Methods & Techniques of

Costing
Unit - II
Methods
1.Unit Costing
2. Job Costing
3. Contract Costing
4. Batch Costing
5. Operating Costing
6. Process Costing.
7. Multiple Costing
8. Uniform Costing.
Unit Costing :
Unit Costing: This method also called 'Single output Costing'. This
method of costing is used for products which can be expressed in
identical quantitative units and is suitable for products which are
manufactured by continuous manufacturing activity. Costs are
ascertained for convenient units of output. Examples: Brick
making, mining, cement manufacturing, dairy, flour mills etc.

Job Costing::
Job Costing: Under this method costs are ascertained for each work
order separately as each job has its own specifications and scope.
Examples: Painting, Car repair, Decoration, Repair of building etc.
Contract Costing:
Contract Costing: Under this method costing is done for big jobs which
involves heavy expenditure and stretches over a long period and often
it is undertaken at different sites. Each contract is treated as a separate
unit for costing. This is also known as Terminal Costing. Construction of
bridges, roads, buildings, etc. comes under contract costing.
 
Batch Costing:
Batch Costing This methods 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 Bakery,
Pharmaceuticals etc. usually use batch costing method.
Operating Costing or Service Costing:
Operating Costing or Service Costing: Where the cost of operating a
service such as 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 separate units in operating
costing. 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 kilometer is treated as a
unit.
Process Costing:
Process Costing: This kind of costing is used for the products which go
through different processes. For example, manufacturing cloths goes
through different process. Fist process is spinning. The out put of spinning is
yarn. It is a finished product which can be sold in the market to the weavers
as well as use as a raw material for weaving in the same manufacturing unit.
For the purpose of finding out the cost of yarn, the cost of spinning process
is to be ascertained. The second step is the weaving process. The out put of
weaving process is cloth which also can be sold as a finished product in the
market. In such case, the cost of cloth needs to be evaluated. The third
process is converting cloth in to finished product such as shirt or trouser etc.
Each process is to be evaluated separately as the out put of each process
can be treated as a finished good as well as consumed as a raw material for
the next process. In such industries process costing is used to ascertaining
the cost at each stage of production.
Multiple Costing/ Composite Costing:
Multiple Costing: When the output comprises many assembled parts or
components such as in television, motor Car or electronics gadgets,
costs have to be ascertained for each component as well as the finished
product. Such costing may involve different methods of costing for
different components. Therefore this type of costing is known as
composite costing or multiple costing.
Techniques of Costing
Marginal Costing::
Marginal Costing: In Marginal Costing, it allocates only variable costs
i.e. direct materials, direct labour and other direct expenses and
variable overheads to the production. It does not take into account the
fixed cost of production. This type of costing emphasizes the distinction
between fixed and variable costs.

Absorption Costing::
Absorption Costing: The technique of absorbing fixed and variable costs
to production is called absorption costing. Under absorption costing full
costs, i.e. fixed and variable costs are absorbed to the production.
Standard Costing::
Standard Costing: When costs are determined in advance on certain
predetermined standards under a given set of operating conditions, it is
called standard costing. Standard costing is to be compared with the
actual costs periodically to analyze the changes in the cost to revise the
standards to avoid any loss due to outdated costing.

Historical costing::
Historical costing: When costs are determined in terms of actual costs
and not in terms of predetermined standards cost is called Historical
costing. In this system of cost accounting, costs are determined only
after they have been incurred. Almost all organizations use historical
costing system of accounting for costs.
Budgetary Control: Closely allied to Standard Costing is the technique
of budgetary control.

Uniform Costing:
Uniform Costing: This is not a separate method of costing. This is a
system of using the same method of costing by a number of firms in the
same industry. It is treated as a common system of using agreed
principles and standard accounting practices in the identical firms or
industry. This helps in fixation of price of the product and inter-firm
comparisons.