MAPS - Chapter 5 - Methods of Costing Flashcards
What methods of costing are there?
- Unit costing
- Job Costing
- Batch costing
- Service costing
How do you calculate unit cost?
cost of production or output / number of cost units
What are the four unit costs?
- Prime cost
- Marginal cost
- Absorption cost
- Total cost
How do you calculate prime cost?
Direct materials + direct labour + direct expenses
How do you calculate marginal cost?
Prime cost + variable production overheads
How do you calculate absorption cost?
Marginals cost + fixed production overheads
How do you calculate total cost?
Absorption cost + fixed non-production overheads
What is job costing?
Job costing is used where each job can be separately identified from other jobs and costs are charged to the job
What should you do after a job is complete with the job costing?
Compare actual costs to estimated costs to reduce any future variance
What is batch costing?
Batch costing is used where the output consists of a number of identical items which are produced together as a batch
How does batch costing differ to job costing?
In a batch a number of identical units are produced and the costs are collected together
What type of work would job costing be used for?
- Making one racing bike
- Preparing one clients accounts
- Putting a central heating system into one house
What type of work would batch costing be used for?
- Brewing a batch of beer
- Producing a batch of wallpaper
- Baking a batch of loaves
What comes under specific orders?
- Job costing
- Batch costing
What comes under continuous work?
- Service costing
- Unit costing
