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In: Accounting

which costing methods are used by manufacturing conpanies? explain

which costing methods are used by manufacturing conpanies? explain

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Expert Solution

Following costing methods used by manufacturing companies-

Process costing- it is method of a costing which is used in those industIndu where the production is in continupus profess. i.e. output of one process become input for subsequent process and so on. Example- Chemical plants, food manufacturing, texilte mills etc.

Job costing- This metnod use in job order industries where production as per requirement of customer. In job prdor industries, the production is not on continuous basis, rather it is only when where order from customers is received and too as per specification of customers. Consequently, each job is different from other one. Example - such as in building pianos, ships, or airplanes.

Target costing- is not just a method of costing, but rather a management technique wherein prices are determined by market conditions, taking into account several factors, such as homogeneous products, level of competition, no/low switching costs for the end customer, etc.

The key objective of target costing is to enable management to use proactive cost planning, cost management, and cost reduction practices. Example - FMCG, construction, healthcare, and energy


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