Abstract

Gopal was running a catering services business in Hyderabad in the southern Indian state of Telangana. He supplied food to college canteens, school canteens, office canteens, and private hostels. He also supplied food for events like marriages, birthday parties, etc. During the fourth quarter of the financial year 2018-19, Gopal started food outlets to cater to the food requirements of people in different areas of the city. Starting from a single supply contract in the year 2015, Gopal expanded his business significantly. He accepted orders, and made and supplied food through different channels, incurring cost at various levels. After launching the food outlets, Gopal wanted to understand the profitability of each food outlet and gain an idea about the costs incurred on the whole business process. The administrative unit of the business gave Gopal excerpts collected from the financial records of his business unit. However, he was unable to understand the cost structure. Though he had an idea about the costs he would incur, he could not find a logical way of dealing with the flow of costs. The present case study is helpful in understanding the nature of different costs incurred by a business organization, how various costs are classified, and the process of costing followed by different business organizations and the purpose of a cost sheet in providing a comprehensive view of different costs incurred at different stages of a business process.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• The difference between financial accounting and cost accounting
• The tools and techniques used in cost accounting
• Methods of Costing
• Classification of Costs and Cost Sheet

Keywords

Financial Accounting; Cost Accounting; Costing; Cost Sheet; Direct Expenses; Indirect expenses; Over-head expenses; Manufacturing unit; Methods of costing; Classification of costs; Performa Cost Sheet