ICWA

★ The classification of total cost as variable cost and fixed cost is difficult as no cost can be completely variable or completely fixed.

★ Fixed costs are eliminated for the valuation of inventory of finished goods and semi-finished goods in-spite of the fact that they might have been actually incurred.

★ It does not provide any standard for the evaluation of performance.

★ Fixation of selling price on marginal cost basis may be useful for short term only and may be dangerous in the long run.

★ It does not consider the fixed overheads.

★ It can be used for assessment of profitability only in the short run.

★ Bin Card is a quantitative record of receipts, issues and closing balance of an item of material. Whereas Stores ledger records not only quantities received or issued or in stock but also the financial expressions of the same.

★ Bin Card is maintained by stores department while stores ledger is maintained by costing department.

★ Maintenance of stores ledger provides a second check on maintenance of bin cards.

Control-ability wise Classification:

• Controllable Overheads

• Uncontrollable Overheads

A measure of the wealth is earned by nations through economic activates all around the world.

Gross National Income comprises the total value of goods and services produced within a country (i.e. its Gross Domestic Product), together with its income received from other countries (notably interest and dividends), and less similar payments made to other countries. It is also known as GNP.

GNI = Gross Domestic Product + Net property income from abroad.

★ It will block a large amount of working capital.

★ More storage facilities will be required.

★ Risk of deterioration of quality and obsolescence of material.

★ More attention will be required in material handling and up keeping.

★ Additional Insurance cost.

Material Cost is the cost of commodities and material used by the organization. It can be direct and indirect material. Direct material indicates that material which can be identified with the individual cost center and which becomes an integral part of the finished goods. Indirect material indicates that material which cannot be identified with the individual cost center. This material assists the manufacturing process and does not become an integral part of finished goods.

Expenses is the cost of services provided to the organization. It can be direct or indirect. Direct expenses are those expenses which can be identified with the individual cost centers. Indirect expenses are those expenses which cannot be identified with that individual cost centers.

Fixed Cost indicates that portion of total cost which remains constant at all the levels of production. As the volume of production increases, per unit fixed cost may reduce, but not the total fixed cost.

Labor cost is the cost of remuneration paid to the employees of the organization. It can be direct or indirect. Direct labor cost indicates that labor cost which can be identified with the individual cost center and is incurred for those employees who are engaged in the manufacturing process. Indirect labor cost indicates that labor cost which cannot be identified with the individual cost center and is incurred for those employees who are not engaged in the manufacturing process but only assist in the same.

★ Indirect Material

★ Indirect Labor

★ Indirect Expenses

Most economic experts cite that regional integration allows disadvantaged countries to realize economies of scale, compete on a broader (often global) platform and increase overall economic efficiency. The Deputy Managing Director of the International Monetary Fund states that-regional integration 'enables participating countries to pool their resources and avail themselves of regional institutional and human resources, in order to attain a level of technical and administrative competence that would not be possible on an individual basis'.

Normality wise Classification:

★ Normal Overheads

★ Abnormal Overheads

Semi-variable cost indicates that portion of the total cost which is partly fixed and partly variable in relation to the volume of production.

★ Nature of the Product

★ Nature of the Organization

★ Manufacturing Process

★ Simplicity and Cost

★ Reporting Systems

Direct Cost also termed as Prime cost. It indicates that cost which can be identified with the individual cost center. It consists of direct material cost, direct labor cost and direct expenses.

Variable indicated that portion of the total cost which varies directly with the level of production. The higher the volume of production, the higher the variable cost and vice versa, though per unit variable cost remains constant at all the levels of production.

Elements of costs:

★ Material Cost

★ Labor Cost

★ Expenses

Indirect cost also termed as Overhead. It indicates that cost which cannot be identified with the individual cost center. It consists of indirect material cost, indirect labour cost and indirect expenses.

★ Fixed Overheads

★ Variable Overheads

★ Semi-variable Overheads