Wednesday 30 January 2019

Elements Of Cost - Cost Accounting

Elements Of Cost

To discuss the elements in the production process, the company has been taking into account against costs that were sacrificed by d. Hartanto, in his book accounting for Entrepreneurs, so the production process does not experience barriers that means, then in sales results can obtain the results of the production could earn a profit.

In a production process involves a fee charged elements according to group certain costs in order to craft a price of staple production can be incorporated into cost elements. But this was not immediately can be viewed as a cost, because it must be in accordance with the cost factor, because of the cost it must be in accordance with the cost factor that held firm.

The cost of the elements above, are as follows:

  1. Manufacturing cost, are all costs that arose since the purchase the ingredients to turn into finished products (final product). Manufacturing cost is divided into: Prime cost (cost), is the cost of materials directly and direct labor wages in factory activity.
  2. Direct material, i.e. all the raw materials that make up the whole material which can be directly included in the calculation of work of principal.
  3. Direct cost of labor, which directly contributing in the production process.
  4. Manufacturing expenses, can also be called a factory overhead cost or indirect cost of fabrication.

That included the cost of this is

  1. Indirect labor, that labor is not involved directly in the production process, for example to the section of the workshop, General helpers and as the basis for the ceasing of towards the costs incurred in the production process.
  2. Other manufacturing expenses, i.e. expenses not directly apart from indirect labour and indirect materials, such as costs for the use of land, tax removal, maintenance and repair

2) Commercial expenses, which include:

  • a. Selling expenses, is all cost incurred after the completion of the production process until such time as sold it. Fees include departures, freight billing and expenses relating to sales functions.
  • b. Administration expenses, are the fees that include cost planning and monitoring. Usually all fees are not charged on the production or sales is seen as the cost of administration.

Meanwhile, according to Charles t. Horngren, in his book Cost Accounting a. production management Emphasis, (1999:15) cost elements can be classified into:

a Time when computed)

1. Historical cost

2. Budgeted cost

b) Behavior in relation to fluctuation in activity:

1. Variable cost

2. Fixed cost

3. Other cost of over aging Degree


1. Total cost

2. Unit cost

d) Management function:

1. Manufacturing cost

2. the Selling cost

3. Administration cost

Easy e) of traceability:

1. Direct cost

2. Indirect cost

f) Timing of change against revenue:

1. Product cost

2. Period cost

As for the explanation of the elements of the charges above are as the following:

1) Historical cost is the cost that has happened in the past, while budgeting cost is a cost that is estimated to occur in the foreseeable future.

2) Variable cost, is the overall cost will vary with the changing volume of production or sales. While the fixed cost, the overall cost is not going to change at some level of production or sales.

3) Total cost, are a number of costs that laid down on the entire cost objective. While the unit cost, is the average cost of each unit of the objective.

4) Manufacturing cost is the cost required to produce goods (with the use of machines, equipment and labor). Manufacturing cost comprises direct cost, material cost, direct labor cost and indirect cost/overhead cost.

While the administrative cost is costs that are necessary for the management of the company as a whole.

5) Direct cost, are the costs that are easily traceable to a particular object. While the indirect cost is the cost-the cost of which cannot be traced to a particular object with relationship

While the period cost is costs that arise due to the passage of time. In other words, period cost is any cost that is allocated based on time.

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