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Budgetary Control and Costing System - Case Study Example

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This paper "Budgetary Control and Costing System" sheds some light on the costing system that refers to the body of principles and rules for ascertaining the cost of a product or service. As a process, it refers to the procedure for ascertaining the cost…
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Budgetary Control and Costing System
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Download file to see previous pages Job costing and Process Costing are the two basic methods of costing. Job costing is suitable to industries, which manufacture or execute the work according to the specifications of the customers. Process costing is suitable to industries where production is continuous and the units produced are identical. All other methods are combinations, extensions or improvements of these basic methods.

1. JOB COSTING: It is also called specific order costing. It is adopted by industries where there is no standard product and each job or work order is different from the others. The job is done strictly according to the specifications given by the customers and usually, the job takes only a short time for completion. The purpose of job costing is to ascertain the cost of each job separately. Job costing is used by printing presses, motor repair shops, automobile garages etc.

2. CONTRACT COSTING: It is also known as terminal costing. This method is similar to job costing. However, it is used where the job is big and spread over a long period. The work is done according to the specifications of the customer. The purpose of contract costing is to ascertain the cost incurred on each contract separately. Hence, a separate account is prepared for each contract. This method is used by firms engaged in shipbuildings, construction of buildings, roads and dams.

3. PROCESS COSTING: It is called continuous costing. In certain industries, the raw material passes through different processes before it takes the shape of a final product. In other words, the finished product of one process becomes the raw material for the subsequent process. Process costing is used in such industries. A separate account is opened for each process to find out the total cost as well as cost per unit at the end of each process. Process costing is applied to continuous process industries such as chemicals, textiles, paper, soap, etc. ...Download file to see next pagesRead More
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