Illustrate the concept of cost, Managerial Accounting

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Illustrate the concept of Cost

The term cost indicates the amount of expenditure (actual or national) incurred on, or attributable to, a specified thing or thing or cost unit. Ryall in "dictionary of the costing gives different denotations of cost - from a technical point of view, for instance it may be used when referring to the cost of manufacturing unit only, or the cost of selling and distribution of the goods or to indicate the total cost of the manufacturing, selling and distribution". Thus cost is a generic term and it is advice able to quality the word cost in a particular way. Thus by using the term total cost factory cost or prime cost is there by is clearing indicated the nature of the items under consideration. The non technical concept of the cost varies with the circumstances, but in general cost to the average man / women is what he / she actually pays to obtain the desired articles.

 A cost must always be studied in relation to its purpose and conditions. If we want to define the physical volume accurately we must define or specify the conditions of temperature and pressure under which the measurement of volume has been carried out. Similarly, a cost must be related to its purpose and the actual or assumed conditions under which it has been computed. Even where the purpose of cost study is the same, different conditions alter cost. The total cost per unit of production in a manufacturing concern varies with the different volumes of output because, as output rises, the amount of fixed overhead to be borne by each unit decreases. The resulting costs, although all total differ since the conditions have varied. The concept of the cost is thus not something definite and care must be taken on quality if accounting to its context

 


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