Historical Costing. Costs are ascertained
Since the price has to exceed the cost of
after they have been incurred. The main
production, effective costing enables appro-
goal is to determine costs on work actually
priate pricing, which should reflect what
done in the past. It has limited use, though
the market can stand.
periodical comparisons may bear good results.
From this, it is evident that to reach target
Direct Costing. All direct costs, variable
profit margins, it is important to en-
and some fixed costs related to processes,
sure that efficient costing controls are in
operations or products are charged, leaving
place.
the rest of the costs to be deducted from
profits in which they arise.
Absorption costing. All costs, both variable
METHODS OF COSTING
1.
and fixed, are charged to operations, processes or products. This is different from
2.
marginal costing where fixed costs are not
included.
3.
Cost is also closely knitted to price and value. Price is the amount of money paid for a
4.
product or service while value is defined
from the customer’s perception and represents their appraisal of the worth of the
product of service offered.
5.
Uniform Costing
Best applied by unit
members of business
Standard Costing
Best applied for
investigations of
discrepancies
Historical Costing
Best for periodic
comparisons
Direct Costing
Applied to those processes
that are attributable on a
marginal basis
Absorption Costing
For all costs-operational,
procedural and
production.