Question

how does cost accounting affect the production of goods and rendering of services?

Answer 1

Cost accounting is a process of accounting for cost which begins with the recording of expenditure and ends with preparing of periodical statement and report for ascertaining and controlling cost. Cost accounting is a formal machanism of cost ascertaiment.

Cost of production

Cost of production consits of material consumed, direct wages and salaries, direct expenses, works overhead, quality constrol costs, research and development cost, packing cost administrative overhead relating to production.To arrive at cost of production of goods dispatched for captive consumption, adjustment for stock of work-in-progress, finished goods, recoveries for sales of scrap, wastages etc. shall be made.

The term cost of production or cost of manufacturing denote the same meaning and are used interchangeably

Cost of rendering service

Cost of provision of service consists of cost of material consumed, direct employee cost, direct expenses,operation overhead and administration overhead relating to provision of services.Operating cosing method is used to acsertaine cost of providing or rendering service. This method of costing is applied by those undertaking which provide services rather than production of commodities. This costing method is usually made use of by transport companies, gas and water works department, electricity supply companies, canteens, hospitals, theaters, school