1 organization of the factory 2 conditions of

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1. Organization of the factory 2. Conditions of incidence of cost 3. Requirements of the costing system i.e. Suitability of the units or centres for cost purposes. 4. Availability of information 5. Management policy regarding making a particular choice from several alternatives 22.3.6 PROFIT CENTRE A profit centre is that segment of activity of a business which is responsible for both revenue and expenses and discloses the profit of a particular segment of activity. Profit centres are created to delegate responsibility to individuals and measure their performance. 22.3.7 METHODS OF COSTING: Depending upon the nature of the business and the types of its products, numbers of methods of cost ascertainment are used in practice. The methods of costing are as follows: a) Job Costing: In this system the cost of each job is ascertained separately which is suitable in all cases where work is undertaken on receiving a customer’s order. Like a printing press, motor work shop etc. b) Batch Costing: It is considered as the extension of job costing. It represents a number of small orders passed through the factory in batch. Each batch here is treated as a separate unit of cost. c) Contract Costing: It is suitable for the firms which are engaged in the work of construction of bridges, roads, buildings etc. d) Single or Output Costing: It is used in the business where a standard production is turned out and it is desired to find the cost of a basic unit of production. e) Process Costing: It is a method of costing used to ascertain the cost of a product which may passes through various processes before completion.
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300 f) Operating Costing: The cost of providing a service is known as operating cost and the methods to ascertain the cost of such services is known as operating costing. g) Multiple Costing: In multiple costing, a combination of two or more methods of costing is used in conjunction to determine the cost of final product. This method is used by the industries where different components are separately manufactured and subsequently assembled into the finished product. For e.g.: Motor car, Television, Ships etc. 22.3.8 TECHNIQUES OF COSTING For ascertaining cost, following techniques of costing are usually used:- a) Uniform Costing: The practice in which common methods of costing for different undertakings in the same industry are used is known as uniform costing. b) Historical Costing: In this technique, ascertainment of cost is done after they have been incurred but the utility of this technique is limited. c) Direct Costing: The practice of charging all direct costs to operations, processes or products leaving all indirect costs to be written off against profit’s in which they arise are called as direct costing. d) Absorption Costing: In this all costs, both variable and fixed are charged to production, operations or processes.
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