Professional Documents
Culture Documents
Cost Classification
Ibrahim Sameer (MBA - Specialized in Finance,
B.Com Specialized in Accounting & Marketing)
www.ibrahimsameer.wordpress.com
the product.
For eg: component part, part finished product,
primary packing materials.
Functional Costs
Classification by Function
Classification by function involves classifying
costs
as
production
manufacturing
costs,
Functional Costs
Functional cost Includes:
Production cost
Administration cost
Selling cost
Distribution costs
direct
labour
and
manufacturing
Cost Codes
Once costs have been classified, a coding system
can be applied to make it easier to manage the
cost data, both in manual systems and in
computerized systems.
Cost Codes
Feature of a good coding system
The
code
must
be
easy
to
use
and
communicate.
Each item should have unique code.
The coding system must allow for expansion.
The coding system should be brief.
The likelihood of error going undetected should be
minimized.
Types of Codes
Sequential (or progressive) codes
Numbers are given to items in ordinary numeral
42cm nail
000043
office stapler
000044
hand wash
Types of Codes
Block (or group classification) codes
These are an improvement on simple sequence
Nails
5NNNNN
Screws
6NNNNN
Bolts
Types of Codes
Faceted codes
These are a refinement of block codes, in that
Types of Codes
The 1st digit:
Nails
Screws
Bolts
Steel
Brass
Copper
Types of Codes
The 3rd digit:
50mm
60mm
75mm
Types of Codes
Mnemonic codes
Under this type of coding the code means
Types of Codes
Hierarchical codes
This is a type of faceted code where each digit
Advantages of Coding
A code usually briefer than a description, thereby
saving clerical time in a manual system & storage
space in a computerized system.
A code is more precise than a description and
therefore reduce ambiguity.
Coding facilitates data processing.
has
direct
responsibility
for
its
performance. (OR)
It is an organization unit for which a manager is
made responsible.
Thank You
Ibrahim Sameer
Seek knowledge from cradle to grave