Characteristics of an ideal costing system

 Suitabality
 Simplicity
 Flexibility
 Economical
 Comparibility
 Minimum clerical work
 Minimum changes to existing setup]
 Adequate wage procedure
 Efficient system of material control
 Reconciliation of cost and financial accounts
 Duties and responsibilities of cost accountant

Installation if a costing system

 The existing organization should be disturbed as little as possible
 There should be a gradual and smooth installation
 The over elaboration of records should be avoided

Steps for installation

 Objective to be achieved through the costing system
 Studying the existing organization
 Deciding the structure of cost accounts
 Determining the cost rates
 Introducing the system
 Organizing the cost office
 Relationship of cost offices to other departments

Practical difficulties

 Lack of support
 Resistance from existing staff
 Non cooperation at other levels of organization
 Shortage of train staff
 Heavy operation cost

Cost unit
 It is a device for the purpose of breaking up or separating cost into smaller subdivisions attributable to products and services it is a
unit of product service or time in relation to which cost maybe ascertained ex--- tons in case of coal, meters in case of textile
etc.
 Cost units are the units of physical measurement, number weight area volume etc.

Methods of costing
 Job costing
 Contract costing
 Batch costing
 Process costing
 One operation costing
 Service or operating costing
 Farm costing
 Multiple costing

Overheads can also be classified as indirect material indirect labour and indirect expenses
Indirect materials---such materials refer to those materials which do not normally form a part of the finished product exmaples on indirect
materials are stores consumed for repair and maintainace work small tools for general use lubricating oil etc
Indirect labour--- the wages that labor which cannot be allocated but which can be apportioned is known as indirect labour. wages paid
to labor which is employed constitute labor cost example material handling, departmental coolies etc
Indirect expenses---- such expenses which cannot be allocated but can be apportioned to or absorbed by cost centers
As rent municipal tax lighting and heating telephone expenses etc

Expenses excluded form cost

Items of expense relating to capital loses capital assets payments by way of distributing profits should not form a part of the cost in
matters of pure finance should not be a part of the cost

Cost sheet or statement of cost

Cost sheet is a statement designed to show the output of a particular acconting period along with breakup of costs. The data incorporated
in cost sheet is collected from various statements of accounts which have been written in cost accounts either day to day or regular
records

Specimen of cost sheet

 Direct material
 Direct labour
 Direct expenses
 Factory overheads work or manufacturing overhead
 Admin overheads