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CLASSIFICATION OF COST - (REVISED 2015)

CAS - 01 - Rule - Companies Law - CAS - 01 - CAS - 1 (REVISED 2015) COST ACCOUNTING STANDARD ON CLASSIFICATION OF COST The following is the COST ACCOUNTING STANDARD - 1 (CAS - 1) (Revised 2015) issued by the Council of the Institute of Cost Accountants of India for determination of CLASSIFICATION OF COST . In this Standard, the standard portions have been set in bold italic type. This standard should be read in the context of the background material which has been set in normal type. 1. Introduc .....

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nitions The following terms are being used in this standard with the meaning specified. 4.1 Abnormal Cost: An unusual or atypical cost whose occurrence is usually irregular and unexpected and / or due to some abnormal situation of the production or operation. 4.2 Administrative Overheads: Cost of all activities relating to general management and administration of an entity. Administrative overheads shall exclude production overheads, marketing overheads and interest and finance charges. Administ .....

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the purpose of production of goods or rendering services. Manufacturing of goods or rendering services involves consumption of resources. The type of cost often referred to in the costing system depends on the purpose for which cost is incurred. For example, material cost is the price of materials consumed for manufacturing a product or for rendering a service. 4.6 Cost Centre: Any unit of an entity selected with a view to accumulating all cost under that unit. The unit can be division, departm .....

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Centres are those which are in the chain of operations like machine shop, welding shop, assembly shop, operation theatre, call centre and so on. Support-service Cost centres are for rendering services to operating cost centre like power house, maintenance, stores, help desk, transport for call centre staff and so on. 4.7 Cost Object: An activity, contract, cost centre, customer, process, product, project, service or any other object for which costs are ascertained. 4.8 Cost of Production: Cost o .....

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es of scrap, wastage and the like, shall be made. 4.9 Cost of Transportation: Cost of Transportation comprises of the cost of freight, cartage, transit insurance and cost of operating fleet and other incidental charges whether incurred internally or paid to an outside agency for transportation of goods but does not include detention and demurrage charges. Cost of transportation is classified as inward transportation cost and outward transportation cost. 4.10 Cost Unit: Cost Unit is a form of mea .....

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s or services before the start of commercial production or use. 4.12 Direct Employee Cost: Employee costs, which can be attributed to a cost object in an economically feasible way. 4.13 Direct Expenses: Expenses relating to manufacture of a product or rendering a service, which can be identified or linked with the cost object other than direct material cost and direct employee cost. Examples: • Royalties charged on production • Job charges • Hire charges for use of specific equipm .....

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nit transfer. The cost of any non manufacturing operations such as packing, repacking and labelling at an intermediate storage location will be part of distribution cost. Examples: • Secondary packing • Outward transportation cost • Warehousing cost • Cost of delivering the products to customers • Clearing and forwarding charges • Cost of mending or replacing packing materials at distribution point. 4.16 Employee Cost: Benefits paid or payable for the services rende .....

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3 Short provisions of prior period employee cost in current period shall form part of the employee cost in the current period, but not a part of production cost. Employee cost includes payment made in cash or kind. 4.17 Fixed Costs: Fixed costs are costs which do not vary with the change in the volume of activity. Fixed indirect costs are termed fixed overheads. 4.18 Indirect Employee Cost: Employee cost, which cannot be directly attributed to a particular cost object. 4.19 Indirect Expenses: E .....

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er a number of periods or seasons under normal circumstances taking into account the loss of capacity resulting from planned maintenance. The above definition is also applicable for normal capacity in relation to a service being rendered. 4.24 Overheads: Overheads comprise costs of indirect materials, indirect employees and indirect expenses. 4.25 Packing Material Cost: The cost of material of any nature used for the purpose of packing of a product. Packing material can be classified into primar .....

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The terms Production Overheads, Factory Overheads, Works Overheads and Manufacturing Overheads denote the same meaning. Production overheads include administration costs relating to production, factory, works or manufacturing. 4.28 Research Cost: Research cost is the cost of original and planned investigation undertaken with the prospect of gaining new scientific or technical knowledge and understanding. 4.29 Selling Overheads: Selling overheads are the expenses related to sale of products or s .....

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e cost centre but not directly engaged in manufacturing process or operation or in rendering a service is a support-service cost centre. A support-service cost centre renders services to other cost centre s/ other units and in some cases to outside parties. Examples: • Engineering • Workshop • Quality control • Quality assurance • Designing • Laboratory • Help desk • Transport for call centre staff 4.32 Standard Cost: A predetermined cost of a product or s .....

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sts 5.1 Costs shall be classified by the process of grouping the components of cost under a common designation on the basis of similarities of nature, attributes or relations. Items grouped together under common heads shall be further classified according to their fundamental differences. It is the process of identification of each item and the systematic placement of like items together according to their common features. The same costs may appear in several different classifications depending .....

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t), its relation to functions /activities, its behaviour (fixed, semi-variable or variable)and its relationship to production process. 5.2 Scheme of classification shall be such that every item of cost is classified. 6. Classification of Costs 6.1 By Nature of expenses 6.1.1 Items of costs differ on the basis of their nature. Costs shall be gathered together in their natural groupings such as material, employee and expenses. The elements of cost can be classified in the following three categorie .....

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ion paid and payable for the services rendered by employees of an entity (including temporary, part time and contract employees). Consideration include wages, salaries, and other payments, including benefits, as applicable. 6.1.4 Expenses are costs other than material cost and employee cost for the purpose of production of a product or rendering of a service. Examples : • Cost of utilities • Payment for bought out services • Job processing charges 6.2 By nature of traceability to .....

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h are identifiable to the product or service form the direct material cost. Direct material cost includes cost of procurement, freight inward, taxes & duties and insurance directly attributable to the acquisition of the material. Trade discounts, rebates, duty drawbacks, refunds of duties/taxes and other similar items are deducted in determining the costs of direct material. 6.2.3 Direct Employee Cost are employee costs, which can be assigned to a cost object in an economically feasible way. .....

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a cost centre • Royalties in connection to a product • Job processing charges 6.2.5 Indirect Material Costs are cost of materials, which cannot be directly assigned to a particular cost object in an economically feasible way. Examples: • Consumable spares and parts • Lubricants • Cost of computer stationary for administrative function 6.2.6 Indirect Employee costs are employee costs, which cannot be directly assigned to a particular cost object in an economically feasibl .....

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