What Is an Accounting Cost?

Accounting costs refer to all the costs actually incurred by an enterprise during its operations. Including wages, interest, land and house rents, raw material costs, depreciation, etc.

Accounting cost

Accounting cost

Accounting cost = account expenditure = consumed + unconsumed

Of which: Unconsumed = Assets, Consumed = Generated income (expense) + not generated income (loss) ^[1]

Accounting costs are objective and tangible expenditures recorded in the company's books, including expenditures on raw materials, power, wages, rent, advertising, and interest incurred during production and sales.

Pricing cost refers to the cost on which the government sets prices. Accounting costs are the basis of pricing costs. The accounting regulations and accounting systems on which accounting costs are based are also an important basis for calculating pricing costs. However, the pricing cost is very different from the accounting cost, which is mainly reflected in the following aspects:

Different accounting purpose

This is the most fundamental difference between pricing costs and accounting costs. accounting

Accounting costs are explicit costs, which can be measured in currency and can be reflected in the accounts of the accountant. In addition to accounting costs, there is another hidden cost. Hidden costs are often not recognized by managers. It is very different from explicit costs, that is, accounting costs. In general, hidden costs cannot be directly reflected on the books, so it is difficult to measure accurately. such as,

Cost accounting is a mixture of financial accounting and management accounting. It is an accounting method for calculating and providing cost information.

Financial accounting should be based on the relevant information provided by cost accounting for asset valuation and revenue determination, and the cost formation, aggregation and carry-over procedures should also be included in the general financial accounting framework based on double-entry accounting. Often used by external information users of enterprises to evaluate the performance of enterprise management authorities and make investment decisions accordingly. Similarly, the cost data provided by cost accounting is often used as the basis for decision-making by enterprise management authorities or used to evaluate the performance of internal management personnel of enterprises.

The function of cost accounting is the role that cost accounting can play in the production and management process as an economic management activity. Because modern cost accounting is tightly integrated with management, it actually includes

Sort by different signs

Classified by cost accounting system, it can be divided into actual cost system, standard cost system and estimated cost system.

(1) Actual cost system. The actual cost system is a cost accounting system that calculates costs based on actual expenditures.

(2) Standard cost system. The standard cost system is a cost system based on a pre-established standard cost of a product, comparing the standard cost of actual production with the actual cost and recording and analyzing cost differences.

(3) Estimated cost system. The estimated cost system is a history in which the unit product cost is estimated in advance before the production of the product, the selling price is determined, and the estimated cost of the actual output is compared with the actual cost of the book through double-entry bookkeeping. Incomplete cost accounting system that has been used.

Classified by cost calculation mode, it can be divided into full cost calculation mode and variable cost calculation mode.

(1) Full cost calculation model. The full cost calculation mode, also known as the "absorption cost" calculation mode, is based on the traditional cost concept, which absorbs all manufacturing costs, including variable costs and fixed costs, into product costs for the purpose of inventory valuation and A calculation model that determines the cost of products sold.

(2) Variable cost calculation model. The variable cost calculation mode refers to a cost calculation mode in which the product cost includes only variable manufacturing costs and does not include fixed manufacturing costs.

Classification by temperament

Generally, in accounting, costs are divided into fixed costs, variable costs and mixed costs according to their nature. Cost behavior refers to the dependency relationship between total cost and output.
(I) Fixed Costs <br Fixed costs refer to the costs that are not affected by changes in output within a specific output range and that the total amount for a certain period of time can remain relatively stable. For example, fixed monthly wages, depreciation of fixed assets, heating costs, property insurance costs, employee training costs, scientific research and development costs, advertising costs, etc.
The stability of fixed costs is based on the total cost. If we look at the fixed costs per unit product allocation, the opposite is true. When the output increases, the fixed cost per unit product allocation will decrease; when the output decreases, the fixed cost per unit product allocation will increase.
(II) Variable cost < br Variable cost refers to the cost whose total amount changes in proportion to the output change within a specific output range. For example, direct materials, direct labor, external processing fees, etc.
This type of cost is directly affected by output, and the two maintain a proportional relationship with a stable proportional coefficient. This proportionality factor is the variable cost of a unit product.
The stability of unit cost is conditional, that is, the range of output changes is limited. For example, the consumption of raw materials is usually directly proportional to the output, which is a variable cost. If the output is very low, the savings potential of nesting and cutting can not be exerted, or the output is too high, which will increase the reject rate and increase the material cost per unit product. This means that the linear relationship between variable costs and output usually exists only within a certain relevant range. It may appear non-linear outside the relevant range.
(3) Mixed cost < br Mixed cost refers to the cost between fixed cost and variable cost, which is between the two. They change due to changes in output, but they are not proportional.
1. Semi-variable cost Semi-variable cost refers to the cost that increases proportionally with output on the basis of the initial base. For example, utility costs such as electricity and telephone charges, fuel, maintenance and repair costs, etc., are mostly semi-variable costs.
This type of cost usually has an initial basis, which generally does not change with output, which is equivalent to fixed costs; on this basis, the total cost changes proportionally with the change in output, and is equivalent to variable costs. These two parts are mixed together to form a semi-variable cost.
2. Ladder cost Ladder cost refers to the cost in which the total amount increases stepwise with output, also known as step-up cost or semi-fixed cost. For example, power costs, vehicle transportation costs, and inspector wages affected by shifts.
This type of cost does not change in a certain amount of output. When the output increases beyond a certain limit, the amount of the cost suddenly jumps to a new level, and then, the amount of the change in output remains constant within a certain limit of output growth until Another new jump so far.
3. Deferred variable cost Deferred variable cost refers to the cost that the total amount remains stable within a certain output range, and that it starts to increase with the proportion of output when it exceeds a certain output. For example, pay employees a fixed monthly salary under normal production conditions, and pay overtime when production exceeds normal levels. This type of labor cost is a deferred variable cost.
4. Curve cost Curve cost refers to the cost that the total amount increases in a curve with the increase of output. This cost and output are dependent, but not linear.
For example, the cost of self-provided water sources, the greater the amount of water used, the higher the total cost, but the two are not proportional and have a non-linear relationship. The larger the amount of water used, the higher the total cost, but it is slower and slower, and the rate of change is decreasing. The cost of maintaining a certain amount of inventory is also a curved cost.
To control costs, you need to complete two main steps:
The first step is to clarify the classification of costs. For your company, you need to know which are variable costs, which are fixed costs, and which are mixed costs.
Because different costs require different control methods.
For example, in the relationship between variable costs, control point inputs, and output, companies focus on whether the ratio is reasonable, lower than the same industry, or high.
Fixed costs, control points in the early stage of investment, determination of fixed asset prices, determination of basic salary of personnel, etc.
For mixed costs, the control point must be combined with the actual operation of the enterprise, because when the output changes, this part of the cost will also change accordingly. Usually, a more complicated mathematical analysis method is used to determine its function formula.
The second step is to determine the control objectives for each cost. And try every means to achieve the goal.
For example, in order to achieve the target profit, at what level should the material consumption be controlled and at what level should the price be controlled? How much should the fixed cost be reduced to achieve the target profit? What are the daily expenses of an enterprise that must be spent, which are optional, and which expenses are wasting the resources of the enterprise? | ^[1]