ained an¢ relative! eS With towhich c wand lich like sal service ¢ jer serviinvolve in make/ nich rn zations fe specific order ne rant con nce co nga She TE SPE * stor costing ™ . vet jobs oF POG ‘i Reeenuirementsanecac hy eam Prete lowe csi Peialactuag : ee : od is applies, as machine tool jewhere workis ote costing Me ‘such as ma ool ie i etna otto ig Mor compara Lae cee ol ran Be cen “peonrasoranaconiccd cerns where Prod ale x and contra manufacture, print oe ble where there is 802 erat beret work, such as is = § n of js applica av ch ref fo cons! . gpecial requirements: contract costing ork or ob. whe [er eT meet Ae ey period *Ceomplishment of WOH OT action work Sted to be mit tinwed for = long period “ris commenced Om site and not at the of each portant feature tha J ‘contractor jn quantity of identical premises ofthe conta . eronderscertaind * sineases where acustomel OFC Pers atch Costing This method is; icdincones rs rtueed orn a concern {0% splenishing icine ora batch of identical parts oF stocks Continuous Operation Costing CIMA defines continuous operation costing as the basic costing Gr eorvices result front a series of eontinuols OF repetitive operations OF processes or charged before being averaged over the units produced during the period”. Where organizations which involve in mass production of products, through continuous opera: tions, which will then be sold from stock ‘and will not be produced to the specific requirements of aon ei re Theimportant feature of continuous operation costing is that, the process involves inproduetio odntical unit of output and total costs are divided by number of units produced to give the average cost per unit. The continuous operation costing is classified into the following: method applicable where goods to which costs Process Costing It is used to ascertain the cost of each stas f fe ol ge of manufacture where material Fc a arin pains oan a al ra POMS products if [ie n a final product saith bs nat ier ges Ths met appa onde ceca, dairy, Operation Costing This method is applic pplicable where there i i conducted though dierent operations. A See ee eerie Production NE ita acer eaeh oan ig process may sometimes be sub- a ration ion process is considered as a separate cost cr alt hd ng pc nae ‘sting’. tis applicable to the of manufacture ‘i single artick ‘ eae nie articles luced are eae by acontinuous process radio « is adopted in industries like logeneous or only a few overheads are materials and labour ae ah continuous ‘horas in cas of continu ope cost ene bel cu units produced, apportioned to eee Costing, all costs Hee a RE to cost unit and centres from which shee materials, oe ql IeSe Costs and overheadsChapter 1 Introduction to Cost Accounting 17 {Types of Costing Systems The important types of costing systems are discussed in brief as follows: Historical Costing In this type of costing system, the costs are ascertained only after they have been incurred. The main objective of it is to ascertain costs that have been incurred in past. Itis the process of accumulation of costs after they are incurred in a systematic manner. The historical costs are used only for postmortem examination of actual costs incurred and it would be too late to control. The actual figures can be compared only when the standards of performance exists. Absorption Costing Under the ‘absorption costing system all fixed and variable costs are allotted tocost units and total overheads are absorbed according to activity level. In absorption costing system, fixed manufacturing overheads are allocated to products, and these are included in stock valuation. Therefore, valuation of inventories of finished goods and WIP includes manufacturing fixed cost and transferred to next period. Unlike manufacturing fixed overhead, the administrative overhead, selling and distribution overheads are treated as fixed cost and recorded only when they incurs. It is a traditional form of cost ascertainment. It is based on the principle that costs should be charged or absorbed to whatever is being costed - be it cost unit, cost centre - on the basis of the benefit received from these costs. Direct Costing It is a method of costing in which the products charged with only those costs which vary with volume. Variable or direct costs such as direct material, direct labour and variable manufacturing expenses are examples of costs charged to the product. All indirect costs are charged to profit and loss account of the period in which they arise. Indirect costs are disregarded in inventory valuation. Marginal Costing Under marginal costing, costs are classified into fixed and variable costs. Variable costs are charged to unit cost and the fixed costs attributable to the relevant period is written-off in full against the contribution for that period. Contribution margin indicates the recovery of fixed cost before contributing towards the operational profit. This technique is widely used for internal management purpose for decision making rather than for external reporting. Standard Costing Under standard costing system, the ascertainment and use of standard costs and the measurement and analysis of variances is done for control purpose. Standard cost is a predetermined cost which is computed in advance of production on the basis of a specification of all the factors affecting costs and used in Standard Costing. Its main purpose is to provide abase for control through Variance Accounting, for valuation of stock and work-in-prozress and, in some cases, for fixing selling prices, Uniform Costing It is not a distinct method of costing. It is the adoption of identical costing principles and procedures by several units of the same industry or several undertakings by mutual agreement. It facilitate valid comparisons between organizations and helpsin elimination of inefficiencies. Cost It represents the resources that have been or must be sacrificed to attain a particular objective. Costing It involves in classification, recording, allocation, appropriation of expenses incurred to facilitate the determination of the cost of the product or service. Cost Accounting It deals with collection and analysis of relevant cost data for interpretation and presentation for managerial decision making.