This brief report will cover various definitions of dissimilar types of costing such as Marginal costing and more. It will also aim to provide examples where necessary to explain the definitions more clearly and in detail. As following this introduction, there are a few different types of costing methods well defined and analysed in order to help with decision making. The purpose behind costing is to determine the value inventory as the cost per unit can be used to value stock in the statement of financial position. It could also record the costs associated with the product need to be recorded in the income statement. Costing also assists with pricing products as the organisation will use the cost per unit to assist in pricing the product.…show more content… This method ensures that all sustained costs are recuperated from the selling price of a good price. This method is also known as ‘full absorption costing’. The three steps required to complete a periodic assessment of costs produced to good is to: Assign costs to cost pools. This consists of a standard set of accounts that are always included in the cost pools and they should not be changed. The second step is to calculate the usage and this can be done as there needs to be a checking of the usage of whatever activity measure is used to allot overhead costs such as machine hours or direct labour hours used. The final step would be to assign the costs. In order to do this, first divide the usage measure into the total costs in the cost pools to conclude at the allocation rate per unit of activity, and assign overhead costs to produced goods based on this usage rate.
• Marginal Costing – ‘Marginal costing is the accounting system in which variable costs are charged to cost units and fixed costs of the period are written off in full against the aggregate contribution.’ It is known to for recognising cost behaviour and hence aiding with decision making. The marginal cost is the extra cost which arises as a result of making and retailing one more unit of a product, however it is also the saving in cost of producing and selling one less unit. This is the cost of the next unit or one unit of output or volume. This is known as the