Process Costing.

Q88. Write short notes on process costing.
Ans. Process Costing Method is used where input goes into two or more process or operation to convert into finished goods. Each process or operation is separated from other process or operation. Industries where process costing can be applied have normally one or more of the following features:

  1. Each plant or factory is divided into a number of process.
  2. Manufacturing activity is carried on continuously by means of one or more process run sequentially, selectively or parallel.
  3.  The output of one process take comes the input of another process.
  4. The end product usually is like units not distinguishable from another.

Methods of Costing.

Q10. What are the methods of Costing?
Ans. Methods of Costing are:

  1.  Job Costing: According to this method, costs is collected and accumulated according to jobs or contract. Each job is treated as a separate entity for the purpose of costing. Its purpose is the ascertaining the cost of each job separately. For example: Printing Press.
  2. Batch Costing: It is a form of job costing. In such costing, a lot of similar units which comprises the batch may be used as a cost unit for ascertaining cost. The number is allotted to each such batch.
  3. Contract Costing: It is a form of application of the principles of job costing. In fact bigger job is treated as contract. Contract costing is usually adopted by building contractors.
  4.  Single or Output Costing: Where only one product is produce, until or output costing is applied. In such method, a cost sheet is prepared for such items showing total cost and also cost per unit.
  5. Process Costing: Where goods  pass from one process or operation to another process or operation then separate account is prepared for each such process or operation. Such system of Costing is called process costing. It is used in the industries like steel, soap, chemical etc.
  6.  Operating Costing: Undertakings, which provide service, uses such method of Costing. For example transport, passenger buses etc. In such undertaking, cost unit are expressed in terms of ton per kilometer, passenger per kilometer etc.
  7.  Multiple Costing: When an undertaking use two or more methods at one time than it is using multiple costing. It is used by those undertaking which produce two or more goods.