Here are some notes on methods and techniques of costing in detail:
Methods of Costing
There are a number of methods of costing that can be used to determine the cost of a product or service. Some of the most common methods of costing include:
- Job costing: Job costing is a method of costing that is used to determine the cost of a specific job or order.
- Process costing: Process costing is a method of costing that is used to determine the cost of a product or service that is produced in a continuous process.
- Operational costing: Operational costing is a method of costing that is used to determine the cost of a product or service that is produced in a repetitive process.
- Target costing: Target costing is a method of costing that is used to determine the cost of a product or service that is targeted to a specific price.
- Activity-based costing: Activity-based costing is a method of costing that is used to determine the cost of activities that are performed in an organization.
Techniques of Costing
There are a number of techniques of costing that can be used to improve the accuracy and efficiency of costing. Some of the most common techniques of costing include:
- Variance analysis: Variance analysis is a technique that is used to analyze the differences between actual costs and budgeted costs.
- Standard costing: Standard costing is a technique that is used to set standards for costs and then compare actual costs to the standards.
- Cost-volume-profit analysis: Cost-volume-profit analysis is a technique that is used to analyze the relationship between costs, volume, and profits.
- Life-cycle costing: Life-cycle costing is a technique that is used to determine the total cost of a product or service over its entire life cycle.
The method and technique of costing that is used will depend on the specific needs of the organization. For example, a job-costing system might be used by a company that produces custom furniture, while a process-costing system might be used by a company that produces canned food.