Coding of Cost

A code is an accurate reference designed to enable easier entry & analysis (of cost items) . Coding of costs would be based on a cost classification selected.

For example , a cost code is indicated as 298.311 where,

2-labour
9-semi skilled
8-grade 8
3-indirect cost
1-northeast factory
1-machine department

So insted of saying it's the expenditure of "grade 8, semi-skilled labour which should be changed as indirect cost to the maintaining department in the northeast factory", we could simply say 298.311.

Advantages of Coding System

1. It's shorter than a lengthy description.
2. Ir saves time in a manual system.
3. Reduces ambiguity
   i.e. Two people will have different description for the same cost item where as a code will be more precise.
4. More suitable for a computerized system because it facilitates faster data procession.

For examples of cost coding click here. 

11/09/2010 |Pg 5