Costs–A Key to Sawmill Profits

An understanding of the types of total costs is essential to the development of a process cost accounting system. Basically these types are fixed and variable. Variable costs may be extracted from such sources as payroll records and invoices for goods and services purchased during the accounting period. Fixed costs are obtained from property tax assessments and payment records, certain insurance premiums, and depreciation schedules. To be useful in management, costs must be assigned to the processes being considered. This involves a systematic indexing of the various incurred charges. By process cost accounting a business manager can know where he is, where he is going, and progress towards objectives.

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