METHOD OF COSTING

METHOD OF COSTING 

MEANING: There are various method or type of costing , but the basic principal underlying all these methods or type are the same .The basic principal are to collect and analyse the expenditure according to elements of cost and to determine the cost for each cost center or cost unit . The nature of the manufacturing operation carried out of the nature of the services rendered by a concern decides the method applicable to it . Broadly speaking , there are three main  method  of costing ---1. job costing , process costing , and farm costing , the other are either variants of  these three method or are techniques use for a particular purpose under particular condition .   

METHOD OF COSTING  

1. JOB COSTING 

2. PROCESS COSTING 

3. FARM COSTING 

1. JOB COSTING : Under this method , the cost unit is taken to be a job ,small or big , comparison of a definite quantity of a product manufactured . So , the approach is product approach . Job costing system is used where it is desired to ascertain the cost of a job or a specific order or of a batch of finished goods and also profit or loss each such job . Thus , painters , publisher , machine tool manufacturers , caterers , job foundries , builders etc . use job costing system . 

2. PROCESS COSTING : Process represents type of costing for continuous and mass production industry . In such industry output consists of like unit each unit being process in same manner . Therefore it is assumed that all same amount of material , labour and overhead is chargable to each unit processed . cost are assumulated on the process basic records of unit product are variable . 

3. FARM COSTING : The agriculture farms are quite different from the manufacturing industry in many respect . Manufacturing industry used standard plants which gives standard output .Plant of a farm is highly influenced by climate , rainfall , nature of manuring , nature of labour used at different stages from showing to harvesting , nature of seeds used etc . Manufacturing product are not influenced by these factors . Another  peculiarity of a farm is that output of a period in part at least , is used as the input of the period following . paddy potato ,onion etc . produced in one year are preserved for using them as seeds in the next year.