Ppt of costing

Methods and Techniques of Costing Article shared by: Methods to be used for the ascertainment of cost of production differ from industry to industry. It primarily depends on the manufacturing process and also on the methods of measuring the departmental output and finished products.

Companies move to Activity-based costing to better understand the real costs of goods and services. The activities that go into them Resources consumed by these activities ABC contrasts with traditional costing cost accountingwhich sometimes assigns costs using somewhat arbitrary allocation percentages for overhead or the so-called indirect costs.

Basics of Standard Costing – Understanding the Cost Component Structure-Part 3

As a result, ABC and traditional cost accounting can estimate the cost of goods sold and gross margin very differently for individual products. Contradictory and uncertain cost estimates can be a problem when management needs to know exactly which products are profitable and which are selling at a loss.

Cost accountants know that traditional cost accounting can hide or distort information on the costs of individual products and services—especially where local cost allocation rules misrepresent actual resource usage.

As a result, the move to ABC usually motivated by a desire to understand the "true costs" of individual products and services more accurately.

Companies implement activity-based costing to: Identify specific products that are unprofitable. Improve production process efficiency. Price products appropriately, with the help of accurate product cost information. Reveal unnecessary costs that become targets for elimination.

This impact is minimal because both ABC and traditional costing ultimately assign costs to the same existing accounts. The two approaches merely use different mathematics to do so. Note especially, however, that ABC sometimes brings improvements in reported margins and profitability.

Costing - Methods And Techniques |authorSTREAM

These outcomes follow when ABC reveals unnecessary or inflated costs, or when ABC shows where to adjust pricing models, workflow process, or the product mix. Explaining Activity-Based Costing in Context This article further defines, describes, and illustrates activity-based costing using example calculations to contrast ABC with traditional cost accounting.

Examples appear in context with related terms from the fields of budgeting, cost accounting, and financial accounting.Activity Based Costing Costing vs Traditional Costing. In the field of accounting, activity-based costing and traditional costing are two different methods for allocating indirect costs to products..

Both methods estimate overhead costs related to production and then assign these costs to products based on a cost-driver rate. The differences are in the accuracy and complexity of the two methods. Operation Costing is the category of basic costing methods applicable where standardized goods or services result from a sequence of repetitive and more or less continuous operations or process to which costs are charged before being averaged over units produced during the period.

•Product Costing is the tool used in SAP for planning costs and establishing material prices.

BREAKING DOWN 'Cost Accounting'

It helps in estimating the Cost of goods sold manufactured and COGS of each for each product unit. Material Management (MM) module for material master record / purchase info record.

Production Planning. Costing PowerPoint Presentations - PPT View powerPoint Presentations (PPT) about 'Costing'. © Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed.

2-* Two costing systems are commonly used in manufacturing and many service companies – process costing and job-order costing. A process cost system is best used by companies that produce many units of a single product and when one unit of output is indistinguishable from any other unit of output. Because the units of output are identical.