Cost Accounting Fundamentals: Cost Sheets and Cost Behaviour

Posted on Oct 15, 2026 in Accounting and Finance

Types of Cost Based on Cost Behaviour

Based on cost behaviour, costs are mainly divided into the following three types:

• 1. Fixed Cost:
  Fixed cost remains constant regardless of the level of production or activity within a certain range.
  Example: Rent of building, salary of manager, insurance premium.
• 2. Variable Cost:
  Variable cost changes in direct proportion to the level of production or activity.
  Example: Direct materials, direct labour, packing expenses.
• 3. Semi-Variable Cost:
  Semi-variable cost contains both fixed and variable elements. It remains fixed up to a certain level and changes with the level of activity after that.
  Example: Electricity bill, telephone bill, repair and maintenance expenses.

Storage of Accounting Information

Storage of accounting information means the process of saving and keeping accounting data and records in a computer system so that they can be used, retrieved, and managed when needed.

Types of Data Storage

• 1. Primary Storage:
  Primary storage stores data temporarily and is directly accessed by the computer’s processor.
  Examples: RAM and cache memory.
• 2. Secondary Storage:
  Secondary storage stores data permanently and can hold a large amount of accounting information.
  Examples: Hard disk, SSD, pen drive, and memory card.
• 3. Cloud Storage:
  Cloud storage saves accounting data on remote servers through the internet. It allows data to be accessed from different devices.
  Examples: Google Drive, OneDrive, and Dropbox.

Inventory Valuation Formulas

Weighted Average Cost (WAC) Formula

Weighted Average Cost per Unit (WAC) = Total Cost of Goods Available for Sale ÷ Total Units Available for Sale

Ending Inventory Formula

Ending Inventory = Ending Units × WAC

Cost Sheet: Company Cost & Output Unit