COST CALC U L ATI O N

DE LS: AN O V ER V I E W
MO
Prepared by:
D-12
student of group MEZ
o
Roksoliana Lohvynenk
 CONTENT
1. What are the costs?
2. Cost calculation: definition and purpose.
3. Main types of cost calculation models.
4. Unit and Job Costing.
5. Contract and Batch Costing.
6. Process and Service (operating) Costing.
7. Multiple, Product and Inventory Costing.
8. Costing Methods for Manufacturing.
9. References.
 WHAT ARE THE COSTS?
• The necessary expenditures that must be made
in order to run a business.
Costs • Associate with each factor of production.
• Their measurement is vital for the profound
business management.

• Fixed and Variable costs (connection with the output volume);

• Direct and Indirect costs (according to the relation to the production

Main types
process);
• Product and Period costs (association with the products production or
the passage of time);
• Other types of costs (controllable/uncontrollable, out-of-pocket/sunk,
incremental/opportunity etc.).

* Formed at the basis of sources 3 and 7

 COST CALCULATION: DEFINITION AND
PURPOSE
Cost the calculation of the unit
prime cost of output or job
calculation performed

Comparison of the
prime costs and
profitability
Main
purposes Solution of problems
with production
program, material-
technical supply etc.
* Formed at the basis of source 1
 MAIN TYPES OF
COST CALCULATION MODELS
Unit Costing Job Costing Contract Costing

Service or
Batch Costing Process Costing operating Costing

Multiple costing Product Costing Inventory Costing

Costing Methods
for
Manufacturing
* Formed at the basis of source 2
 UNIT AND JOB COSTING
UNIT COSTING JOB COSTING

Costs are ascertained for

Costing of products that are
each work order separately
expressed in identical units
as each has its own
(e.g. cement manufacturing,
specification and scope (e.g.
dairy, mining)
repair of buildings, painting)

* Formed at the basis of sources 2, 5 and 6

 CONTRACT AND BATCH COSTING
CONTRACT COSTING
Costing is done for jobs that
involve heavy expenditure
and stretches over long
period
(e.g. construction of roads
and bridges, buildings)
* Formed at the basis of sources 2, 5 and 6
BATCH COSTING
The costing is done for
units that are produced in
batches that are uniform
in nature and design
(e.g. pharmaceuticals)
 PROCESS AND SERVICE COSTING
PROCESS COSTING SERVICE COSTING

Is used for the products

The method is used for the
which go through different
costing of operating a service
processes, and to ascertain
such as Public Bus,
the cost of each stage of
Railways, Nursing home.
production

* Formed at the basis of sources 2, 5 and 6

 MULTIPLE, PRODUCT AND INVENTORY COSTING
MULTIPLE COSTING PRODUCT COSTING INVENTORY COSTING

LIFO. The exact

FIFO. The oldest opposite of the
costs are assigned to FIFO method,
The costs of different inventory items assigning the most
sections of production Is used to assign cost sold. recent inventory
costs to items sold.
are combined after to a manufactured
finding out the cost of product (job costing, Specific
Average cost identification
each and every part process costing) method. Assigns method. Assigns
manufactured inventory costs by
calculating a
the exact cost of
each sold inventory
moving average. item when the
specific item is sold.

* Formed at the basis of sources 2, 5 and 6

 COSTING METHODS FOR MANUFACTURING
TRADITIONAL METHODS
Process costing method.
Analyzes the net cost of a
manufacturing process.
Job-order costing. Involves
costing based on an individual
product basis.
* Formed at the basis of sources 2, 5 and 6
ACTIVITY-BASED COSTING (ABC)
Considers all the costs associated with
a single manufacturing task.
- Indicates high cost activities;
- helps in establishing and monitoring
performance measures;
- is useful for forecasting financial
baselines;
- captures the current cost of
performing any activity.
 REFERENCES

1. Cost calculation [Electronic resource]. – Access mode: https://encyclopedia2.thefreedictionary.com/Cost+Calculation.

2. Costing methods & important cost terms [Electronic resource]. – Access mode: https://www.edupristine.com/blog/costing-methods.

3. Costs [Electronic resource]. – Access mode: https://www.inc.com/encyclopedia/costs.html.

4. Different calculation models [Electronic resource]. – Access mode: https://ebrary.net/262/accounting/different_calculation_models.

5. Overview of cost estimation models [Electronic resource]. – Access mode: https://www.brighthubpm.com/project-planning/121839-how-

to-estimate-project-cost-using-models-to-guide-you/.

6. What are the main methods for calculating business costs? [Electronic resource]. – Access mode:
https://www.investopedia.com/ask/answers/101314/what-are-main-methods-calculating-business-costs.asp.

7. What are the types of costs in cost accounting? [Electronic resource]. – Access mode:
https://www.investopedia.com/ask/answers/041415/what-are-different-types-costs-cost-accounting.asp.