What Are The Methods Of Costing And Please Tell Me About These?

Various Mehtods of Costing.

Different industries follow different methods for ascertaining cost of their products. The method to be adopted by business organisation will depend on the nature of the production and the type of out put. The following are the important methods of costing.

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      Job Costing: Job costing is concerned with the finding of the cost of each job or work order. This method is followed by these concerns when work is carried on by the customers request, such as printer general engineering work shop etc. Under this system a job cost sheet is required to be prepared find out profit or losses for each job or work order.
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      Contract Costing: Contract  costing is applied for contract work like construction of dam building civil engineering contract etc. Each contract or job is treated as separate cost unit for the cost ascertainment and control.
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      Batch Costing: A batch is a group of identical products. Under batch costing a batch of similar products is treated as a separate unit for the purpose of ascertaining cost. The total costs of a batch is divided by the total number of units in a batch to arrive at the costs per unit. This type of costing is generally used in industries like bakery, toy manufacturing etc.
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      Process Costing: This method is used in industries where production is carried on through different stages or processes before becoming a finished product. Costs are determined separately for each process. The main feature of process costing is that output of one process becomes the raw materials of another process until final product is obtained. This type of costing is generally used in industries like textile, chemical  paper, oil refining etc.
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      Service (Operating) Costing: This method is used in those industries which rendered services instead of producing goods. Under this method cost of providing a service is also determined. It is also called service costing. The organisation like water supply department, electricity department etc. Are the examples of using operating costing.
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      Operation Costing: This is suitable for industries where production is continuous and units are exactly identical to each other. This method is applied in industries like mines or drilling, cement works etc. Under this system cost sheet is prepared to find out cost per unit and profits or loss on production.
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      Multiple Costing: It means combination of two or more of the above methods of costing. Where a product comprises many assembled parts or components (as in case of motor car) costs have to be ascertained for each component as well as for the finished product for different components, different methods of costing may be used. It is also known as composite costing. This type of costing is applicable to industries producing motor vehicle, aeroplane radio, T.V. Etc.

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.

The job costing method, costs are collected and accumulated for each job, work order or project separately. Each hob can be separately identified; so it becomes essential to analyze the cost according to the each job. A job card is prepared for the each job for cost accumulation. This method is applicable to printers, machine tool manufactures, foundries and general engineering workshops. In contract costing, when the job is big and spread over long periods of time, the method of contract costing it used. A separate account is kept for each individual contract.

Builders, civil engineering contractors, constructional, use this method and mechanical engineering firm's etc. batch costing is an extension of job costing. A batch may represent a number of small orders passed through the factory in batch. Each batch is treated as a unit of cost and separately costed. The cost per unit is determined by dividing the cost of the batch by the number of units produced in a batch. This method is mainly applied in the biscuits manufacture; garments manufacture and spare parts and components manufacture.

Hi, I want to know what are tha correct methods of food costing as I am a chef I find it difficulty in costing a single dish.