What is operating costing, Cost Accounting

Describe Operating Costing

The Chartered Institute of Management Accountants, London defines "operating cost" as "the cost of providing a service." Services performed may be internal or external. Services are termed as internal where they have to be performed on inter-departmental basis in the factory itself, e.g. supplying power, gas or electricity from factory's own power-house, catering from the factory's canteen; supplying steam raised from the boiler house, repairing necessary items by the repair and maintenance department etc. Services are termed as external when they have to be provided to outside parties. Such concerns are service undertakings, e.g. transport corporations carrying loads of goods or human beings; electricity companies generating electricity or power; hospitals serving patients or carrying out operations; canteens serving meals or dishes of different varieties etc. The method employed to find out the cost of rendering a service, either internal or external, is service costing or, so to say, operating costing.

Operating costing is just a variant of unit or output costing. The method of computing operating cost is very simple. The expenses of operating a service for a particular period are grouped under suitable headings and their total is divided by the number of service units for the same period, and thus cost per unit of service is obtained. The cost for a future period may be estimated on the basis of estimated service units and the estimated costs. This will help in fixing the price to be charged for the service units and the estimated costs. Thus, the principle involved under operating costing is the same as under unit costing but they differ in the manner in which costing information have to be collected and allocated to cost units. The data about expenses are to be classified according to their nature of variability and moreover, the units of cost may be simple or composite.

 

Posted Date: 1/5/2013 7:17:06 AM | Location : United States







Related Discussions:- What is operating costing, Assignment Help, Ask Question on What is operating costing, Get Answer, Expert's Help, What is operating costing Discussions

Write discussion on What is operating costing
Your posts are moderated
Related Questions
OBJECTIVES OF COST ACCOUNTING : 1-DETERMINING SELLING PRICE 2-CONTROLING COST 3- PROVIDING INFORMATION FOR DESING MAKING 4-ASCERTAINING COSTING PROFIT 5-Facilitating preparation of

1.    The following table summarizes the short-run production function for your firm. Your product sells for $5 per unit, labor costs $5 per unit, and the rental price of capital i

Vorticella can first be seen by the naked eye, b.ut to study it place a prepared slide under the microscope. Focus it under low power, and observe it. You can see a large number of

The number of workdays varies from month to month due to the number of weekdays, holidays, days of vacation, and sick leave taken in the month. The number of units produced in a

ACRS is a system of depreciation started by the Economic Recovery Tax Act of 1981. ACRS depreciation relies on recovery periods in spite of useful life. These periods were preset b

what are the three of product costs in manufacturing company,discuss in detail each and supporting with examples.

HOW APPLICABLE IS THE MARGINAL COSTING CONCEPT IN ACCOUNTING

What are the five accounts used in adjusting entry for periodic inventory at the end of the year?


Support Department Cost Allocations. Riverside Furniture Company manufactures unfinished furniture for sale to retailers. Riverside has two support departments, Maintenance and Hu