Professional Documents
Culture Documents
Types:
Units of production such as a ream of paper, a tonne of
steel, a meter of cable etc.
Units of services such as passenger miles, consulting
hours, room per day, bed per day
Methods of costing
It refers to the techniques and processes
employed in the ascertainment of costs
Choice of the method depends upon the type and
nature of manufacturing activity
Types: Broadly,
Job costing or job order costing
Process Costing
Other methods are variations of one of these
methods.
Methods of costing - Types
Job Order Costing Applies where work is
undertaken to customers special requirements.
Contract Costing or Terminal Costing: It is same
as Job order costing; however, job is small and
contract is big contract. Contract is of long
duration and may continue for more than a
financial year.
Batch costing: Cost of a batch or group of
identical products is ascertained; each batch of
products is a cost unit for which costs are
ascertained.
Methods of costing Types..
Process Costing Applies to a context where there
is a continuous process. Costs are accumulated
for each process. And then total cost of a process
is divided by the number of units produced to
arrive at cost per unit.
Operations Costing: Involves cost ascertainment
for each operation.
Operating or services costing: It is applied to
services; cost units are passenger kilometer,
room per day, bed per day.
Methods of costing Types..
Multiple or composite costing Application of
more than one method of costing in respect of the
same product. Used in industries where a number
of components are separately manufactured and
then assembled into a final product.
Single, output or unit costing: Applied to a context
where output produced are identical, the cost per
unit is found by dividing the total cost by the
number of units produced. E.g. Steel output is
identical but differentiated by grades.
Techniques of costing Types..
Standard costing Standard cost is
predetermined as target of performance and
actual performance is measured against the
standard.
Budgetary control: By comparing actual with
planned / budgeted performance
Marginal costing: Only variable cost is allocated
to individual cost centers or cost units
Techniques of costing Types..
Total Absorption costing Both fixed and variable
costs are charged to products.
1 Prime Cost
2. Works cost or factory cost
Prime cost + Factory Overheads
Cost of production
Work cost + Administration Overheads
Total cost or cost of sales
Cost of production + Selling and
distribution overhead