Flow of materials the order that materials are issued for use in the factory. Pdf chapter 2 managerial accounting and cost concepts. Chapter 2 managerial accounting and cost concepts solutions to questions. The cost of indirect material is treated as one of the cost elements of indirect manufacturing expense.
Icai is established under the chartered accountants act, 1949 act no. Indirect material indirect material is all other material used in the manufacturing process. Typical indirect material are factory supplies of various sorts such as machine lubricants or janitors supplies. Cost accounting is a practice of cost control which is as follows. Managerial and cost accounting kenyatta university. Close the variance entirely to cost of goods sold for the period. Prorate the variances to cost of goods sold, work in process, and finished goods in proportion to the standard materials, labor, and overhead costs included in the ending balances for those accounts. Icai the institute of chartered accountants of india set up by an act of parliament. It consist its own principles, concepts and conventions which may vary from industry to industry. The prime cost consists of direct materials, direct labour and. The literature indicated that traditional cost accounting information is largely inaccurate for the purpose of decisionmaking, prompting a call for innovation in cost accounting innes and. The flow of materials does not dictate the flow of costs. Cost accounting is the process of accounting for cost which begins with recording of income and expenditure and ends with the preparation of statistical data. It is the formal mechanism by means of which cost of products or services are ascertained and controlled.
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