Methods of Costing in Accounting
Methods of Costing in Accounting or value accounting is a department of accounting that offers recording classifying and suitable allocation of expenditure to decide the value of products and services. After figuring out the value you possibly can restore the earnings margin and additionally restorative the promoting charge. In this complicated and aggressive marketplace scenario, it’s far crucial to decide the value of merchandise and services. It additionally assists the control to take a knowledgeable choice to lessen value and boom the earnings, lessen the producing value, wherein lowering the promoting charge. To preserve this aggressive marketplace, manufacturers desire to lessen the promoting charge and boom quality.
Methods of Costing in Accounting
- Unit Costing
- Job Costing
- Contract Costing
- Batch Costing
- Operating Costing
- Process Costing
- Multiple Costing
- Uniform Costing
1. Unit Costing
This approach is moreover called ‘Single output costing’. This approach of costing is used for products that can be expressed in equal quantitative devices and are suitable for products that may be artificial through a manner of non-forestall manufacturing activity. Costs are ascertained for on-hand devices of output. Examples: Brick making, mining, cement manufacturing, dairy, flour turbines, etc.
2. Job Costing
Under this method, fees are ascertained for every painting order separately as every task has its personal specs and scope. Examples: Painting, Car repair, Decoration, Repair of construction, etc.
3. Contract Costing
Under this technique, costing is achieved for huge jobs which entail heavy expenditure and stretches over a protracted length and frequently it’s far undertaken at exceptional sites. Each settlement is dealt with as a separate unit for costing. This is likewise called Terminal Costing. Construction of bridges, roads, buildings, etc. comes below settlement costing.
4. Batch Costing
This method of costing is used where the units produced in a batch are uniform in nature and design. For the purpose of costing, each batch is treated as a job or separate unit. Industries like bakeries, Pharmaceuticals, etc. usually use the batch costing method.
5. Operating Costing
Where the cost of operating a service such as a nursing home, Bus, railway or chartered bus, etc. this method of costing is used to ascertain the cost of such particular service. Each particular service is treated as a separate unit in operating methods of costing in accounting. In the case of a Nursing Home, a unit is treated as the cost of a bed per day and for buses operating cost for a kilometre is treated as a unit.
6. Process Costing
This shape of costing is used for the products which go through wonderful processes. For example, manufacturing clothes goes in a wonderful way. Fist way is spinning. The output of spinning is yarn. It is a finished product that can be offered withinside the market to the weavers similarly to being used as a raw cloth for weaving withinside the same manufacturing unit. For the purpose of finding out the charge of yarn, the charge of the spinning way is to be ascertained. The 2d step is the weaving way. The output of weaving way is a cloth which moreover can be offered as a finished product withinside the market. In such a case, the charge of cloth desires to be evaluated. The 1/three way is converting cloth into a finished product which encompasses shirt or trousers etc. Each way is to be evaluated separately due to the fact the output of each way can be dealt with as a finished proper similar to consumed as a raw cloth for the following way. In such industries, way costing is used to ascertain the charge at each diploma of manufacturing.
7. Multiple Costing
When the output contains many assembled factors or components along with television, motor Car, or virtual gadgets, costs need to be ascertained for each factor further to the finished product. Such costing may additionally incorporate super strategies of costing for super components. Therefore this type of costing is a notion of composite costing or more than one costing.
8. Uniform Costing
This isn’t always a separate technique of cost. This is a machine of the usage of the identical technique of cost through some of the companies withinside the identical industry. It is handled as a not unusual place machine of the usage of agreed ideas and widespread accounting practices withinside the equal companies or industries. This enables in fixation of charge of the product and inter-firm comparisons.