Cost allocation and product costing are closely related concepts in accounting. Cost allocation involves distributing indirect costs (overheads) to various cost objects, such as products or departments, while product costing focuses on determining the total cost of producing a specific product, including both direct and allocated indirect costs. Accurate cost allocation is essential for product costing, as it ensures that all relevant costs are considered, leading to more precise pricing, profitability analysis, and financial reporting. Together, they help businesses understand the true cost structure and make informed decisions regarding pricing and production.
Direct cost is cost of product while direct costing is the process which study or accounts the direct cost allocation to products.
Activity-based costing (ABC) enhances overhead cost allocation by assigning costs to specific activities related to each product, rather than using a broad averaging method. This allows companies with diverse product lines to better understand the true cost drivers and resource consumption associated with each product. By identifying and analyzing activities, ABC helps in pinpointing inefficiencies and enables more accurate pricing strategies, ultimately leading to improved profitability and better resource allocation. As a result, companies can make more informed decisions regarding product development and discontinuation.
Identifying the activities and identification of cost drivers
Identifying the activities and identification of cost drivers
variable costing
Direct cost is cost of product while direct costing is the process which study or accounts the direct cost allocation to products.
Activity-based costing (ABC) enhances overhead cost allocation by assigning costs to specific activities related to each product, rather than using a broad averaging method. This allows companies with diverse product lines to better understand the true cost drivers and resource consumption associated with each product. By identifying and analyzing activities, ABC helps in pinpointing inefficiencies and enables more accurate pricing strategies, ultimately leading to improved profitability and better resource allocation. As a result, companies can make more informed decisions regarding product development and discontinuation.
this is the study of labour which entails analysis and calculation of labour remuneration, recording of labour hours, introduction of incentives, recording of labour related cost and allocation of labour cost to products.
Cost objectives determines the cost allocation. It determines the product, service or department that will receive the allocation.
Identifying the activities and identification of cost drivers
Identifying the activities and identification of cost drivers
variable costing
There are two type of costing are involved in a product or service. ie Direct cost and Indirect cost. In this two head there are two sub type costing are involved. ie Varriable cost and Fixed cost. Here the the total varriable cost are involved in a product of cost is called marginal costing. In another way the totoal cost -fixed cost is called marginal costing By M.Magesh 099948 33079
There are two type of costing are involved in a product or service. ie Direct cost and Indirect cost. In this two head there are two sub type costing are involved. ie Varriable cost and Fixed cost. Here the the total varriable cost are involved in a product of cost is called marginal costing. In another way the totoal cost -fixed cost is called marginal costing By M.Magesh 099948 33079
Product cost accuracy is a term used in the accounting field. It essentially defines the amount of money it actually costs to produce a product.
I think..... In marginal costing method only variable cost is considered as product cost and fixed cost is not considered as product cost. But in reality product cost include fixed and variable, thus both variable and fixed costs should be considered while allocating cost. Marginal costing is used for inside reporting and absorption costing is used for outsider to clarify the real cost of product........ Am i right? Please confirm it
Cost is determined by calculating all expenses related to producing a product or providing a service, including materials, labor, and overhead costs. These costs are then used to establish the selling price of the product or service to ensure a profit margin. Various costing methods, such as job order costing or activity-based costing, can be used to determine costs accurately.