What are different methods of Costing? State the industries to which they can be applied.
The different methods of costing are classified according to the nature of operations. The main methods of ascertaining cost aJob costing, contract costing, batch costing, unit costing, process costing, operating costing, multiple costing and uniform costing.
Job costing: This method is applied where production consists of different jobs, projects or work orders this method is used in industries like repair shoes, printing etc.
Contract costing: This method is used where work to be done is a big job it is generally used in industries undertaking building contracts.
Batch costing: In this method products are arranged in batches. Each batch is treated as a different job. It is used in industries like toy manufacturing.
Process costing: It is desired to ascertain the cost of product at each process in industries where product passes to various processes. This method is used to calculate the product cost at each process it is used in industries like chemicals, paints etc.
Operating costing: It is used in industries which render services it is used at transport companies, cinemas etc.
Multiple costing: It is a combination of two or more methods of costing. In this system cost of different sections of production are combined after finding out the cost of each part manufactured. It is used in cycling industries.
Uniform costing: When numbers of firms in an industry agree among themselves to follow a same system of costing in detail, adopting common terminology for various items and processes they are said to follow a system of uniform costing.
Unit costing: It is used in industries where products are turned out of continuous activity and can be expressed in identical units it is suitable for industries like brick making, dairy etc.