Is an accounting discipline used by management accounting to determine, inter alia, the contribution margin, break even the cost of the product and the possible decisions.
The data that throws the current cost accounting, usually used as a basis for the preparation of projected financial statements, and also provide support for the calculation of standard cost variances aimed at measuring the performance of some departments of a company.
DIRECT AND INDIRECT COST
Are those expenses incurred in any company, regardless of the rotation, which are directly related to obtaining the product or service around which the performance of the company.
That is, direct costs are those needed to obtain a product (raw materials, parts or additional components and workmanship of workers in the production area). These costs are defined as because they directly affect the pricing of a product, which must be recovered through the determination of its retail price and sales of the same in the market for which it was provided.
Indirect costs are those costs that affect the overall production process of one or more products, so it can not be assigned directly to a single product without using any criteria of allocation. Example: Rental of a warehouse or salary of staff.
That is, we can not assign only to a specific reference unit. But more general criteria, which depend somewhat on the type of production. As the cost of electricity, water, air conditioning, etc. a production process.
FIXED COSTS
Fixed costs are those whose total amount does not change according to the production activity. In other words, one can say that fixed costs vary over time rather than the activity will be presented during a period of time even when there is no production activity.
By definition, the fixed costs do not change during a specified period. Therefore, unlike variables, not dependent on the quantity of goods or services produced during the same period (At least within a range of production). For example, payment of rental of facilities and the salary of the president of the company are fixed costs, at least to over a certain period.
VARIABLE COSTS.
Variable costs are those which vary with changes in production volume. Total variable cost is moving in the same direction as the output. The cost of raw materials and the cost of labor are the most important variable cost.
The decision to increase the level of production means the use of more material and more workers, so the total variable cost tends to increase production. Variable costs are therefore those which vary with changes in production.
BREAK-EVEN ANALYSIS
Is a technique widely used by production management and management accountants. It is based on categorising production costs between those which are "variable" (costs that change when the production output changes) and those that are "fixed" (costs not directly related to the volume of production).
Total variable and fixed costs are compared with sales revenue in order to determine the level of sales volume, sales value or production at which the business makes neither a profit nor a loss (the "break-even point").
cost accounting allows us to make decisions about the production since it is the only one that provides real data on the profitability of an operation. through it we control what is spent on products and if combiene its production.
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