ASSIGNMENT

Standard Costing

Is the practice used for various applications by substituting expected cost of the project
in place of the actual cost. Thereafter the variances are substituted to actual realization of
the difference between actual cost and estimated cost

The standard costing of the company cost is normally done in areas where the actual
costing is difficult to realize/obtain.
Advantages of standard costing
In most cases, users are probably not even aware that they are using standard costing,
only that they are using an approximation of actual costs. Here are some potential uses:

 Budgeting
 Overhead application
 Price formulation
 Inventory costing

Problems with Standard Costing

Despite the advantages just noted for some applications of standard costing, there are
substantially more situations where it is not a viable costing system. Here are some
problem areas:

 Cost-plus contracts
 Drives inappropriate activities
 Fast-paced environment
 Unit-level information

Direct Costing

Direct costing is a form of costing that only utilize variable costs of the product to make
decisions. It does not consider fixed costs, which are assumed to be associated with the
time periods in which they were incurred. The direct costing concept is normally used
for short-term decisions of the company.

When to use Direct Costing

Direct costing is of great use as an analysis tool. The following decisions all involve the
use of direct costs as inputs to decision models. They contain no allocations of overhead,
which are not only irrelevant for many short-term decisions, but which can be difficult to
explain to someone not trained in accounting.

 Automation investments
 Cost reporting
 Customer profitability
 Internal inventory reporting
 Profit-volume relationship

Problems with Direct Costing

Direct costing is an analysis tool, but it is only usable for certain types of analysis. In
some situations, it can provide incorrect results. This section describes the key issues
with direct costing that you should be aware of. They are:

 External reporting
 Increasing costs
 Indirect costs
 Relevant range

Direct costing is an excellent analysis tool. It is almost always used to create a model to
answer a question about what actions management should take. It is not a costing
methodology for constructing financial statements – in fact, accounting standards
specifically exclude direct costing from financial statement reporting.
Historical costing
Historical costing is an important element of financial bookkeeping for a company.
Recording purchases at their historical cost allows you to adjust as needed and
differentiate historical cost from other types of costs. In this article, we discuss what
historical cost is, explore other types of costs and provide examples of historical costing
to help you better understand its purpose.
Historical cost is the cost of an asset at the time of purchase. Historical cost is used in
accounting to record an asset's original cost and allow for adjustments based on a change
in value over time. This idea is also called the cost principle, and it is widely recognized
in accounting. It states that all assets, liabilities and expenses should be recorded at their
acquired cost.
Historical costing applies to both fixed assets and liabilities on a balance sheet. Since
fixed assets are purchases that exist for an extended period, they often depreciate or
increase in value, so it is important to record the original cost of each asset in order to
adjust later. Liabilities may also change in value, so it is important to know their original
prices as well

Uniform Costing
The term uniform costing implies the use of several undertakings of the same costing
systems, i.e., the same basic costing methods, principles and techniques.

Like job costing, process costing, and operating costing Uniform Costing is not a method
of costing. It is a system which is agreed to be accepted and followed by enterprises
belonging to the same industry. It is a system according to which the enterprises which
have agreed to follow it decide to use common or uniform principles, methods and
procedures of costing so that their cost records and performances become comparable
with each other.

Comparison of cost data of one enterprise becomes comparable with other member
enterprises when the data is compiled by all member enterprises by following the
common cost principles and the same method of costing and by following the same
procedure of recording of the cost data.