“Cost may be classified according to their nature and characteristics”. Elaborate on this
statement and explain the different methods of costing
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Cost classification based on the nature and characteristics is very important as it helps to evaluation the work that is in progress. Here, classification is done on the basis of materials and labor that are used and expenses that are incurred. Comprehensive classification of each category is done the, such as materials are classified into packaging materials, tools, etc.
The methods of costing include:
1) Job costing
Here, costs are associated with each job.
2) Contact costing
This is done in companies where contracts are allotted.
3) Batch costing
This is done in companies where orders are manged in batches.
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