Question

Explain in detail the effect to the organization of changing the costing method.

Answer 1

Answer:

Cost can be just defined as cash or resource related with acquisition of an item or administration. Numerous associations utilizes various kinds of costing techniques to find out the expense of their items relying on the nature of the item or product.

Techniques for costing are :-

Unit costing :  The item or product that are communicated in indistinguishable unit and manufactured by continous action utilize this unit costing strategy.For exampple :  mining , dairy products and so on.

Job costing : For each work order cost will be cost are discovered independently as every ha its own detail and extension. For example: tailor items, repairing work and so forth.

Batch costing: As the name propose, under it, costing is accomplished for the units that are created in group or batch.Example: Pharmaceuticals and so on.

Contract costing : It is accomplished for that occupations or jobs which include substantial expenditures and stretches over significant stretch and across various sites. Examples : Buildings, roads and so on.

Process costing: The item which experiences different process during produtcion, at that point costing is done at each phase of production.Example: Making a clothe includes spinning , weaving and so on.

Service costing: It is utilized to determine the expense of a specific service. Example: Hospital administration, railways and transport administration.

Product costing :This technique is utilized to allocate cost to a manufactured item. Example: like Job costing.

Stock costing: It incorporates FIFO (First In First Out) and LIFO (Last In First Out).

Effect to the organization of changing the costing method.

• It influence the selling price of the item since selling price incorporates cost in addition to profit.
• Choosing the suitable costing technique is neccessary in light of the fact that it will influence the financial position of the association.
• Changing the costing technique additionally impact the comparison of the business information with earlier years and with comparative firms.
• Nature of the item and sort of the item legitimately influence the costing technique for an association.