Know The Variations Of Process Costing That Are Employed In The Business Process

Know The Variations Of Process Costing That Are Employed In The Business Process

Process costing is a technique employed by most of the business companies involved in trading of assets and other manufacturing goods. The review on BTC profit explains that this process of costing is commonly exploited for the extended or long-term process. There are many variants within the process costing system and includes

  • Operation Costing. This is applicable to the continuous production process which undergoes several procedures before the final product is prepared. There are chances that each individual manufacturing unit produces waste. And so, the overall cost unit is calculated by accumulating the costs from the single units. Industries like the shoe manufacturing, boxes or toys production usually employ this method of costing.
  • The Single output type of Costing. Here also, the cost of a continuous production nature items are estimated but there would be only a single last product or there are different manufactured grades of the same item. Usually, the heavy industries like the mining companies, quarries, and steel manufacturing units use this method of cost analysis.
  • Another type of costing is used by those companies which are involved in rendering services. Example of this includes the transportation sectors, electrical maintenance, and division units. In case of the transportation facility, the cost is evaluated on an individual passenger as a Kilogram kilometer.

The Requirements of a Good Costing System

Great costing criteria must be dependent on factors like

  • It should be able to definitely fit with the general working principles of the business organization. Further, no such adjustment should be facilitated in the industry to promote the costing system. In addition, simple changes are acceptable that could bring up a strong and effective costing system based on the company production and wastage.
  • For recognizing the apt cost control technique, all the technical aspect of the company from different views should be considered. This may include the nature and source of the operation, the output and efficiency and so on.
  • The dimension and design of the organization along with its working strategies should be clearly explained for bringing out the best possible operating costing scheme that very well suits the need of the company.
  • Moreover, it is also vital to inform in advance the way adopted for buying, storing and delivering or distributing the output materials. This also includes the method utilized for dispensing the receipt and invoice system too.
  • Every money involved activities like the wage payment and workforce controlling notion should be thoroughly specified for bringing the effectual costing process.