Methods of Costing
Methods of costing refers to ‘techniques and processes of ascertaining costs’
A) Specific order costing ie Job Costing
B) Operation Costing ie Process costing
A)
Specific Order Costing
1.
Job Costing – Job Costing is that
form of specific order costing under which each job is treated as cost unit and
costs are accumulated and ascertained for each job separately.
2. Batch Costing
– Batch Costing is that form of specific order costing under which each batch
is treated as a cost unit and costs are accumulated and ascertained separately
for each batch.
3.
Contract Costing- Contract costing is
that form of specific order costing under which each contract is treated as
cost unit and costs are accumulated and ascertained separately for each
contract.
4. Composite or Multiple Costing –
it involves the application of two or more methods of cost in respect of the same
product.
5.
Class Cost Method – it is the method
of costing where the costing of goods is done by classes instead of the unit, instead of the cost being separately
accumulated for each article or piece the cost will cover a group of orders of
the same class of product.
B) Operation Costing
1.
Process Costing – Process Costing is
a method of costing under which all costs are accumulated for each stage of
production and cost per unit of product is ascertained by dividing the total cost
of each process by the normal output of that process.
2. Operating costing or service
costing - it is used to ascertain the cost of providing
services.
3. Unit Costing
- Unit Costing is a form of process
costing under which costs are accumulated and analyzed under various elements
of costs and the cost per unit is ascertained by dividing the total cost by the number of units produced.
4. Departmental Costing –under this method, the cost incurred in maintaining a particular department is
ascertained.
5. Operation Costing - Operation costing is a form of process costing under which costs are accumulated for each operation and cost per unit is ascertained at each stage of operation by normal the output of that operation.
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