College · B.Com. (Programme) · Semester 4

DSC-4.2 — Cost Accounting

Compiled notes

Compiled from actual DU previous year question papers — key concepts, definitions, and exam patterns.

Cost Accounting - Complete Visual Study Guide

Course: B.Com. (Prog.) CBCS - Paper BC 4.3: Cost Accounting

Purpose: A complete, exam-focused Markdown revision guide based on the supplied course material. It is an original synthesis: use the source PDF for its full question bank and detailed numerical practice.

The big picture
Unit I - Introduction and Cost Concepts
Unit II-A - Materials
Unit II-B - Labour
Unit III - Overheads and ABC
Unit IV-A - Costing Methods
Unit IV-B - Job, Contract and Process Costing
Unit IV-C - Joint Products and By-products
Unit V - Service Costing and Accounting Systems
Formula bank and exam toolkit
Practice checklist

1. The big picture

Cost accounting in one view

Rendering diagram…

Syllabus map

Unit	What you must be able to do	High-value outputs
I	Explain the purpose, concepts and classifications of cost	Definitions, distinctions, cost sheet
II-A	Buy, store, issue and value materials	EOQ, stock levels, FIFO/LIFO/weighted average
II-B	Record and control labour	Idle time, overtime, turnover, incentive plans
III	Collect, distribute and recover overhead	Allocation, apportionment, absorption, ABC
IV	Select and apply an appropriate costing method	Job, contract, process, unit costing
V	Cost a service and reconcile accounting systems	Passenger-km, integral/non-integral accounts

The cost pyramid - a memory infographic

Layer	Formula	What it represents
Selling Price	Cost of Sales + Profit	Price charged to customer
Cost of Sales	Cost of Production + Selling and Distribution OH +/- Finished Goods stock adjustment	Cost of goods sold
Cost of Production	Works Cost + Administration OH +/- WIP adjustment	Finished output cost
Works Cost	Prime Cost + Factory OH +/- WIP adjustment	Factory conversion cost
Prime Cost	Direct Material + Direct Labour + Direct Expenses	Directly traceable production cost

Fast rule: direct costs are traced to a cost unit. Indirect costs are collected as overhead and then allocated, apportioned and absorbed.

2. Unit I - Introduction and Cost Concepts

2.1 Meaning of cost, costing and cost accounting

Term	Plain meaning
Cost	Amount of resources sacrificed to obtain or produce something.
Costing	Techniques and processes used to ascertain cost.
Cost accounting	Recording, classifying, analysing and reporting costs to support control and decisions.
Cost accountancy	The wider application of costing principles to cost ascertainment, profitability and management decision-making.
Cost unit	Unit for which cost is measured, e.g., one unit, tonne, job, passenger-km.
Cost centre	Location, person, machine or department for which costs are collected.

2.2 Objectives of cost accounting

Rendering diagram…

Cost ascertainment: determine the cost of a product, job, process, department or service.
Price fixation: set a rational selling price, especially where cost-plus pricing or tenders are used.
Cost control: compare actual cost against standards, budgets or prior periods; investigate exceptions.
Profitability analysis: identify profitable products, customers, jobs or activities.
Decision support: compare relevant costs and benefits of alternatives.
Information to management: provide timely, classified data for planning and control.

2.3 Limitations

There is no single universal costing procedure for every business.
Several allocations, apportionment bases and valuation methods use judgement.
A cost useful for one decision may not be relevant for another.
It can be expensive to design, operate and continuously update a suitable system.
Results are estimates where assumptions are involved; cost accounting is not an exact science.

2.4 Financial, cost and management accounting

Basis	Financial accounting	Cost accounting	Management accounting
Primary users	External users	Internal operating management	Senior management
Main focus	Overall profit, financial position	Product/service/department cost	Decisions, plans and performance
Time focus	Historical, periodic	Historical plus current control	Future-oriented as well as historical
Statutory requirement	Generally compulsory	Usually voluntary	Voluntary
Detail	Aggregated	Detailed by cost unit/centre	Tailored to the decision

2.5 Cost classification

Rendering diagram…

Classification	Meaning	Example
Direct material	Material identifiable with a unit of output	Timber in a table
Direct labour	Wages traceable to a unit/job/process	Wages of a job worker
Direct expense	Expense directly attributable to a unit	Royalty per unit, special design fee
Indirect cost	Cannot be economically traced to one unit	Factory rent, supervisor salary
Fixed cost	Total cost remains constant within a relevant range	Building rent
Variable cost	Total cost changes with activity	Direct material
Semi-variable cost	Contains fixed and variable elements	Power bill with minimum charge
Sunk cost	Past cost that cannot be changed	Book value of old equipment
Opportunity cost	Benefit forgone by choosing one alternative	Rent lost by using own building
Marginal cost	Additional cost of one more unit	Usually variable cost of extra output
Conversion cost	Direct labour + factory overhead	Cost of converting material into output

2.6 Role of a cost accountant

Planning	Control	Reporting	Decision support
Budget cost and set standards	Compare actual with standard	Prepare cost sheets and reports	Make/buy, pricing and product mix
Design records and procedures	Investigate deviations	Report profitability	Evaluate alternatives
Estimate tenders/quotations	Reduce waste and idle resources	Supply management information	Advise on relevant costs

2.7 Installing a costing system

Rendering diagram…

Use a system that is simple, economical, flexible, timely and aligned to the organisation's product, production method and management needs.

2.8 Cost sheet format

text

Direct materials consumed                         xxx
Direct wages                                      xxx
Direct expenses                                   xxx
                                                   ---
Prime cost                                        xxx
Add: Factory / works overhead                     xxx
                                                   ---
Gross works cost                                  xxx
Add/Less: WIP adjustment                          xxx
                                                   ---
Works cost                                        xxx
Add: Administration overhead                      xxx
                                                   ---
Cost of production                                xxx
Add/Less: Finished goods adjustment               xxx
Add: Selling and distribution overhead            xxx
                                                   ---
Cost of sales                                     xxx
Add: Profit                                        xxx
                                                   ---
Sales / selling price                             xxx

2.9 Mini example - cost sheet logic

Suppose direct material is 60,000, direct wages 40,000, direct expenses 5,000, factory overhead 25,000, administration overhead 10,000, selling overhead 15,000, and desired profit is 20% of sales.

Step	Amount
Prime cost = 60,000 + 40,000 + 5,000	105,000
Works cost = 105,000 + 25,000	130,000
Cost of production = 130,000 + 10,000	140,000
Cost of sales = 140,000 + 15,000	155,000
Selling price = Cost of sales / 0.80	193,750

If profit is 20% of selling price, cost is 80% of sales. Divide cost by 0.80. Do not add 20% of cost.

3. Unit II-A - Materials

3.1 Material control: purpose

Material control ensures the right material is available in the right quantity, quality, time and price, while keeping stock investment and losses under control.

Rendering diagram…

3.2 Key documents

Document	Prepared/used by	Main purpose
Purchase requisition	User department	Authorises need for material
Request for quotation	Purchase department	Invites supplier prices and terms
Purchase order	Purchase department	Formal order to supplier
Goods received note (GRN)	Receiving/stores	Records quantity and condition received
Bin card	Storekeeper	Quantity record at storage location
Stores ledger	Cost/accounts department	Quantity and value record
Material requisition note	Production department	Authorises issue to a job/process
Material return note	Production/stores	Records unused material returned
Material transfer note	Department to department	Records internal transfer

3.3 Stock levels

Level	Formula
Re-order level	Maximum usage x maximum lead time
Minimum level	Re-order level - (normal usage x normal lead time)
Maximum level	Re-order level + EOQ - (minimum usage x minimum lead time)
Danger level	Average usage x emergency lead time
Average stock level	Minimum stock + 1/2 EOQ, or (minimum + maximum) / 2

3.4 EOQ - Economic Order Quantity

EOQ balances ordering cost against carrying cost.

EOQ = \sqrt{\frac{2DS}{H}}

Where:

D = annual demand in units
S = ordering cost per order
H = annual holding/carrying cost per unit

At EOQ, the total of ordering and carrying cost is at or near its lowest point. The first falls as order size rises; the second rises as order size rises.

3.5 ABC analysis - selective control infographic

Category	Typical share of items	Typical share of annual usage value	Control level
A	10%	70%	Very strict; senior review; frequent monitoring
B	20%	20%	Normal control
C	70%	10%	Simple, economical controls

Rendering diagram…

ABC principle: rank items by annual consumption value:

\text{Annual usage value} = \text{Unit cost} \times \text{Annual quantity used}

3.6 Pricing material issues

Method	Rule	Effect when prices are rising
FIFO	Earliest receipts issued first	Lower issue cost; higher closing stock
LIFO	Latest receipts issued first	Higher issue cost; lower closing stock
Simple average	Average of unit prices, ignoring quantities	Easy but less representative
Weighted average	Total value available / total quantity available	Smooths price fluctuations
Replacement price	Issue at current replacement price	Useful for current-cost decisions
Standard price	Pre-set price; difference is a variance	Useful for control

FIFO, LIFO and weighted average example

Receipts: 100 units at 10 and 100 units at 14. Issue: 120 units.

Method	Issue valuation	Closing stock valuation
FIFO	100 x 10 + 20 x 14 = 1,280	80 x 14 = 1,120
LIFO	100 x 14 + 20 x 10 = 1,600	80 x 10 = 800
Weighted average	Average = 2,400 / 200 = 12; issue = 120 x 12 = 1,440	80 x 12 = 960

3.7 Stores ledger workflow

Rendering diagram…

3.8 Material losses

Loss	Meaning	Accounting treatment
Normal loss	Expected, unavoidable loss	Cost is absorbed by good output; scrap value reduces material cost
Abnormal loss	Avoidable or unusual loss	Charge separately to costing P&L / loss account
Scrap	Small residue with low sale value	Credit scrap proceeds to relevant overhead/process
Defectives	Units repairable at extra cost	Charge rectification according to cause
Spoilage	Units not repairable	Treat as normal or abnormal based on cause

4. Unit II-B - Labour

4.1 Labour cost control system

Rendering diagram…

Activity	Question answered	Common record
Time keeping	Was the employee present?	Attendance register, clock card, biometric log
Time booking	Which job/process used the employee's time?	Job card, time sheet, daily time record
Payroll	How much gross/net pay is due?	Wage sheet, pay slip
Labour analysis	Where should labour cost be charged?	Labour distribution sheet

4.2 Time keeping vs time booking

Basis	Time keeping	Time booking
Focus	Attendance	Time spent on each job/process
Main objective	Payroll and punctuality control	Accurate job/process costing
Typical source	Gate/biometric/clock card	Job ticket/time sheet

4.3 Methods of remuneration

Method	Wage calculation	Best suited for
Time rate	Hours worked x hourly rate	Quality-sensitive work; output hard to measure
Piece rate	Units produced x rate per unit	Measurable, repetitive output
Differential piece rate	Different rate above/below standard	Strong output incentive
Halsey plan	Time wages + worker share of time saved x rate	Shared saving approach
Rowan plan	Time wages + (time saved/time allowed) x time taken x rate	Incentive with a built-in limit

Let T be time allowed, t actual time, and R wage rate.

Incentive plan	Formula
Halsey (50% share)	`tR + 50% x (T - t)R`
Rowan	`tR + ((T - t) / T) x tR`

4.4 Idle time

Idle time is time paid for but not used in productive work.

Type	Causes	Treatment
Normal idle time	Set-up, normal waiting, minor machine adjustment, tea break	Include in factory overhead or inflate labour rate
Abnormal idle time	Breakdown, strike, power failure, avoidable delay	Charge to costing P&L / abnormal loss

4.5 Overtime

Cause of overtime	Treatment of premium
Specific customer/job request	Charge to that job
General production requirement	Treat as factory overhead
Abnormal reason	Charge to costing P&L

4.6 Labour turnover

Labour turnover means change in the workforce over a period.

\text{Average employees} = \frac{\text{Opening employees} + \text{Closing employees}}{2}

Measure	Formula
Separation rate	Separations / average employees x 100
Replacement rate	Replacements / average employees x 100
Flux rate	(Separations + replacements) / average employees x 100

Avoidable causes	Unavoidable causes
Low wages, poor conditions, poor supervision, lack of training, job dissatisfaction	Retirement, illness, accident, death, personal/family reasons, relocation

Cost of high turnover: recruitment, training, lost output, lower quality, more supervision, overtime and higher scrap.

4.7 Fringe benefits

Fringe benefits are employment-related benefits in addition to basic wages, such as employer retirement contributions, medical support, paid leave, canteen subsidy, insurance and welfare facilities.

Treatment: charge directly when clearly attributable to a job; otherwise include in labour/factory overhead and recover systematically.

5. Unit III - Overheads and ABC

5.1 What are overheads?

Overheads are indirect material, indirect labour and indirect expenses that cannot be directly traced economically to a cost unit.

Functional classification	Examples
Factory/production OH	Indirect wages, factory rent, power, depreciation
Administration OH	Office salary, audit fee, legal expenses
Selling OH	Sales salaries, advertising, showroom expense
Distribution OH	Packing for delivery, warehouse, delivery vehicles

5.2 Four stages of charging overhead to a cost unit

Rendering diagram…

Term	Meaning	Example
Allocation	Entire item charged to one cost centre	Salary of one department's supervisor
Apportionment	Common cost divided among cost centres on fair basis	Factory rent by floor area
Re-apportionment	Service-centre cost redistributed to production centres	Canteen cost to production departments
Absorption	Production-centre OH charged to jobs/units	OH per labour hour

5.3 Common bases of apportionment

Overhead	Suitable basis
Rent, rates, lighting	Floor area
Power	Machine hours / kWh
Canteen, welfare, personnel	Number of employees
Depreciation, insurance	Asset value
Indirect wages/supervision	Direct wages / number of workers
Stores expenses	Material value / number of requisitions
Repairs	Machine value / machine hours

5.4 Primary and secondary distribution

Rendering diagram…

Primary distribution: allocate/apportion all overheads among production and service departments.
Secondary distribution: redistribute service department overheads to production departments.
Absorption: recover each production department's final overhead from jobs/units.

5.5 Overhead absorption rates

Method	Formula	Appropriate when
Percentage of direct material	OH / direct material x 100	Material drives overhead
Percentage of direct wages	OH / direct wages x 100	Labour cost is main driver
Percentage of prime cost	OH / prime cost x 100	Mixed direct inputs are relevant
Labour hour rate	OH / labour hours	Labour intensity drives OH
Machine hour rate	OH / machine hours	Machine-intensive production
Unit rate	OH / units produced	Homogeneous output

5.6 Under- and over-absorption

Position	Meaning
Under-absorption	Actual OH > OH absorbed; too little was charged to output
Over-absorption	OH absorbed > actual OH; too much was charged to output

Treatments: use supplementary rate, transfer a small abnormal amount to costing P&L, or carry forward only when justified.

5.7 Machine hour rate

\text{Machine Hour Rate} = \frac{\text{Machine-related standing and running costs}}{\text{Productive machine hours}}

Include, as applicable: depreciation, repairs, insurance, power, lubricants, operator wages, lighting share, rent share and supervision. Exclude non-productive hours from the denominator when the question requires a productive-hour rate.

5.8 Activity Based Costing (ABC)

Traditional absorption often uses one broad base, such as labour hours. ABC traces overhead through activities and cost drivers.

Rendering diagram…

Traditional system	ABC system
Usually one/few volume bases	Multiple cause-and-effect cost drivers
Suitable when overhead is low and output homogeneous	Useful with diverse products and high overhead
Can distort complex/low-volume products	More accurate product/activity cost
Simpler and cheaper	More data-intensive

ABC sequence: identify activities -> create cost pools -> choose drivers -> calculate driver rate -> charge output according to driver usage.

6. Unit IV-A - Costing Methods

6.1 Choosing the costing method

Rendering diagram…

Method	Cost unit	Best suited for
Unit/output costing	One unit, tonne, litre, kg	Cement, bricks, sugar, paper
Job costing	One job/order/batch	Printing, repair work, furniture
Contract costing	One contract	Construction, roads, bridges
Process costing	One process/unit	Chemicals, textiles, food processing
Service/operating costing	Passenger-km, tonne-km, room-day	Transport, hospitals, hotels, utilities

6.2 Unit costing

Use a cost sheet to calculate total cost and cost per unit.

\text{Cost per unit} = \frac{\text{Total cost}}{\text{Units produced or service units}}

Exam order: classify each expense correctly -> prepare total column -> divide by output -> add required profit basis accurately.

7. Unit IV-B - Job, Contract and Process Costing

7.1 Job costing

Each job receives a distinct job number and cost record.

Rendering diagram…

Job cost sheet: direct material + direct labour + direct expenses + absorbed factory OH + administration/selling OH as required.

7.2 Contract costing

Contract costing is a form of job costing for large, long-duration, site-based jobs.

Characteristic	Contract costing implication
Work performed at site	Site account and site records are important
Long duration	Work-in-progress and notional profit matter
Large value	Contract account is prepared separately
Materials/plant at site	Show closing value/return/depreciation separately
Certification by architect/engineer	Work certified is a key WIP figure

7.3 Contract account flow

Rendering diagram…

Key formulas

\text{Notional profit} = \text{Value of work certified} + \text{Cost of work uncertified} - \text{Cost of work to date}

Cost of work to date includes materials, wages, direct expenses, overheads and depreciation of plant, less materials/plant returned or on hand as appropriate.

Profit recognition: follow the rule specified by your university/text. A common practice is to transfer a conservative fraction of notional profit to P&L based on the stage of completion and cash received, retaining the balance as reserve.

7.4 Process costing

Process costing applies when production passes through continuous stages. Output from one process can become input to the next.

Rendering diagram…

Normal and abnormal loss

Item	Meaning	Treatment
Normal loss	Expected loss inherent to process	Cost is borne by good output; credit any scrap value
Abnormal loss	Actual loss exceeds normal loss	Valued at cost per good unit and transferred to abnormal loss account
Abnormal gain	Actual loss is lower than normal loss	Credit process; debit abnormal gain account

\text{Cost per expected good unit} = \frac{\text{Total process cost} - \text{Scrap value of normal loss}}{\text{Input units} - \text{Normal loss units}}

Process account layout

Debit side	Credit side
Input units, material, labour, direct expenses, overhead	Normal loss, abnormal loss, transfer to next process/finished stock, closing WIP

7.5 Work-in-progress (WIP) in process costing

When WIP is given, units can be incomplete for material, labour and overhead. Use equivalent production where needed.

\text{Equivalent units} = \text{Actual units} \times \text{Percentage completion}

Calculate material, labour and overhead equivalent units separately when their completion percentages differ.

8. Unit IV-C - Joint Products and By-products

8.1 Core idea

When one common process produces more than one output, costs incurred before separation are joint costs. The point at which outputs become separately identifiable is the split-off point.

Rendering diagram…

Term	Meaning
Joint product	Product of significant relative sales value produced jointly
By-product	Product of relatively minor sales value arising incidentally
Joint cost	Cost incurred before split-off that benefits all joint outputs
Separable cost	Cost incurred after split-off for one individual product

8.2 Joint cost apportionment methods

Method	Basis
Physical units	Quantity/weight/volume produced
Sales value at split-off	Relative market value at split-off
Net realisable value (NRV)	Final sales value less further processing and selling cost
Constant gross-margin NRV	Allocates to achieve common gross margin percentage

8.3 Decision after split-off

Rendering diagram…

Only compare incremental revenue with incremental cost. Joint cost is already incurred and is usually irrelevant to this sell-or-process-further decision.

9. Unit V - Service Costing and Accounting Systems

9.1 Service/operating costing

Service costing finds cost per unit of service rather than cost per physical product.

Service	Common cost unit
Passenger transport	Passenger-km
Goods transport	Tonne-km
Hotel	Room-day / bed-day
Hospital	Patient-day / bed-day
Power	kWh
Canteen	Meal served

9.2 Transport costing

\text{Passenger-km} = \text{Number of passengers} \times \text{Distance travelled}

\text{Tonne-km} = \text{Tonnes carried} \times \text{Distance travelled}

Rendering diagram…

Cost category	Examples
Standing/fixed charges	Insurance, road tax, garage rent, manager salary
Maintenance charges	Repairs, servicing, tyres, depreciation where treated by policy
Running/variable charges	Fuel, oil, lubricants, trip wages/tolls

Operating cost sheet skeleton

text

Standing charges                                   xxx
Maintenance charges                                xxx
Running charges                                    xxx
                                                   ---
Total operating cost                               xxx
Service units (passenger-km / tonne-km)             xxx
Cost per service unit = total cost / service units  xxx
Add profit                                          xxx
Fare or freight                                     xxx

9.3 Integral vs non-integral accounting

Basis	Integral accounting	Non-integral accounting
Books maintained	One integrated set	Separate cost and financial ledgers
Duplication	Avoided	Possible
Reconciliation	Normally unnecessary	Often necessary
Main advantage	Unified, timely information	Detailed independent cost records
Other name	Integrated accounts	Interlocking accounts may be used

9.4 Reconciliation of profit

Reconcile profit when cost and financial books show different results, usually because of different stock valuation, overhead absorption, purely financial items or different depreciation/treatment of expenses.

Rendering diagram…

Common reconciling item	Why it creates a difference
Over/under-absorption of OH	Cost books recover OH at pre-set rate; financial books show actual OH
Different stock valuation	Opening/closing material, WIP or finished goods may differ
Interest, dividend, income tax	Usually financial-account items only
Goodwill/preliminary expense write-off	Often financial-account item only
Different depreciation	Cost and financial policies can differ

Direction check: Start with the stated profit. Add items missing from the target profit but present in the starting profit, and subtract items that have the opposite effect. Label every adjustment with the reason before entering it.

10. Formula bank and exam toolkit

10.1 Formula bank

Topic	Formula
Prime cost	Direct material + direct labour + direct expenses
Conversion cost	Direct labour + factory overhead
Works cost	Prime cost + factory OH +/- WIP adjustment
Cost of production	Works cost + administration OH
Cost of sales	Cost of production +/- finished goods adjustment + selling/distribution OH
EOQ	`sqrt(2DS/H)`
Re-order level	Maximum usage x maximum lead time
Average stock	Minimum stock + 1/2 EOQ
Weighted average issue rate	Total stock value / total stock quantity
Labour turnover	Separations/replacements/flux numerator divided by average employees x 100
OH absorption rate	Budgeted OH / budgeted base
Machine hour rate	Machine-related OH / productive machine hours
Process cost per good unit	(Process cost - normal-loss scrap value) / expected good units
Passenger-km	Passengers x km travelled
Tonne-km	Tonnes x km travelled

10.2 Profit basis traps

If the question says	Use
Profit is 25% on cost	Selling price = cost x 1.25
Profit is 25% on sales	Selling price = cost / 0.75
Gross profit is 20% on sales	Cost of sales = 80% of sales
Cash received is 80% of work certified	Cash = 80% x work certified; retention = balance

10.3 Numerical-answer workflow

Rendering diagram…

10.4 Presentation rules that earn marks

Start with a heading: Stores Ledger Account, Cost Sheet, Contract Account, Process A Account, etc.
Write working notes before the final statement whenever a rate or allocation is derived.
Use consistent units: rupees, units, hours, passenger-km or tonne-km.
Show formulas, not just answers.
Keep total columns and per-unit columns separate.
For process questions, show units and value side by side.
For reconciliation, state whether each item is added or deducted and why.

11. Practice checklist

Theory questions

Numerical questions

Final one-page memory map

Rendering diagram…

Source and use note

This guide follows the syllabus and topics visible in COST ACCOUNTING SHIVDAS 2.pdf, including its worked-practice emphasis. It deliberately paraphrases and reorganises the material into concise revision notes and diagrams; consult the original PDF for the complete wording of its questions and full numerical solutions.

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DSC-4.2 — Cost Accounting

Compiled notes

DSC-4.2 — Cost Accounting

Cost Accounting - Complete Visual Study Guide

Contents

1. The big picture

Cost accounting in one view

Syllabus map

The cost pyramid - a memory infographic

2. Unit I - Introduction and Cost Concepts

2.1 Meaning of cost, costing and cost accounting

2.2 Objectives of cost accounting

2.3 Limitations

2.4 Financial, cost and management accounting

2.5 Cost classification

2.6 Role of a cost accountant

2.7 Installing a costing system

2.8 Cost sheet format

2.9 Mini example - cost sheet logic

3. Unit II-A - Materials

3.1 Material control: purpose

3.2 Key documents

3.3 Stock levels

3.4 EOQ - Economic Order Quantity

3.5 ABC analysis - selective control infographic

3.6 Pricing material issues

FIFO, LIFO and weighted average example

3.7 Stores ledger workflow

3.8 Material losses

4. Unit II-B - Labour

4.1 Labour cost control system

4.2 Time keeping vs time booking

4.3 Methods of remuneration

4.4 Idle time

4.5 Overtime

4.6 Labour turnover

4.7 Fringe benefits

5. Unit III - Overheads and ABC

5.1 What are overheads?

5.2 Four stages of charging overhead to a cost unit

5.3 Common bases of apportionment

5.4 Primary and secondary distribution

5.5 Overhead absorption rates

5.6 Under- and over-absorption

5.7 Machine hour rate

5.8 Activity Based Costing (ABC)

6. Unit IV-A - Costing Methods

6.1 Choosing the costing method

6.2 Unit costing

7. Unit IV-B - Job, Contract and Process Costing

7.1 Job costing

7.2 Contract costing

7.3 Contract account flow

Key formulas

7.4 Process costing

Normal and abnormal loss

Process account layout

7.5 Work-in-progress (WIP) in process costing

8. Unit IV-C - Joint Products and By-products

8.1 Core idea

8.2 Joint cost apportionment methods

8.3 Decision after split-off

9. Unit V - Service Costing and Accounting Systems

9.1 Service/operating costing

9.2 Transport costing

Operating cost sheet skeleton

9.3 Integral vs non-integral accounting

9.4 Reconciliation of profit

10. Formula bank and exam toolkit

10.1 Formula bank

10.2 Profit basis traps

10.3 Numerical-answer workflow

10.4 Presentation rules that earn marks

11. Practice checklist

Theory questions

Numerical questions

Final one-page memory map

Source and use note

Notes

Previous year question papers