Question

What are the alternative costing methods? Describe the scenario in which each costing method can best be used.

Answer 1

Followings are the alternative costing methods;

1. Job costing

2. Unit costing

3. Contract costing

4. Batch costing

5. Process costing

6. Operating costing

Let’s discuss each method one by one;

1. Job costing;

This method of costing is adopted for unique job or we can say that this method is suitable for products which are unique in nature.

2. Unit costing;

This method of costing is adopted for products that are manufactured by continuous activity.

3. Contract costing;

This method of costing is adopted in case of project that required heavy capital expenditures or required long time period for completion such as road, bridges etc.

4. Batch costing;

This method of costing is adopted in case of products produced in batches or we can say that when we produce some products in a batch then this method is adopted.

5. Process costing;

This method of costing is suitable in case of products that are passed through various process. In other words we can say that when a product is finished with the help of various independent processes then this method is adopted.

6. Operating costing;

This method of costing is suitable in case of various services such as Public Bus, Railways, Nursing etc.