SESSION 1:

COST CLASSIFICATION EXERCISE

F&A 377

Example

Functional
M/S/A/O

Traceability
D/I

Behaviour
V/F

Part I : Illustrative Answers

1
2
3
4
5
6
7
8

Wheat flour in bread

Tailoring charges in garment making
Factory rent
General Manager's salary
Salesmen's commission
Interest paid on deposits (Finance charges)
Loss due to theft
Cost of installing machinery

M
D
V
M
D
V
M
I
F
M
F
M
V
M
F
Loss, not a cost
Capital Asset; not a cost till it is depreciated

Part II : Homework for practice

9
10
11
12
13
14
15
16
17
18

Pulp in paper making

Daily wages paid for raod construction
Salesmen's salary
Salesmen's samples
Depreciation of machinery (common for all products)
Monthly rental for leased computer
Fire loss
Commission paid to sales agency
Commission paid to raw material buying agency
Rent for head office building

19 Depreciation of delivery truck with a fixed scheduled of trips

every month
20 Auditors' fee
21 Batteries for a car manufacturer
22 Insurance premium on company car
23 Dividend paid to shareholders

M
M
S
S
M
O
Non-recurring
S
M
A

D
D
I
I

V
V
F
F, V
F
F

I
I
-

F
F, V
-

A
A
M
A
Financial

I
I
D
I

F
F
V
F

Functional
M/S/A/O

Traceability
D/I

Behaviour
V/F

Part III : For Class Discussion

24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47

Cloth in garment making

Thread in garment making
Lubricating oil for the sewing machine
Depreciatioin of a chemical processing plant and machinery
Power to run the machinery
Electricity for lighting the shop floor
Freight-in
Customs duty for raw materials
Royalty to author in book publishing
Royalty (one short payment) for using a foreign brand name
Helper's wages in a furniture firm
Nails used in a furniture firm
Advertising expenses
Trade discount (margin to outlets)
Cash discount (for prompt payment)
Expenses account for Government liaison
Bribes paid
Donations
Overtime (factory workers)
Idle time (accounts clerk)
Waste of raw material in manufacturing
Bottled perfume: the perfume
Bottled perfume: the bottle
Bottled perfume: the fancy carton for each bottle

M
D
M
D, I
M
I
M
I
M
D
M
I
M
D
M
D
M
D
M
D
M
I, D
M
D, I
S
S
S
A
No formal recording
O
I
M
I
I
A
M
I
M
D
M
D
S
D, I

V
V
V
F
V
F
V
V
V
F
F, V
V
F
V
F, V
V
F
F, V
F, V
V
V
V
V

48 Cardboard boxes to pack and deliver large orders of perfumes

and other toiletries to the retails shops

49 Civil Engineer's salary in a construction firm

50 Advanced basic research

A
O

Could be
allocated
I

F
F

SESSION 1:

COST CLASSIFICATION EXERCISE

Example

Functional
M/S/A/O

Traceability
D/I

Part I : Illustrative Answers

1
2
3
4
5
6
7
8

Wheat flour in bread

Tailoring charges in garment making
Factory rent
General Manager's salary
Salesmen's commission
Interest paid on deposits (Finance charges)
Loss due to theft
Cost of installing machinery

M
D
M
D
M
I
M
M
M
Loss, not a cost
Capital Asset; not a cost till it is depreciated

Part II : Homework for practice

9
10
11
12
13
14
15
16
17
18

Pulp in paper making

Daily wages paid for raod construction
Salesmen's salary
Salesmen's samples
Depreciation of machinery (common for all products)
Monthly rental for leased computer
Fire loss
Commission paid to sales agency
Commission paid to raw material buying agency
Rent for head office building

19 Depreciation of delivery truck with a fixed scheduled of trips

every month
20 Auditors' fee
21 Batteries for a car manufacturer
22 Insurance premium on company car
23 Dividend paid to shareholders
Functional
M/S/A/O
Part III : For Class Discussion
24
25
26
27
28
29
30

Cloth in garment making

Thread in garment making
Lubricating oil for the sewing machine
Depreciatioin of a chemical processing plant and machinery
Power to run the machinery
Electricity for lighting the shop floor
Freight-in

Traceability
D/I

31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47

Customs duty for raw materials

Royalty to author in book publishing
Royalty (one short payment) for using a foreign brand name
Helper's wages in a furniture firm
Nails used in a furniture firm
Advertising expenses
Trade discount (margin to outlets)
Cash discount (for prompt payment)
Expenses account for Government liaison
Bribes paid
Donations
Overtime (factory workers)
Idle time (accounts clerk)
Waste of raw material in manufacturing
Bottled perfume: the perfume
Bottled perfume: the bottle
Bottled perfume: the fancy carton for each bottle

48 Cardboard boxes to pack and deliver large orders of perfumes

and other toiletries to the retails shops
49 Civil Engineer's salary in a construction firm
50 Advanced basic research

F&A 377
Behaviour
V/F

V
V
F
F
V
F

a cost till it is depreciated

Behaviour
V/F