Cost Accounting

Activity-based costing (ABC) is a useful costing method that accounts for overheads and indirect costs. It allocates costs through identifying cost activities, cost drivers, and cost pools. The ABC method removes several inefficiencies in the traditional costing approach. However, the approach requires effective implementation and change management to achieve efficiency. Let us discuss what is […]

Variable or marginal costing and full or absorption costing methods are two widely used inventory costing methods. Both come with different advantages and some limitations to implement. The marginal costing method helps a company in key decisions such as operational efficiency and control measures. The absorption method allocates full production costs and offers accurate final

Absorption costing is the full costing method that considers variable and fixed overheads. It comes with several advantages as compared to the marginal costing method. Absorption costing is a simple and less costly method as compared to the modern activity-based costing approach. However, it comes with limitations against other costing methods a well. Let us

Activity-based costing is a comprehensive cost allocation method. It helps the management identify cost activities and cost drivers. ABC method serves several purposes including product costing, pricing, profitability, and customer profitability analysis. On the other hand, absorption costing is the conventional costing approach. It adds fixed overhead costs to the variable costs of production. Let

Joints costs incur when more than one product is produced using the same resources. Companies can extract several products out of one main ingredient. Apportioning joint costs can help companies in calculating the correct selling price. Eventually, the decision can impact the company’s long-term profits. A company can use several methods to apportion joint costs.

A business may incur several types of expenses. There are various ways of categorizing these costs. By nature, a business can classify costs into two categories; direct costs and indirect costs. Direct cost can be directly linked to the production of a product or rendering a service. Indirect costs can be associated with the production

A cost is an expenditure that companies must incur to produce or sell their products. It may also include investment in assets and bringing them to a usable condition. For companies, costs may come from various sources and in different forms. In management and cost accounting, analyzing costs is crucial for obtaining further information about

Companies that deal in physical stock must always keep their stock replenished to generate revenues. It is crucial to do so as customers will require suppliers to provide their supplies whenever needed. However, the same may not apply to all companies as some may deal on a job-basis. Nonetheless, for most other companies, maintaining a

There are commonly two types of costs associated with products, fixed and variable costs. In many cases, there are semi-variable costs that can either be termed as variable or fixed costs. It is important to differentiate between the portion of each cost type to analyze the profit margins of each product and improve the total

We can define the delivery time as the time spent between an order placement and order delivery. The cycle of time from the moment a confirmed order is placed and the moment by it is delivered to the customer. The delivery cycle time can be for products or services. Understanding the Delivery Cycle Time The