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Defining Costing System, Process of Costing Systems, Cost Accounitng Help
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homework help and projects assistance with best online support for 24*7 hours. Our cost accounting experts make easy theory and solutions for costing systems topic. A costing system can be defined as an a counting system which is established for monitoring a company’s cost as well as for providing the management with information on various operations and their specific performance.
For the allocation of costs, the following systems are applied.
1. The allocation of costs is made for those devices and products which lead to increase of the cost in question.
2. All the allocation bases used are objective which do not intend to modify the cost of one service to the benefit of others services.
3. As per the rules, the changes in the cost allocation processes are not done on a yearly basis, without giving the objective justifications, and any such changes are also not described and applied retroactively to the previous years, if there is a significant effect on the result of the calculations which are at hand.
4. The allocation of costs is also detailed and transparent and allows the review and verifications.
5. The authoritative sources of financial statements provide for the reconciliation of costs.
6. The main concern of the allocation costs is to analyze various categories of costs which have a material impact on the results.
The activity based costing methodology is used for apportionating all costs. The process is of two stages and comprises of apportionment of costs from the general ledger and fixed asset register for redefining activity based costing pools and then mapping the pools to products.
The input data
a. Operating costs- all the staff costs, maintenance materials, depreciation, services provided by the third parties and other operational expenses form the annual cost incurred by the CYTA. These costs are drawn from the various accounting records. Below is a list of various methodologies which are applied to costs that which according to the costs and also explains the nature in which they are recorded.
1. Direct and directly attributable costs- some costs can be attributed directly to the specific cost, for example ordinary pool costs(ORD), customer facing activities (CFA), network elements (NE) or even the products and hence do not require apportionment.
2. The indirectly attributable costs-some other require indirect appointment as they cannot be directly associated with particular cost pools or products. These costs refer to the general costs involved in CYTA’s departments which are used for servicing various products and departments. They are recorded on a cost centre basis by using the activity based costing process. The costs help in selecting a specific apportionment base for identification and measurement.
All the above costs types include the other costs involved like the cost of transmission equipment. These costs support a number of network services. The costs are then grouped and further apportioned to network elements by using the network statistics, surveys and also other methods of analyses.
b. The unattributable costs- whenever possible, the CYTA utilizes objective data which relates to the cost drivers. There is, however, some expenditure present for which no specific appointment bases could be derived. These costs are only attributable to the business on a whole and could not be attributed to services by using cost casualty. The representation of central corporate overheads like bank charges and other general legal expenses is done by these costs. They are also apportioned to products on a pro rate basis which is relative to the total attributable costs of each product.
The mean capital employed and the WACC
The mean capital, as defined by the WACC is defined by the mean which is obtained by calculating the averaging the values at the start and at the end of the periods.
CYTA gives definition of mean employed capital as a mean of total assets minus the current liabilities and provisions (other than those for referred taxation corporate taxes, long term liabilities, investments and excess cash).
A similar approach to that used in operating costs is used for the apportionment of the capital employed. The WACC is also used as a type of input data and is also calculated by separate studies.
The non financial data
The non financial data are the relative data which are obtained in a specific period (for example the number of customers of a product, the volume of traffic minutes etc.)
Supporting systems and the costing systems cost pools.
The supporting systems include the project and activities management systems, the fixed asset register and the general ledger. The costing system cost pool comprise for the ordinary cost pools, the network elements, the transmission products, routing factors, customer facing activities and the central overheads.
After all the allocation processes are completed, the system then produces the final results which comprise of-
The total cost per product, the unit cost per product and the analysis per cost pool. These results have their reliability checked by reconciliation them to the costing results of the general ledger, audit trail and also by trough traceability, which is facilitated by the reports provided by the system.
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