PRESTIGE INSTITUTE OF MANAGEMENT GWALIOR

TOPIC: METHODS AND TECHNIQUES OF COSTING

PRESENTED BY:
HIMANI SHIVHARE
KIRAN GUPTA
NIDHI CHAUDHARY
RAGINI SEN
Introduction
 Costing has been defined
as “the technique and
process of ascertaining
costs.”
 The principles in every type
of costing are same but the
method of analyzing and
presenting the cost differ
with the nature of business.
Methods of costing
Unit costing method

Job costing method

Contract costing method

Process costing method

Operation costing method

Operating costing method

Departmental costing method

Multiple costing method

 1. Unit costing
method
 This method is  It is also known as
applicable in those
industries where the
work of production
goes on continuously.
The per unit cost is
found out in this
method. This method is
also known as simple
or output method. This
method is used in brick
making, cement, paper,
cloth mills etc.
2. Job costing
method
terminal costing
method. This method
is generally adopted
when the cost of every
contract or job is to be
found out separately.
This method is used in
construction of
building, ship building,
printing press etc.
3. Contract costing 4. Process costing
method method
 This method is  This method is
adopted in those applicable to those
businesses, firms or industries
industries where work manufacturing a
is done on contract in number of units of
different places. The output requiring
builders of building, various processes. It
roads, dams etc. use is applicable to
this method in chemical industries
determining cost. producing soaps,
edible and non-edible
oils, perfumes, paints
etc.
5. Operation costing 6. Operating costing
method method
 This method is  This method is used in
modified version of businesses which
process costing provide public utility
method. In this like railways,
method, the cost of transport, electricity
each operation in the and water. The main
process of production aim of these
is ascertain. This businesses is to
method is used by render services to
those industries general public. The
where semi- finished total cost of providing
goods are required to the service is divided
be kept as stock. by the total units and
thus, per unit cost is
obtained.
7. Departmental costing 8. Multiple costing
method method

 This method is used  This method is used

by institutions where by those production
the production work is houses where various
done by various small goods are
departments. In this produced and then
method, the cost of these are assembled
production in various to produced a
departments is found particular commodity.
out separately. This For example, in the
method is used in production of cycle,
departmental typewriters, airplanes
warehouse. etc.
Techniques of costing

Standard Marginal Direct

costing costing costing

Absorption Uniform
costing costing
1. Standard costing: In this technique the
standards are first set and then they are
compared with the actual costs. The
difference between the standard cost and
the actual cost is known as variance. The
variances are analyzed and the causes
are found out so that the expenditures and
costs can be checked and controlled.
2. Marginal costing: The increase in total
cost by increasing one more unit of the
factor of production is known as marginal
cost. In this, expenses are divided into two
parts i.e. fixed and variable. Marginal
costing takes into account only the
variable factors to find out marginal cost of
production.
3. Direct costing: This technique is, “The
practice of charging all direct costs to
operations, processes or products, leaving
all the indirect cost to be written off against
profits in the period in which they arise.
Here the direct costs are the variable
costs.
4. Absorption costing: In this technique, no
differentiation is made between fixed and
variable costs while determining costs. In
this, both the fixed and variable costs are
charged in the same manner.
5. Uniform costing: when several firms
and industries adopt a common
approach to problems related to costing
then the technique is known as uniform
costing. The firm that adopt this
technique can benefit from expenditure
of one another. Under uniform costing,
an effort is made to establish uniformity
in cost calculation.
CONCLUSION
 The methods of costing and the
techniques of costing used in
determination of costs are different for
different groups of industries.
Theoretically all these methods and
techniques are similar but analysis and
presentation of costs for various
industries and for various objectives
become different.