UNIT II - Methods of costing

           Every business enterprise in some way is different from the other. As such, several methods/systems of costing have been developed to suit the needs of individual business conditions. The general fundamental principles of ascertaining costs are the same in every system of costing but the method of analysis & presentation of costs differ from industry to industry. The main consideration which applies to the choice of a particular method of costing is the nature & type of products/services rendered by an enterprise.
           

   Basically, there are two methods of costing :
1. Specific order costing
2. Continuous operation costing

1. Specific order costing: The term specific order costing refers to costing methods that are used by organizations that manufacture/assemble/construct jobs/products to individual customers' specific orders. Thus, specific order costing can be further classified into three categories.
(i) Job costing
(ii) Batch costing

2. Continuous operation costing: It refers to costing methods that are used by organizations that are engaged in mass production & manufacture goods on a continuous basis. In continuous operation costing, goods/services are not produced according to the specific requirements of the customers but are sold out of stocks produced on a continuous basis. It includes the methods of costing such as,
(i) Process costing
(ii) Single or output costing
(iii) operating/service costing

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