World Business View

In any company, it is essential to maintain a balanced budget. To do so, managers must know the enterprise’s finances well, as well as define strategies so that their incomes cover the needs of the business. It is no wonder that many use costing methods for this purpose. In general, costing methods are tools used to identify expenses that involve the business’ processes, such as manufacturing and sales. Because there are different types, it is very important that the company assess their key characteristics and see which one fits best in its environment. Before we begin, we need to define what variable and fixed cost is. Variable costs are those that change according to the volume of production, while fixed costs are those that remain stable regardless of what the company produces. That said, let’s learn about the methods. Keep reading! PROCESS AND JOB-ORDER COSTING.   There are two conventional costing approaches used in manufacturing. The first, and more common, ...

An amount that has to be paid or given up in order to get something. In business, cost is usually a monetary valuation of effort, material, resources, time and utilities consumed,  risks incurred, and opportunity forgone in production and delivery of a good or service. All expenses are costs, but not all costs (such as those incurred in acquisition of an income-generating asset) are expenses. Types of Costs (Cost Classifications): Costs can be classified into different categories for different purposes. Costs may be categorized according to their: management function, ease of traceability, timing of charge against revenue, behavior in accordance with activity, and relevance to decision making. According to Management Function: 1. Manufacturing costs  - incurred in the factory to convert raw materials into finished goods. It includes cost of raw materials used (direct materials), direct labor, and factory overhead. 2. Nonmanufacturing costs ...