What is Costing

Calculation is the definition of expenses (in monetary terms) for the production of a group of units (or one unit) of products or for certain types of productions. The counting process allows to form the actual or planned cost of the product. Costing is the basis for estimating the cost price. In some companies, valuation and counting are applied to accounting objects in cash.

In the system of organization of production costs in firms, different types of calculation are used.

In accordance with the compilation time, the calculations can be subsequent and preliminary. The latter include projected, planned, project, normative and estimate calculations. Such calculations are carried out prior to the commencement of the manufacture of goods, the provision of services or the performance of work. The subsequent cost estimate is the actual calculation. It is carried out after the production of the goods (the provision of services or the performance of work).

The project cost estimate is used for the economic justification of the expansion or reconstruction of the operating enterprise, workshops and productions, the release of a new product. Such calculations justify new construction, equipment modernization, rationalization proposals, and the introduction of innovations. The design cost estimate is in accordance with a relatively small amount of data used in calculating the cost of production. In particular, the calculations are based on the release of goods, equipment performance, forecast prices, specific norms for the consumption of material resources. Calculation is based on the estimated number of employees, the estimated value of fixed assets. In accordance with these conditions, the nomenclature of the elements of prime cost is determined, as well as the methods for calculating them.

The planned cost estimate is compiled in accordance with the forecasted, progressive permissible norms and economic quarterly standards for the year. Such calculations represent a specific task for the subdivisions and the enterprise as a whole on the marginal cost of manufacturing the relevant types of goods, services, works.

Estimated costing is a subtype of the planned. Estimates are compiled for work and products produced in a single order. Such a calculation is used in setting prices, making settlements with customers, and also in justifying the costs of manufacturing goods (works, services).

The normative calculations reflect the cost of production in accordance with the current regulations and expenditure norms at the beginning of the month. Unlike the planned, this calculation is an expression of the level of the cost price of the goods at the time of its compilation. Normative calculations use norms and norms on expenditures reflecting the level of technology, technology, organization of labor and production that has been achieved.

This type of calculation is used in the analysis, control, management of production processes, to identify deviations from established expenditure standards, perpetrators, causes and locations of these deviations. In addition, these calculations make it possible to evaluate the effectiveness of the implemented activities of the organizational and technical plan.

The actual costing is called the compilation of the actual cost of production. This calculation is carried out in accordance with the data on the accounting for expenditures under the articles provided for in the plan. The calculation reflects losses and expenses, which are not provided for in the planned calculations. In addition, the actual calculation is a means of control over the level of the cost price of goods, allows you to evaluate the progressiveness of existing and forecasted norms for the expenditure of resources.