cost and management a/c

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Querist : Anonymous

Querist : Anonymous (Querist)

26 January 2010 my question is from material control.pricing of issue.
Q.1.what is standard cost method, replacement cost ,and base stock method.
Q.2- what is the use of ABC system/technique in costing . why companies use this.

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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26 January 2010 Q.1.Standar cost method- A price arrived based on the Standard costing of the firm engaged
Replacement cost is the cost to replace the current materials. suppose you are having the 100 units materials i stock how much you need to pay the same to replace the matrials

Base stock method is the method based on the materials in the stock
ABC System of Inventory Management
A - outstandingly important; B - of average importance; C - relatively unimportant as a basis for a control scheme. Each category can and sometimes should be handled in a different way, with more attention being devoted to category A, less to B, and still less to C.

Popularly known as the "80/20" rule ABC concept is applied to inventory management as a rule-of-thumb. It says that about 80% of the Rupee value, consumption wise, of an inventory

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CA SURENDRA KUMAR RAKHECHA

CA SURENDRA KUMAR RAKHECHA (Expert)
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26 January 2010 Thanks Ramesh.

I wish to add/elaborate the following as under :

1. Standard Costing means these are "desired cost" per unit from the management point of view.

2. Replacement cost means : What is cost of goods at Present (say market value of raw materials).

3. Base Stock means that quantity of stock which is required all the time. The value would be put when it was acquired at the lowest price.

4. ABC means as explained by Shri Ramesh.

A Category means the items which are costly but in quantity used less.

B : Average quantity with less costly than A category.

C : Large quantity but very less value.

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