The various methods of costing available are as below:
Job Costing - This is done, as the name suggests, on job works which may differ from case to case basis. By giving different job numbers and debiting the costs on the jobs, cost of each job work can be ascertained.
Batch Costing - This is similar to job costing but pertains to batches.
Contract or Terminal Costing - This is done for large contracts. Such businesses need not maintain costs separately as financial accounting will indicate the costs and expenses. In such contracting firms, the cost sheets are maintained for individual contracts. In the absence of expense budgets, inefficiencies are often hidden in such cost sheets.
Single or Output Costing - This is done when the end product is single like a colliery or a power station. Cost sheets are maintained.
Process Costing - This is useful when a product passes through various processes, yielding different by products of commercial value. This is useful in industries like refineries.
Operation Costing - This is followed by mechanical engineering industries which make products or parts. Each manufacturing operation cost is taken into account. There is no difference between this and process costing.
Operating Costing - This method is followed when the company does not have a specific product as output like the service industries.
Departmental Costing - When an end product is ultimately manufactured by different departments this method can be useful.
Multiple Costing - This is useful when a product is manufactured in an assembly line like an automobile.
It is important to choose the most appropriate method of costing for your business or industry. Most businesses do not like to engage cost accountants and leave it to financial accountants to take care of this job. It is not recommended. There are many free lance cost accountants available and they can be engaged on need basis.
© Copyright. Written on August 09, 2008. Without prejudice. All rights reserved.
Various Methods of Costing - To learn more about this author, visit Madhavan T Gopalachary's Website.
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Madhavan T Gopalachary
(Visit Madhavan's Website)
Madhavan Gopalachary, nick name "madgopes"
(g pronounced as in go) given by IIT
classmates, is a Mechanical Engineer and
an alumnus of Indian Institute of
Technology, Madras having passed out
specializing in IC Engines &
Thermodynamics.
He has nearly 35 years of experience in
the Corporate World. He started off as a
trainee and handled sales, marketing,
manufacturing, product management, profit
center management, strategic planning and
corporate development including R & D in
various organizations and at various
levels before becoming a CEO. His last two
professional assignments were at CEO level
before embarking to start management
consultancy business on January 01, 1998.
He has worked for British, Swedish MNCs as
well as very large Indian business houses.
He has spent a large portion of his time
from June 1998 till date in East African
Countries practicing as an independent
Management Consultant.
More details can be obtained at the
following web sites:
mmg.name
/mtg.html;
mmgconsu
lting.biz/
Madhavan's articles can be accessed at www.madgopes.com
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