A power point presentation describing some basic definitions, father of cost accounting, Indian aspect of cost accounting and Various Methods and Techniques of costing. Presented by: Aquib Ali, Ajay Gupta and Ashwin Showi. (M.Com students) at the Bhopal School of Social Sciences(BSSS) on 6 September, 2017

1. Methods and Techniques
of
Costing
Presented by: -
•Aquib Ali
•Ajay Gupta
•Ashwin Showi

2. Cost and Costing
A ‘Cost’ can be defined as the monetary value
spent to acquire something; ‘Costing’ is defined
process of ascertaining cost and ‘Cost Accounting’
is the process of accounting and recording of costs.
Costs are incurred by both manufacturing and
service organizations.

3. Luca Pacioli
Father of Cost Accounting

4. Earlier:
The Institute of Chartered
Accountants of India
At present:
The Institute of Cost Accountants
of India

5. Methods of Costing
Specific Order Costing
Job
Contract
Batch
Target
Continuous Operational
Costing
Process
Single/Output
Operating/Service
Composite/Multiple
Specific Order Costing is the
category of
basic costing methods
applicable where the work
consists of separate jobs,
batches or contracts each of
which is authorised by
a specific order or contract.
Job costing, batch costing and
contract costing are included in
this category.
Continuous operation
costing is used where the
goods or services being costed
are the result of continuous or
repetitive operations or
processes. Costs for a financial
period are collected for the
particular operation or process
and divided by the number of
units produced in the period to
give an average cost per unit.

6. 1. Job Costing:
Under this method, costs are collected and
accumulated for each job, work order or project
separately. Each job can be separately identified; so
it becomes essential to analyse the cost according
to each job. A job card is prepared for each job for
cost accumulation.
Classification Under Specific order costing methods

7. 2. Contract Costing:
When the job is big and spread over long periods of
time, the method of contract costing is used. A
separate account is kept for each individual contract.
Classification Under Specific order costing methods

8. 3. Batch Costing:
This is an extension of job costing. A batch may
represent a number of small orders passed through
the factory in batch. Each batch is treated as a unit of
cost and separately costed. The cost per unit is
determined by dividing the cost of the batch by the
number of units produced in a batch.
Classification Under Specific order costing methods

9. 4.Target Costing:
In this method, before commencement of job, the
cost of work is estimated with the help of experts.
This estimated cost is termed as target cost. The
contractor is paid commission at a certain
percentage on this cost.
Classification Under Specific order costing methods

10. Classification under Continuous Operation Costing
1. Process Costing
This is suitable for industries where production is
continuous, manufacturing is carried on by distinct
and well defined processes.
Products produced during a particular process are
exactly identical.
Also known as Average Costing and Continuous Costing.

11. 2. Single/Output Costing:
This method is used where the production is uniform
consists of only a single product. The cost is
ascertained per unit of output. The units are
identical to each other and are the standard ones.
Where the products manufactured
Classification under Continuous Operation Costing

12. Classification under Continuous Operation Costing
3. Operating Costing
Operating costing method is one designed to
ascertain and control the costs of the
undertakings which do not produce products
but which render services. Also known as
service costing. Operating costing is the cost
of rendering services

13. Classification under Continuous Operation Costing
4. Multiple Costing
Multiple costing, also known as composite costing, is a
type of accounting method used when goods are sold
that contain several other processed parts, and these
parts are costed differently. Just as the final product
needs a cost associated with it, so do each of the parts
created by other processes. This is called costing. Each
component or part can be, and usually is, costed using
a different practice.

14. Techniques of Costing
Historical Costing
Standard Costing
Marginal Costing
Direct Costing
Absorption Costing
Uniform Costing

15. Historical Costing
Costing systems where costs and revenues
are calculated after the end of the accounting
period in which they are incurred.
Historical costing permits the accurate
calculation of costs afterwards but is of little
use for forward planning purposes.

16. Standard Costing
A standard cost has been described as a predetermined
cost, an estimated future cost and comparing them
with recorded actual costs. Standard costs are often a
part of a manufacturer's annual profit plan and
operating budgets.
Suitable where manufacturing is of standardised goods
or repetitive in nature.

17. Marginal Costing
The marginal cost is calculated as the differentiating
between fixed costs and variable costs. It is used to
ascertain the effect of changes in volume or type of
output on profit.

18. Direct Costing
The practice of charging all direct costs to
operations, processes or products leaving all other
costs to be written off against profits in which they
arise is known as Direct Costing.

19. Absorption Costing
The practice of charging all costs, both variable and
fixed, to operation, processes, and product is known
as Absorption Costing.

20. Uniform Costing
It can be defined as the use of same costing
principles and/or practices by several organisations in
an industry for common control or comparison of
costs.

22. Any Questions..??