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Introduction to Unit and Output Costing: A Comprehensive Overview

Unit costing is a method for calculating production costs, particularly suited for continuous production, where output units are homogeneous. This approach utilizes cost sheets to detail total and per-unit costs, adaptable for various reporting periods. Key objectives include determining total costs and analyzing cost components, allowing for better pricing strategies and cost control. Industries such as coal, textiles, brick-making, and cement often use unit costing to enhance financial transparency and decision-making for future projects.

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Introduction to Unit and Output Costing: A Comprehensive Overview

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  1. Unit & Output Costing SEMESTER--1

  2. INTRODUCTION • This is a method of calculating cost of production. Generally this method is used in such industries where : • The production is continuous, • The units of output are homogenous, • The cost units are physical and natural to the product, and • The cost per unit is to be known.

  3. Cost sheet • The cost sheet is a document of cost designed to show the total cost and per unit cost of the product in a detailed form.It can be prepared weekly, monthly, quarterly etc. as per the requirement. • Examples of industries where this method is used; • Coal industry, Textile industry, Brick-making industry, Cement industry etc.

  4. OBJECTIVES OF UNIT COSTING • To ascertain the total cost and per unit cost of products after a definite period. • To know the proportion of each component in total cost such as prime cost, works cost, cost of production. • To make comparative study of costs of any two periods of a product in order to control the cost. • To estimate the selling price of the product in order to acquire a desired level of profit. • To ascertain the tender price of a work to be done.

  5. Advantages of cost sheet • We can have knowledge of the total cost and per unit cost of units produced . • It helps in determining selling price of the production. • It helps to keep control over cost of production through a comparative study of the cost of any two periods. • It helps to ascertain the tender price of a work which is to be done in future.

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