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.
see also finance and business knowledge
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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
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
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?
4. Final Title Search
Just like a final inspection, a final title search will inform you if there have been any dealings with or new interests in the legal ownership of the property. After all, you can't buy something from someone if they don't own it. You'll also need to remove any caveat you've placed on the title to enable the change of ownership to take place.
5. Cheque directions
Your legal advisor and lender will organise the cheques on your behalf, but it's up to you to make sure the settlement amounts and payees are correct before property settlement. Also, make sure the cheques have correct spellings - incorrectly issued non-negotiable bank cheques can hold up and delay a settlement, and that's the last thing you want!
8 Tip on Homeownner Insurance
1. You're a statistic
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2. Know your home's value
Before you choose a policy, it is essential to establish your home's replacement cost. A local builder can provide the best estimate.
3. Insurers differ
As with anything else you buy, what seems to be the same product can be priced differently by different companies. You can save money by comparison shopping.
4. Don't just look at price
A low price is no bargain if an insurer takes forever to service your claim. Research the insurer's record for claims service, as well as its financial stability.
5. Go beyond the basics
A basic homeowners policy may not promise to entirely replace your home.
6. Demand discounts
Americans waste money every year because they forget to ask for them!
7. Insurer isn't necessarily your friend
Your idea of fair compensation may not match that of your insurer. Your insurer's job is to restore your financially. Your job is to prove your losses so you get what you need.
8. Prepare before you have to file a claim
Keep your policy updated, and reread it before you file a claim so there are no surprise.
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.
Buying stocks makes those investors partial owners in the business. Their investment helps the company to grow, and as it becomes more successful, more buyers may see potential and start buying stocks. As demand for those stocks increases, so does their price, increasing the cost for prospective buyers, and raising the value of the company's stocks people already own. For the company, this increased interest helps fund new initiatives, and also boosts its overall market value by showing how many people are willing to invest in their idea. However, if for some reason a company starts to seem less profitable the reverse can also happen.
If investors think their stock value is going to decline, they’ll sell their stocks with the hopes of making a profit before the company loses more value. As stocks are sold and demand for the stock goes down, the stock price falls, and with it, the company’s market value. This can leave investors with big losses–unless the company starts to look profitable again. This see-saw of supply and demand is influenced by many factors. Companies are under the unavoidable influence of market forces–such as the fluctuating price of materials, changes in production technology, and the shifting costs of labor.
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.
