variable costs are the total expense changes as volume changes. Room supplies are a common variable cost. The supplies are directly related to the number of rooms that are filled.

Variable charges – (power, repairs and maintenance) etc...

DEFINITION OF FIXED COST

Costs are identified as fixed if they do not change as volume changes. For instance, a late night registration desk would be attended by one person, whether there was one guest or one hundred.

Fixed charges or standing charges (salary, rent, insurance) etc...

MAINTENANCE CHARGES

Maintenance Charges: These are cost of semi-variable nature and include expenditure on repairs, maintenance, tyres, tubes, accessories and spares.

VARIABLE COST OF JK BUSINESS SCHOOL

Particulars Monthly ExpensesTotal Rs.in lack

Total yearly

Electricity & Diesel

6L 72

Hostel Fooding etc. 4L 48

Marketing Expanses 15L 180

Placement Expenses 5L 60

Telephone Communication

0.5L 6

Scholopership 1 L 12

Administrative Expenses

1 L 12

Seminar & Conference 0.5L 6

Faculty Development 0.5L 6

Library Updation 1L 12

Examination fee/AICTE/ etc

1.5L 18

Stationary Charges 0.5L 6

misc. Expenses 1L 12

TOTAL EXPENCES(A) 38L 456L

Per day variable exp. 456L/365 1.249315

FIXED COST OF J K BUSINESS SCHOOL

Particulars

No. of employ

Monthly salary each

Monthly Total

Total yearly

Director 1 2L 2L 24L

FACULTY

DEC 4 0.8L 3.2L 38.4

University 18 0.9L 16.2L 194.4

AICTE 16 1L 16L 192

Registrar 1L 0.5L 0.5L 6L

Examination Head 1L 0.5L 0.5L 6L

Marketing Department 3 0.4 1.2 14.4

Acount Department 2 0.2 0.4 4.8

Placement Department 3 0.3 0.9 10.8

Admin Dpartment 3 0.2 0.6 7.2

Hostel warden BOYS 1 0.4 0.4 4.8

Hostel Warden GIRLS 1 0.4 0.4 4.8

Office BOYS/Peons 8 0.06 0.48 5.76

Drivers 3 0.08 0.24 2.88

Securty Guard 10 0.08 0.8 9.6

House keeping Staff 10 0.06 0.6 7.2

TOTAL Salary(B) 89 10.98 47.52 570.24Per day fixed expense

570.24/365

1.56230137

NOW THE TOTAL OPERATING COST

Operating cost = Variable cost+ Fixed cost

= 456 + 570.24

= 1026.24 Lack annually

Per day cost is

=1026.24/365

=2.811616438 Lack per day

2 lack 81 thousand 1hundred 61 rupees. Per day

TOTAL ASSET OF JK BUSINESS SCHOOL

Land (10 acre) rate 1 crore acre = 10 crores (estimated)

Appreciation 15% on land

10 core*15% = 1.5 core (increase every year )

Building cost (estimated) 5 cores

Estimated life of building 50 years

Depreciation 10% on building

=50000000*10/50*100 = 100000

Boys Hostel 2.5 core (estimated)

Girls Hostel 2.5 core (estimated)

Life of both building is 50 years estimated

10% depreciation on both buildings

= (2.5 +2.5)*10/50*100 = 1 lakh decrease every year