ADVANCE COST

ACCOUNTING
M-II-2002

METHOD OF COSTING

Are classified into.

METHOD OF COSTING

Specific order Costing

Job Costing
Batch Costing
Contract Costing

Operation Costing
Process Costing
Single Costing
Operating Costing

Specific order Costing

Job Costing
Batch Costing
Contract Costing

Job Costing
costs are collected and accumulated
according to jobs, contracts, products or
work
.
order orders
of customers
& Not continuous
no uniformity in the flow of production
Costs are collected and accumulated after the completion
separate work in progress maintained
identifying profitable and
X entity
more labour intensive
Each job is treated as a separate
unprofitable jobs.
X With increase in clerical work,
Provides information for
there are chances for
preparation of estimates
committing more errors and
facilitates effective cost
mistakes.
control
X It does not provide for the
It helps management to fix
control of cost
selling price
X difficult to make cost
Spoilage and defective works
comparison
can be easily identified
cost-plus formula of pricing
budgetary control of

Specific order Costing

Job Costing
Batch Costing
Contract Costing

Batch
a lot of similar units which
comprise the batch may be
Costing
used as a cost unit for ascertainment of a cost.

Separate cost sheet is maintained for each batch by assigning a

batch number.
Cost per unit of product is determined by dividing the total cost of
a batch by the number of units of that batch.
Batch costing is used in drug industries, readymade garments,
T.V. sets, Radio's and Electronic
Components Manufacture.
EBQ -Determination of economic batch lot is the important work in batch
costing. The two types of costs involved in batch costing are (1) Set up cost
and (2) Carrying cost.
-Economic Batch Quantity will balance these two opposing costs.
Economic Batch Quantity (EBQ) =
D = Annual Production or Demand in Units
S = Setup Cost per batch
C = Annual Holding or Carrying Cost per unit

Specific order Costing

Job Costing
Batch Costing
Contract Costing

Contract Costing
Terminal costing which undertakes definite contract for
long period

Each contract = separate unit of cost

Separate ledger A/C
> 1 year

X No adv due to
No risk of loss
Normally labor & expenses
are direct
favourable
mkt
Protects
from risk of
Calculation of profit of incomplete
contract
X
Suffer
own
efficiency
fluctuations
X Not much scope for cost
Simplifies the work
reduction
Helps in audit
X Price cannot be known
Ensure fair price
till completion

Specific order Costing

Job Costing
Batch Costing
Contract Costing

Job
Costing

Batch Costing

Job or order
Each job is separate
Overheads are determined
Cost at completion

Contract
Costing

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