In business, it can refer to a monetary val-
That is one section of the business is subsi-
uation of materials, resources, time and
dizing another part. This is detrimental in
utilities consumed and risks incurred. It is
the long run.
important to note that all expenses are
costs but not all costs (such as those sus-
As an entrepreneur seeking to turn around
tained in the buying of income generating
his/her costing procedures, the following are
assets) are expenses. There are two main
a bullet piece of information that can be used
types of costs; direct costs are those that
to achieve such. They form an indispensable
can be directly tied to production, such as
part of efficient costing techniques.
raw materials. Indirect costs such as overheads cannot be directly tied to any of the
Uniform Costing. Several undertakings use
production processes.
the same costing principles or practices. Different activities in a business should adopt a
One is compelled to have this burning
question; why is efficient costing that
much important in business? For startups, it helps in determining or having a
good estimate the right amount of finance
and how the amount of money needed
from other sources. Also, knowing the cost
common method of costing and apply uniformly the same principles and techniques
for better cost comparison and common good
and helps in mutual cost control and cost
reduction. Hence, it is recommended that a
uniform method of costing should be adopted
by the member units of a business.
of an item or an activity makes it possible
to calculate the profit from it. This
Standard Costing. The actual cost is com-
is crucial. Many businesses are usually not
pared to a prearranged standard cost and
aware that a specific item or activity is
the cost of any deviation (called variances) is
making a loss because some of the costs
analysed by causes. This allows the manage-
that should have been incurred have been
ment to investigate the cause of these dispar-
absorbed elsewhere.
ities and put in place remedial action.