Unit and output account statement cost

The most widely used system of determining the pro- duction cost of a commodity is known as unit costing or and services are found out in this system. This system isnoutput costing. The total cost and the per unit cost of goods generally used in those manufacturing houses or firms where:
1.There is continuity in the production process.
2.The quantity produced is very large.
3.The units of the goods produced are homogenous
(similar in shape, size, term etc.).
Meaning of Units
Under the system of unit costing, the unit cost of
production of various goods is determined. These goods can be of different types, resulting in their firms also being different. In some of the main firms of industries, according to their nature of production, the associated or related cost units are as stated below:
Name of Industry
1. Textile Mill
2. Paper Industries
3. Collieries
4. Brick making
5. Steel Plant
6.Oil Mill
7.Sugar Mill
8. Transport Company
9. Cement Industries
10. Water Supply
Unit
Per Tonne
Per 1000 Bricks
Per M Bricks
Per Tonne
Per Barrel of Oil
Per Quintal of Sugar
Per Passenger kmien
Per Tonne km
follows-
Per Tonne
Per 1000 Gallons
Objectives of Unit Costing System
The main objectives of unit costing system are as
(1) To find out total cost- To find out the total cost of production of an industry in a fixed period of time.
(2) To find out the per unit cost- To find out the per unit cost of production in a specific industry in a fixed period of time.
(3) Detailed presentation- To present the per unit
cost and total costs under various heads, such as-factory costs, office cost, production cost in a detailed manner.
(4) Comparative study- To make a comparative study of the production costs of a specific industry during various periods and thereby takes decisions.
(5) To find out the proportion or percentage- To find out the proportion or percentage of every element of cost in relation to total cost.
(6) To determine tender price- To estimate the future price on the basic of production costs incurred in the past and then add a fixed amount of profit to it so as to determine estimated price or tender price of a particular commodity.
Elements of Costs
To find out cost in the unit cost system, the following expenditures are included in total cost:
(1) Material- The material that is used in production is either bought from the market or is issued from the store. The amount of material used for production and the price of the material used is obtained from the Material Abstract. Material generally is of two types- direct and indirect. Direct material is included in prime costs while indirect material is included in factory cost.
(2) Labour-Labour is an important factor of production. Labour which is used in the factory for the use of material is known as direct labour and this is included in prime cost. The labour used, other than direct labour, is known as indirect labour and this is included in factory cost.
(3) Direct Expenses- The other expenses, besides
the expenses incurred on material and labour, which are directly related to production, are known as direct expenses. and are included in prime cost.
(4) Indirect Expenses- The indirect expenses can be known through the cost details and cost statements given for a particular period of time, in the financial accounts. There are some expenses, the payment for which has to be made
but the amount is not known, such expenses are estimated and divided properly amongst the various other expenses on the basis of previous experience. Factory overhead costs, office expenses, selling and distribution expenses are included in indirect expenses.