Management 1 (Organizational Behaviour/Finance & Accounting) | 20. Cost Accounting Basics – Types of Costs by Abraham | Learn Smarter
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20. Cost Accounting Basics – Types of Costs

Cost accounting is essential for effective financial management in businesses, helping managers plan and control costs effectively. Understanding the various types of costs, including fixed, variable, direct, and indirect, is crucial for decision-making, especially in fields like computer science where budgeting and cost estimation are integral. This chapter emphasizes the importance of cost classification for improved budgeting, pricing strategies, and profitability analysis.

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Sections

  • 20

    Cost Accounting Basics – Types Of Costs

    This section introduces cost accounting and categorizes costs into various types essential for decision-making and financial management in businesses.

    Learning Practice

  • 20.1

    What Is Cost Accounting?

    Cost accounting is the internal recording and analysis of costs related to products and services, providing critical information for management decision-making.

    Learning Practice

  • 20.2

    Classification Of Costs

    Costs can be classified based on various attributes, including their nature, function, behavior, identifiability, and relevance for decision-making.

    Learning Practice

  • 20.2.1

    Based On Nature/elements

    This section discusses the classification of costs in cost accounting based on their nature, specifically focusing on direct and indirect costs.

    Learning Practice

  • 20.2.2

    Based On Function

    This section categorizes costs based on their function within a business, identifying manufacturing, administrative, and selling/distribution costs.

    Learning Practice

  • 20.2.3

    Based On Behavior

    This section classifies costs based on their behavior, emphasizing the differences between fixed, variable, and semi-variable costs.

    Learning Practice

  • 20.2.4

    Based On Identifiability

    This section discusses the classification of costs based on identifiability, highlighting traceable and common costs.

    Learning Practice

  • 20.2.5

    Based On Relevance For Decision-Making

    This section explains the classification of costs based on their relevance to decision-making, emphasizing relevant and irrelevant costs.

    Learning Practice

  • 20.3

    Other Special Types Of Costs

    This section explores various special types of costs that are crucial for decision-making in cost accounting.

    Learning Practice

  • 20.3.1

    Opportunity Cost

    Opportunity cost refers to the potential benefit lost when choosing one alternative over another.

    Learning Practice

  • 20.3.2

    Sunk Cost

    Sunk costs are expenses that have already been incurred and cannot be recovered.

    Learning Practice

  • 20.3.3

    Marginal Cost

    Marginal cost refers to the additional expense incurred when producing one more unit of output.

    Learning Practice

  • 20.3.4

    Controllable And Uncontrollable Costs

    This section distinguishes between controllable costs, which can be influenced by management, and uncontrollable costs, which cannot be altered.

    Learning Practice

  • 20.3.5

    Imputed Costs

    Imputed costs are economic costs that are not actually incurred but are considered for decision-making.

    Learning Practice

  • 20.3.6

    Incremental And Differential Costs

    This section explores the concepts of incremental and differential costs, which are essential for analyzing financial impacts of changes in business activities.

    Learning Practice

  • 20.4

    Importance Of Cost Classification

    Cost classification is vital for effective budgeting, pricing decisions, cost control, and profitability analysis in business.

    Learning Practice

  • 20.5

    Real-World Applications For Cse Students

    Understanding cost accounting is crucial for CSE students as it applies directly to software development, startups, product management, and IT management.

    Learning Practice

  • 20.6

    Summary

    Cost accounting is crucial for strategic management and decision-making in businesses, particularly for engineering students in project-based fields.

    Learning Practice

References

Chapter_20_Cost.pdf

Class Notes

Memorization

What we have learnt

  • Cost accounting is a key co...
  • Understanding and classifyi...
  • Cost classification is fund...

Final Test

Revision Tests