Costing, as defined by the Institute of Cost and Works Accountants, England is basically “The technique and process of ascertaining costs.” It can also be described as classifying, recording and appropriate allocation of expenditure for the determination of the costs of products or services, and for presentation of suitably arranged data for the purposes of control, and guidance of management.
Cost Accounting is a method of accounting wherein all the costs involved in performing any process, project or product are noted and analyzed. Such analysis helps the management in taking strategic decisions. Cost accounting uses various techniques to make an organization cost effective.
Uplatz provides this comprehensive course on Costing and Cost & Management Accounting.
Cost accounting and product costing are two accounting methods for determining the cash needed to create goods and services. A company's decision to use either accounting technique can have lasting implications on how the business interprets financial data and makes business decisions. Product costing may work better for a business lacking modern manufacturing facilities, while cost accounting better suits a company using large-scale production methods.
Product costing is the accounting process of determining all business expenses pertaining the creation of company products. These costs can include raw material purchases, worker wages, production transportation costs and retail stocking fees. A company uses these overall costs to plan a variety of business strategies, including setting product prices and developing promotional campaigns. A company also uses product costing to find ways to streamline production costs to maximize profits. For example, choosing raw materials that are more cost-effective can allow a company to increase profit from retail sales by lowering its product creation costs.
Job costing is an accounting tool that allows businesses to track costs by individual jobs. Job costing is calculated by accumulating the cost of labor, materials and overhead for a specific project.
Cost accounting is the process of collecting, classifying and recording all the costs associated with accomplishing a business objective or particular company project. A business uses cost accounting to analyze data collected from completing a business task to determine the fair value or selling price of the product created from that task. Cost accounting can also help a company streamline its production process to reduce costs and return a greater profit on individual product sales.
Advantages of Cost Accounting
Cost accounting overcomes the problems associated with adjusting projections to suit modern manufacturing techniques or counting individual inventory components. This allows cost accounting to deliver detailed reports regarding the cost of each phase of production. An organization can use these reports to specifically target areas of the company for cost reduction or efficiency improvement. Additionally, cost accounting focuses solely on the cash spent to create goods as an economic factor of production. This means a business using cost accounting views money as the single factor affecting the company's ability to produce goods and services.
Goals of Costing
To determine the exact cost of each article.
To determine the cost incurred during each operation to keep control over workers’ wages.
To provide information to ascertain the selling price of the product.
To supply information for detection of wastage.
It helps in reducing the total cost of manufacture.
It suggests changes in design when the cost is higher.
To help in formulating the policies for charging the prices of the product.
To facilitate preparation of estimate for submitting the rates in tenders or quotations.
To compare the actual cost with the estimated cost of the component.
Elements of Cost
In general, the costs are divided into:
Each of these costs can then be further classified into direct and indirect costs.
Costing and Cost Accounting - Course Syllabus
Cost and Management Accounting
Overheads - Absorption Costing Method
Activity Based Costing
Cost Accounting System
Job & Contract Costing
Joint and By-product
Unit & Batch Costing
Process & Operating Costing
Cost Management for specific sectors
Divisional Transfer Pricing
Cost Management Techniques