What Is Unit Of Measurement Or Output Costing? Unmarried Unit Of Measurement Or Output Costing Accounting & Pregnant Of Unit Of Measurement Or Output Costing

What is Unit or output costing? Single Unit or Output costing accounting & Meaning of unit of measurement or output costing?

Unit or output costing

Introduction

The method which is used to ascertain the cost of a production or services is called costing. The methods to live on used for the ascertainment of cost differ from manufacture to industry. The unit of measurement of output costing is suitable for the industry, where goods are manufactured inwards units together with are identical inwards nature. As

its yell implies, unit of measurement or output costing is a method of costing nether which cost of a unmarried product, which is produced, past times a continuous manufacturing process, is ascertained or determined. It also determines the amount of each chemical element constituting such cost.

Meaning of unit of measurement or output costing

Unit or output costing is a method of costing, which is applied inwards those undertakings where units of output are identical together with the cost units are physical together with natural. It is ideally used inwards those concerns, which create exclusively i production or 2 or to a greater extent than grades of i production inwards large scale continuously. This method is, therefore, most ordinarily used inwards instance of industries similar mines, queries, collieries, breweries, brick-kilns, cement works, proper mills, saccharide milks, textile industry, electrical appliances etc.

The basic concept of this method of costing is to ascertain the cost per unit of measurement of output. The cost per unit of measurement is ascertained past times dividing the full cost incurred on the production of a production past times the release of unit of measurement of that product. In other words, nether this method, full cost is determined past times adding all kinds of incurred costs kickoff the full production units to decide cost per unit. This solid soil concept of this method tin live on expressed every bit follows:

Cost per unit of measurement or unit of measurement cost = full cost of production/ full quantity or release of units produced

This costing method is also knows every bit unmarried costing since the procedure of production includes exclusively i phase or a unmarried operation. Under this method, mostly a arguing called cost canvass is prepared to decide cost per unit of measurement or full cost.

Importance of unit of measurement or output costing

Unit or output costing helps both inwards ascertainment together with command of cost. It determines cost per unit of measurement of the products on the solid soil of which the selling toll of products tin live on fixed. Thus, a unit of measurement or output costing has the next importance:

1. Ascertainment of cost: it helps inwards ascertainment of full together with cost together with cost per unit of measurement at dissimilar stages of production.

2. Controlling costs: it helps inwards controlling together with reducing costs since fourth dimension to fourth dimension costs are compared from previous menses together with leakages together with wastage are checked.

3. Fixation of selling price: it provides information nigh the cost of a task or production together with on the solid soil of such information appropriate selling toll of the production tin live on fixed.

4. Submitting tenders: it also helps the line organisation inwards ascertaining the tender toll past times providing information nigh estimated cost on the solid soil of component subdivision data.

5. Formulating production policy: it acts every bit a guide to the manufacturer together with helps him inwards formulation a profitable production policy.

Limitations of unit of measurement or output costing

Unit or output costing is really much of import method for ascertaining the full cost together with cost per unit, but it is non gratis from for certain limitations. These are every bit under:

1. Limitations of historical cost: unit of measurement or output costing, beingness basically of historical nature, suffers from all the defects of historical costing.

2. Useful exclusively for homogeneous products: this costing method tin live on used exclusively for homogeneous products together with non for heterogeneous products.

3. Not sufficient for cost control: this costing scheme merely determines full cost together with per unit of measurement cost of the products which is past times itself non sufficient for cost control.

4. Arithmetical accuracy cannot live on checked: nether this system, mostly a arguing is prepared which does non from a component subdivision of the double entry system. Therefore, arithmetical accuracy cannot live on checked nether this system

Methods of unit of measurement or output costing 

Unit or output costing is used to decide the cost per unit of measurement of production inwards a specific menses of time. For this, the next methods are used:

• Cost sheet

• Manufacturing account

Cost sheet

Cost canvass is "a document which provides for the assembly of the estimated detailed cost inwards abide by of a cost pump puddle a cost unit". It is a period's document of cost designed to

exhibit the full cost together with the unit of measurement cost of products inwards an analytically together with detailed form. In other words, a cost canvass acquaint cost information inwards such a mode that it tin present cost of full production, quantity of production together with  per unit of measurement cost of production.

Cost canvass is an operating statement. It analyses together with classifies the expenses on dissimilar items for a exceptional menses inwards a tabular form. It may live on prepared weekly, monthly, quantity, one-half yearly or yearly at whatever convenient interval of time. Similarly, it may live on prepared on the solid soil of actual or estimated cost depending on the locomote to live on achieved. It is online memorandum statement, non an account. It does non shape a component subdivision of the double entry system.

Purposes of cost sheet

Influenza A virus subtype H5N1 properly prepared arguing of cost serves the next purposes: 

a. It helps inwards fixing selling pries to a greater extent than accurately.

b. It helps comparisons of costing of similar jobs or betwixt costs of similar periods.

c. It gives information for compilation of estimates. Quotations or tenders.

d. It provides useful information to draw wastage, loses together with inefficiencies together with those comport on economics.

e. If acts every bit a guide to the produced together with assist him inwards formulation a definitive production policy.

Element of cost sheet

Accounting to natural characteristics, cost tin live on classified into iii grouping (a) materials cost (b) labor costs together with (c) expenses. They are knows every bit elements of cost. There are iii elements may live on farther sub-dividend every bit shown below:

Lets us explained each elements of cost inwards details:

1. Direct material: straight materials are those materials, which tin live on identified amongst together with allocated to cost unit of measurement covertly. They larn component subdivision of the production. For example, woods cost is straight textile for whatever furniture's.

2. Indirect material: textile used inwards the manufacture of a task a production which cannot live on readily identified with, it volition live on indirect materials. For example, cost of nails, glue, smooth etc. for whatever furniture.

3. Direct labor: straight labor is the reward which tin live on conveniently identified amongst together with allocated to cost units. These incorporate wage paid to workers who are engaged to producing a production inwards a manufacturing concern. As, inwards printing press, reward paid ton composites.

4. Indirect labor: indirect labor is the reward which cannot live on conveniently amongst or allocated to cost units. It implies that the fourth dimension paid for was non used for a particulars cost unit of measurement but for piece of work inwards full general as, reward paid to storekeeper inwards a printing press.

5. Direct expenses: straight expenses consist of whatever expenditure (other than straight textile together with straight labor) which tin live on identified amongst together with allocated to cost units. These are called every bit chargeable expenses. Example of straight are:

a. Fees paid to architects of building.

b. Hire of equipment for a particulars.

c. Cost of special layout, blueprint or drawing

d. Royalty paid to mine

e. Experiment piece of work cost.

6. Indirect expenses: indirect expenses are expenses which cannot live on conveniently allocated to cost units. As for example, (i) rent, rates, insurance of manufactory premises (ii) depreciation together with repairs of machine (iii) welfare together with medical expenses.

Actually, indirect expenses divided nether iii grouping (I) manufactory overhead (ii)office together with administrative overhead (III) selling together with distribution overhead.

Component of cost sheet

Cost canvass is a periods arguing prepared inwards a columnar from to know the full cost together with per unit of measurement cost of production. It is a arguing of cost which indulges the full on the solid soil of the next cost components.

Prime cost

The aggregate of all straight costs, which alter inwards straight proportion to alter inwards output, is called prime number cost. It is the full of straight materials cost, straight labor cost together with straight ex

penses. The locomote of determining prime number cost is to know the portion of the straight cost inwards the full cost of production. It is also known every bit basic cost, kickoff cost or apartment cost, it is computed every bit below:

Factory or plant cost or manufacturing cost

Factory or piece of work cost is the full of prime number cost together with manufactory or piece of work overhead, which include indirect materials, cost indirect cost, indirect cost together with indirect expenses  of factory. In other words, when all manufactory or production or manufacturing expenses are added to prime number cost so the full is called manufactory or piece of work cost. It is also known every bit full manufacturing cost.

Cost of production

If component subdivision together with administrative overhead are added to manufactory cost, so cost of production tin live on obtained. In other words, cost of production is the full of manufactory cost together with component subdivision together with administrative overhead.

Office together with administrative overhead includes those expenses, which are concerned amongst the administration of office, administrative, finance together with other arrangement.

Cost of sales or full cost

If selling together with distribution overhead are added to cost of production, it is called cost of sales or full cost. In other words, the full of cost of production together with selling together with distribution overhead inwards knows every bit cost of sales or full cost.

Total cost or cost of sales = cost of production + selling together with distribution overheads

Selling together with distribution overhead includes those expenses, which are used inwards selling or distributing to the customer. Generally, these overhead include the next expenses.

Determination of turn a profit or loss

After determining the amount of full cost or cost of sales, the amount of turn a profit is added to decide the amount of sales or selling price, generally, the amount of turn a profit is calculated on the solid soil of given percent every bit under:

(I) When sales is given:

Net profit= sales –total cost

Treatment of stock inwards cost sheet

Generally the next iii types of stocks are observed which should live on adjusted inwards dissimilar components of cost –sheet:

• Opening together with closing stocks of raw materials

• Opening together with closing stocks of work-in-progress

• Opening together with closing stock of finished goods.

Stock of raw materials

Opening together with closing stocks of raw materials are adjustment to ascertain the "cost of materials consumed" which is considered every bit straight materials cost, a component subdivision of prime number cost.

In a cost sheet, opening stock of row materials is shows first. Thereafter, buy of materials, wagon inward, input of import duty etc are added to it closing stock of raw materials is deducted in that place from for halt upshot "cost of materials consumed".

Stock of work-in-progress (w-i-p)

Work-in-progress agency partly finished goods. These are goods which are non nonetheless completed but inwards the procedure of manufacturing. Such goods comport a proportionate component subdivision of manufactory overheads every bit good prime number cost, therefore, opening together with closing stocks of such goods i.e. piece of work inwards progress are adjustment land calculating manufactory cost inwards a cost sheet.

Stock of finished goods

After ascertaining manufactory cost, component subdivision together with administrative overhead are added to it together with cost of production is determined. Thereafter, opening stock of finished goods is added to it together with closing stock of finished goods is deducted goods is deducted in that place from to larn "cost of goods sold".

If opening together with closing stocks stocks of finished goods are given inwards units, th

ese units should live on valued on the solid soil of cost per unit of measurement (i.e. cost of production per unit).

Here, 

Cost per unit of measurement = cost of production/units produced

Similarly, if production units transcend sales units, the dissimilar volition live on units of closing stock of finished goods, which volition live on valued on the solid soil of cost per unit of measurement together with volition live on deducted from cost of production.

Treatment of sale of scrap, wastage or defective work

In manufacturing process, about units or for certain proportion of production is obtained every bit wastage, fighting or defective work. If whatever amount is received from the sales of such wastage or scrap, so if should live on deducted either from full manufactory overhead or from grocers manufactory cost.

Tender or quotation sheet

Influenza A virus subtype H5N1 manufacturing concern is oft requirement to make tenders or quotations for render of goods manufactured past times it. Again sometimes, it needed to brand together with gauge of the toll of the production to programme the production wisely. The toll at which a manufacturing concern agrees to render its goods is knows every bit tender or quotation price. Similarly, an estimation of the toll of the production inwards advance is knows every bit  price estimation.

Influenza A virus subtype H5N1 tender or quotation is a formal written to render goods or services or to make a task for an agreed toll i.e. tender or quotation price.

Preparation of tender sheet

Tender or quotation toll is estimated toll for futurity period. For decision of tender or quotation toll mostly the next based are used:

One the solid soil of percentages of overheads

When separate materials together with labor costs, other overheads are given together with information for units are non given. Then tender or quotation toll is determined on the solid soil of percentages of overheads'. In this situation, the next formulae are used to decide the percentages of overheads:

On the solid soil of output units

When units or quantity of production for previous menses together with units  or quantity for tender or quotation are given but non the separate materials together with labor costs  for tender or quotation, so tender or quotation toll is determined on the solid soil of per unit of measurement cost. In this situation, the next steps are used:

(i) The menses cost-sheet is prepared past times taking past times previous menses information together with past times determining cost per unit of measurement of dissimilar components of costs.

(ii) Then after, an estimated cost canvass (i.e. arguing of tender or quotation) is prepared past times multiplying tender or quotation units past times cost per unit of measurement of each components of past times cost-sheet.

On the solid soil of special instruction

If specific instructions are given regarding materials, labor together with dissimilar overhead for tender or quotation, so such education should live on followed according to determined tender or quotation price.
Manufacturing Account
When the information related amongst the cost of goods manufactured of a commodity are presented is a conventional shape of line organisation human relationship i.e. inwards T shape from, together with so it is known every bit manufacturing account. Generally, a manufacturing concern prepares this line organisation human relationship to exhibit cost of production or cost

of goods manufactured.
Preparation of manufacturing account
Influenza A virus subtype H5N1 manufacturing line organisation human relationship is based on the regulation of national account. Therefore, it shows opening stock of work-in-progress together with other straight together with indirect costs of goods manufactured ( i.e. manufactory costs) on  its debit side together with closing side together with closing stock of work-in-progress together with sale of fighting or wastage on its credit side. Generally, the balancing figure takes palace inwards credit side which is called "cost of goods manufactured or cost of production C/D".  This line organisation human relationship present the cost production which is transferred to the trading account.
Manufacturing line organisation human relationship for manufacturing turn a profit together with loss
When a manufacturing line organisation human relationship is prepared to ascertain manufacturing turn a profit together with loss, so trading value of manufacturing cost is kept inwards credit side inserted of cost of production. In other words, all items on debit together with credit side volition live on the same every bit mentioned above. But, trading toll or trading value of cost of production volition live on shown on the credit side together with balancing figure or trading value of cost of production volition live on shown on the credit side together with balancing figure volition live on position on debit side of this line organisation human relationship every bit "manufacturing profit" or "manufacturing loss".

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