Techniques of Costing - apk upload

Techniques of Costing

(1)Standard costing- In this technique, the vari-
ous expenditures and costs of producing a commodity are estimated under general working conditions and on the basis of this various standards are fixed. In this technique the standards are first set and then are they compared with the actual costs. The difference between the standard cost and the actual cost is known as the variance. The variances are analysed and the causes are found out so that the expenditures and costs can be checked or controlled.

(2)Marginal costing- The increase in total cost
by increasing one more unit of the factor of production isnknown as the marginal cost. In this, the expenses are divided into mainly into two parts. Firstly fixed expenses which do notnchange but remain the same with an increase or decrease in the quantum of production; secondly variable expensesnwhich change proportionately with a change in the quantumnof production. Marginal costing takes into account only the variable expenses to find out marginal cost of production. Marginal costing is a technique to ascertain the effect of thenchange in volume of output or change in the type of output on profit and on costs.

(3)Direct costing- This technique is, “The prac-
tice of charging all direct costs to operations, processes or products, leaving all the indirect costs to be written off against profits in the period which they arise”. This technique is similar to marginal costing, except that some fixed costs could be considered to be direct costs in some appropriate circumstances. Here the direct costs are the variable costs.

(4) Absorption costing- In this technique, no dif-
ferentiation is made between fixed and variable costs while determining costs. In this, both the fixed and variable costs are charged in the same manner.

(5)Uniform costing- When several firms and in-
dustries or similar undertakings adopt a common approach to problems related to costing then the technique is known as uniform costing. The firm that adopt this technique can benefit from the experiences of one another. They adopt the same method of costing and the same set of books in order to make comparison of performances of one with the other. Under uniform costing, an effort is made to establish uniformity in cost calculation.

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