Cost Accounting

To understand if a product is truly profitable all costs have to be accounted for. Every cost accounted for shows if a profit is made in that product line. More often than not, companies look at making profit through volume sales. This is a fallacy. If a detailed costing is not undertaken it may give an inaccurate picture of profits. Special emphasis is therefore made on capturing all costs involved in the process.

Let us revisit Choco-bloc our chocolate producing company.

The basic tools to capture data at Chocobloc are:

  • Bill of material
  • Timecard
  • Materials requisition form
  • Job cost sheet

The bills of material lists the items quantity wise required to produce the finished product.

Time cards help capture the following information:

Time and raw materials they will use on a job.

Time as a cost factor in production, i.e., total time taken to complete the job

The material requisition list helps capture all materials actually used to complete the job. This will include damaged chocolates as well that will be a cost in that job.

The job cost sheet is the paper trail that follows the flow of jobs through the factory. Here actual production costs are noted.

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