lOMoARcPSD|25448604
6. SINGLE OUTPUT OR UNIT COSTING:
This method of cost ascertainment is used when production is uniform and consists of a single
or two or three varieties of the same product. Where the product is produced in different grades.
Costs are ascertained grade wise. As the units of output are identical, the cost per unit is found
by dividing the total cost by the number of units produced. This method is applied in mine,
quarries, brick kilns, steel production, flour mills etc
7. OPERATING OR SERVICE COSTING:
This method should not be confused with operation costing. Operation costing is used in
undertakings which provide services instead of manufacturing products. For example transport
undertaking (road transport, railways, airways, shipping companies) electricity companies,
hotels, hospitals, cinema, etc use this method. The cost units are passenger-kilometer or ton-
kilometer, kilowatts hour, a room per day in a hotel, a seat per show in cinema, etc. This method
is a variation of process costing
8. MULTIPLE OR COMPOSITE COSTING:
It is an application of more than one method of cost ascertainment in respect of the same
product. This method is used in industries where a number of companies are separately
manufactured and assembled into a final product. For example in a television company,
manufacturer of different component parts may require different production methods and thus
different methods of costing may have to be used. Assembly of these components into final
product still requires another method of costing other examples of industries which make use
of this method are air conditioners, refrigerators, scooters, cars, locomotive works etc
Techniques of Costing
All the types of industries which determines which of the sight methods of costing discussed
above will be used in a particular business. However, in addition to these methods, there are
certain techniques of costing which are not alternatives to the methods discussed above. These
techniques may be used for special purpose of control and policy in any business irrespective
of the method of costing being used there. These techniques are briefly explained below.
1.STANDARD COSTING:
This is a very valuable technique to control the cost. In the techniques standard cost is
predetermined as a target of performance and actual performance is measured against the
Cost Accounting
Jerlin Jose, Asst. Professor, CHRIST (Deemed to be University)
Bengaluru
Downloaded by Nikee Patel ()
, lOMoARcPSD|25448604
standard. The difference between the actual costs and analysed to know the reasons for the
difference so that corrective actions may be taken.
2.BUDGETRAY CONTROL:
Closely allied to standard costing is the technique of budgetary control. A budget is an
expression of a firms plan in financial form of budgetary control is a technique applied to the
control of total expenditure on materials, wages and overhead by comparing actual
performance with planned performance. Thus in an addition to its planning, the budget is also
used for control and co-ordination of business operations.
3.MARGINAL COSTING:
This is a technique of profit planning. In this technique, separation of cost into fixed and
variable is of special interest and importance. This is so because marginal costing regards only
variable costs as the cost of the products. Fixed cost is treated as period cost and no attempt is
made to allocate or appropriation this cost to individual cost centers or cost units. It is
transferred to costing profit and loss account of the period. This technique is used to study the
effect on profit of changes in volume or type of output.
4.TOTAL ABSORPTION COSTING:
It is a traditional method of costing whereby total costs are charged to products. This is in
complete contrast to marginal costing where only variable costs are charged to products. All
though until recently this was the only technique employed by cost accountants, it is now a
days considered to have only a limited application
5.UNIFORM COSTING:
This is not separate technique or method of costing like standard costing or process costing.
Uniform costing simply denotes a situation in which a number of firms adopt a uniform set of
costing principles. It has defined by CIMA as the use of several undertakings of the same
costing principles and/or practices. This helps to compare the performance of one firm that of
other firms and thus to derive the benefit of anyone’s better experience and performance.
Cost Accounting
Jerlin Jose, Asst. Professor, CHRIST (Deemed to be University)
Bengaluru
Downloaded by Nikee Patel ()
6. SINGLE OUTPUT OR UNIT COSTING:
This method of cost ascertainment is used when production is uniform and consists of a single
or two or three varieties of the same product. Where the product is produced in different grades.
Costs are ascertained grade wise. As the units of output are identical, the cost per unit is found
by dividing the total cost by the number of units produced. This method is applied in mine,
quarries, brick kilns, steel production, flour mills etc
7. OPERATING OR SERVICE COSTING:
This method should not be confused with operation costing. Operation costing is used in
undertakings which provide services instead of manufacturing products. For example transport
undertaking (road transport, railways, airways, shipping companies) electricity companies,
hotels, hospitals, cinema, etc use this method. The cost units are passenger-kilometer or ton-
kilometer, kilowatts hour, a room per day in a hotel, a seat per show in cinema, etc. This method
is a variation of process costing
8. MULTIPLE OR COMPOSITE COSTING:
It is an application of more than one method of cost ascertainment in respect of the same
product. This method is used in industries where a number of companies are separately
manufactured and assembled into a final product. For example in a television company,
manufacturer of different component parts may require different production methods and thus
different methods of costing may have to be used. Assembly of these components into final
product still requires another method of costing other examples of industries which make use
of this method are air conditioners, refrigerators, scooters, cars, locomotive works etc
Techniques of Costing
All the types of industries which determines which of the sight methods of costing discussed
above will be used in a particular business. However, in addition to these methods, there are
certain techniques of costing which are not alternatives to the methods discussed above. These
techniques may be used for special purpose of control and policy in any business irrespective
of the method of costing being used there. These techniques are briefly explained below.
1.STANDARD COSTING:
This is a very valuable technique to control the cost. In the techniques standard cost is
predetermined as a target of performance and actual performance is measured against the
Cost Accounting
Jerlin Jose, Asst. Professor, CHRIST (Deemed to be University)
Bengaluru
Downloaded by Nikee Patel ()
, lOMoARcPSD|25448604
standard. The difference between the actual costs and analysed to know the reasons for the
difference so that corrective actions may be taken.
2.BUDGETRAY CONTROL:
Closely allied to standard costing is the technique of budgetary control. A budget is an
expression of a firms plan in financial form of budgetary control is a technique applied to the
control of total expenditure on materials, wages and overhead by comparing actual
performance with planned performance. Thus in an addition to its planning, the budget is also
used for control and co-ordination of business operations.
3.MARGINAL COSTING:
This is a technique of profit planning. In this technique, separation of cost into fixed and
variable is of special interest and importance. This is so because marginal costing regards only
variable costs as the cost of the products. Fixed cost is treated as period cost and no attempt is
made to allocate or appropriation this cost to individual cost centers or cost units. It is
transferred to costing profit and loss account of the period. This technique is used to study the
effect on profit of changes in volume or type of output.
4.TOTAL ABSORPTION COSTING:
It is a traditional method of costing whereby total costs are charged to products. This is in
complete contrast to marginal costing where only variable costs are charged to products. All
though until recently this was the only technique employed by cost accountants, it is now a
days considered to have only a limited application
5.UNIFORM COSTING:
This is not separate technique or method of costing like standard costing or process costing.
Uniform costing simply denotes a situation in which a number of firms adopt a uniform set of
costing principles. It has defined by CIMA as the use of several undertakings of the same
costing principles and/or practices. This helps to compare the performance of one firm that of
other firms and thus to derive the benefit of anyone’s better experience and performance.
Cost Accounting
Jerlin Jose, Asst. Professor, CHRIST (Deemed to be University)
Bengaluru
Downloaded by Nikee Patel ()
