Cost Systems: Characteristics, Types

 The cost systems are the framework used by companies in order to estimate the cost of their products in order to calculate profitability analysis, inventory valuation and cost control.


Estimating the exact cost of products is critical to profitable operations. A business must know which products are profitable and which are not, and this can only be determined if the correct cost of the product has been calculated.


In addition, a product costing system helps estimate the closing value of materials inventory, work in process, and finished goods inventory, in order to prepare financial statements.


A typical costing system works by tracking raw materials as they go through different stages of production and slowly being converted into finished products in real time.


When raw materials are brought into production, the system immediately records the use of these materials by crediting the raw materials account and debiting the work-in-process account.


Since most products go through many stages before they can be called finished products, at the close of a period there are often several different work-in-process accounts.


In a manufacturing environment, various types of costs contribute to making the product. Accounting for these costs in financial and managerial reports improves understanding of the profitability of the manufacturing operation and enables decision making.


Characteristics

The real-time component of the cost system is its most valuable feature. Management can make decisions based on current data and does not have to wait for it to be added to reports at the end of the period. This important feature is not always easily achieved.


In a costing system, the allocation of costs is carried out on the basis of a traditional costing system or an activity-based costing system. The traditional costing system calculates a single expense rate and applies it to each job or department.


On the other hand, the activity-based costing involves the calculation of the activity rate and the application of overheads to the products based on the respective use of each activity.


Cost basics

Materials

Direct materials and indirect materials.


Workforce

Direct labor and indirect labor.


Variable overhead

- General production expenses, including manufacturing personnel.


- General administrative expenses, including office staff.


- General sales expenses, including the production and maintenance of catalogs, advertising, exhibitions, sales personnel, cost of money.


- General distribution expenses


- Maintenance and repair, both office equipment and factory machinery.


- Supplies


- Public services, which include gas, electricity, water and municipal assessments.


- Other variable expenses


Fixed overhead

- Salaries / payroll, including salaries, pensions and deductions.


- Occupancy (rent, mortgage, property taxes)


- Depreciation (durable goods, including office machinery and equipment)


- Other fixed expenses


These categories are flexible and sometimes overlap. For example, in some companies, machine cost is segregated from overhead and reported as a separate item entirely, and payroll costs are sometimes separated from other production costs.


Depending on whether or not fixed manufacturing overheads are charged to products, cost systems have two variants: direct or variable cost, and absorption cost.



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5 Tips to Prepare for Your Property Settlement
5 TIPS TO PREPARE FOR YOUR PROPERTY SETTLEMENT

1. Insurance

5 TIPS TO PREPARE FOR YOUR PROPERTY SETTLEMENT 1. Insurance

Haven't organised insurance yet? Get it now! It can be a risky practice to rely on the vendor's  insurance cover (or lack thereof) if something happens to the property during the period from exchange to settlement. Having adequate insurance in place will give you peace of mind.

2. Keys, codes and passes

5 TIPS TO PREPARE FOR YOUR PROPERTY SETTLEMENT 2. Key, code and passes

Make sure you organise who has the keys and when you can collect them from the agent or your legal representative. Also, make sure you have the alarm codes (if any) and instruction manuals. Some purchasers want to collect the keys that day from the agent; others have the keys delivered to their solicitor after settlement. By sorting out the logistics beforehand, you can enjoy your property sooner (without setting off any house alarms!).

3. Final inspection

5 TIPS TO PREPARE FOR YOUR PROPERTY SETTLEMENT 3. Final Inspection

This is probably the most important inspection you will undertake, so you should organise it during daylight hours as close as possible to settlement and really take your time with it. Has any debris been left behind? Do the fittings and fixtures remain? Are the contractual inclusions actually in place? Have the exclusions been disposed of?

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8 Tip on Homeownner Insurance
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How Does the Stock Market Work?
In the 1600s the Dutch East India Company employed hundreds of ships to trade gold, porcelain, spices, and silks around the globe. But running this massive operation wasn’t cheap. In order to fund their expensive voyages, the company turned to private citizens– individuals who could invest money to support the trip in exchange for a share of the ship’s profits. This practice allowed the company to afford even grander voyages, increasing profits for both themselves and their savvy investors.

Selling these shares in coffee houses and shipping ports across the continent, the Dutch East India Company unknowingly invented the world’s first stock market. Since then, companies have been collecting funds from willing investors to support all kinds of businesses. And today, the stock market has schools, careers, and even whole television channels dedicated to understanding it. But the modern stock market is significantly more complicated than its original incarnation. So how do companies and investors use the market today? Let’s imagine a new coffee company that decides to launch on the market. First, the company will advertise itself to big investors. If they think the company is a good idea, they get the first crack at investing, and then sponsor the company’s initial public offering, or IPO. This launches the company onto the official public market, where any company or individual who believes the business could be profitable might buy a stock.

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Investors may be worried about changes in leadership, bad publicity, or larger factors like new laws and trade policies. And of course, plenty of investors are simply ready to sell valuable stocks and pursue personal interests. All these variables cause day-to-day noise in the market, which can make companies appear more or less successful. And in the stock market, appearing to lose value often leads to losing investors, and in turn, losing actual value. Human confidence in the market has the power to trigger everything from economic booms to financial crises. And this difficult-to-track variable is why most professionals promote reliable long term investing over trying to make quick cash.

However, experts are constantly building tools in efforts to increase their chances of success in this highly unpredictable system. But the stock market is not just for the rich and powerful. With the dawn of the Internet, everyday investors can buy stocks in many of the exact same ways a large investor would. And as more people educate themselves about this complex system they too can trade stocks, support the businesses they believe in, and pursue their financial goals. The first step is getting invested.

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