Costing has been defined by the Institute of Cost and Works Accountants, England as: "The technique and process of ascertaining costs". Whereas, Wheldon
has defined the costing as: "Costing is the classifying, recording and appropriate allocation of expenditure for the determination of the costs of products
or services; and for presentation of suitably arranged data for the purposes of control, and guidance of management".
It is the determination of an actual cost of an article, after adding different expenses incurred in various departments.
It may also be defined as the system, which systematically records all the expenditure to determine the cost of manufactured products.
It differs from the estimating that costing is a determination of cost after knowing the expenditure incurred in various departments on the product, while
estimating is the pre-determination of cost based on the assumptions and previous experiences.
Aims of costing
The important aims and object s of costing are:
1. To determine the cost of each article.
2. To determine the cost incurred during each operation, to keep control over workers wages.
3. To provide information to ascertain the selling price of the product.
4. To supply information for detection of wastages.
5. It helps in reducing the total cost of manufacture.
6. It suggests changes in design, when the cost is higher.
7. To help in formulating the policies for charging the prices of the products.
8. To provide information for economic consideration for purchasing new machines.
9. To help the management in decision making.
10. To facilitate preparation of estimate for submitting in tenders or quotations.
11. To compare the actual cost with the estimated cost of the component.
Also See: Classification of Costing
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