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What are costing methods and what is their importance?

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Costs exist in a business organization. Expenses incurred to meet the demand for the purchase of necessary goods and accessories are expenses. Cost is a matter of necessity. Investing money in the business as needed can be included in expenses. We incur necessary expenses to expand factories or business establishments. These costs can be in different stages.

• Accessory costs: A business needs various expenses. Which was definitely useful. In any business enterprise or business, incidental expenses are incurred to meet the shortfall of capital investment. Incidental expenses meet the minor needs of the business. There are also costs involved in operating the machine and maintaining the machine equipment malfunctions. These expenses are quite small but necessary.

• Import costs: A business has to import various necessary raw materials. Basically it is very difficult to run a business without importing. An import dependent firm can earn export income. And for that you have to import first. Transportation costs, employee costs, product shortages etc. can be observed while importing products. These should also be primarily recorded as expenses.

• Project cost: A business may be running on several projects. Initial investment is essential to complete a project. Considerable costs for business development and project implementation by investing. All our project implementation costs are pre-calculated as project costs. It gives an idea of the total cost and total income of the project.

The mentioned expenses play a very important role for a business or any investment organization. These costs are mainly included in the investment. And it is possible to earn profit from a business only through investment. So the costing method is important to earn profit from the business.

Explain the difference between job order and process costing methods.

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Differences exist between job order costing methods and process costing methods. A work order specifies the manpower required to complete a task and how much they will be paid. And process cost is the cost from the production of the same product to the point of supply and delivery to the consumer. Hence considerable difference is observed here. Below are the differences.

work order	Process costs
After planning a work, the order placed for its execution is called a work order. Here manpower has to be appointed for work order.	Process cost is the cost that is required for processing. Process costs are the costs incurred in the processing steps after a product is produced.
Work order costs are assigned to manpower or ordered to a specific organization.	Certain employees of the entrepreneur may act as laborers in process costs.
Here the entrepreneur does not have to worry about hiring the manpower, only paying the remuneration.	As a process cost, the entrepreneur has to hire manpower and determine their remuneration. which is necessary.
A specific time and investment budget can be estimated to complete the work order.	Process Costing Costs will continue more or less until the sale of the product is completed.

Job order and process costing make quite a difference in a business. which participates in product and cost pricing. As stated requirements can be priced by adding investment costs.

Find and explain to your understanding two costing methods, which are different from those explained in this class.

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Below I discuss two cost constraints. I will mainly discuss a maintenance cost and investment cost approach. Below I have discussed about investment cost and maintenance cost.

• Investment costs: Investment is the main branch of expenditure. Before investing, the amount of investment should be done. Make an estimate of how much money it might cost to run a business. Investment cost is one of the key parts of earning profit. Basically the profit will start from the investment. So there should be planning, risk taking, and expertise before investing. These things should be kept in mind before investing. I understand that running a business without investment is not possible. Therefore, it is important to calculate the investment cost as an expense for running the business.

• Maintenance cost. A business needs to have the necessary tools to run a business. Defects and deterioration of materials can be observed in this. And maintenance costs are included in this depreciation. In this case, the manpower employed for the maintenance must be paid a certain amount. And all incidental expenses are treated as maintenance expenses. Depreciation of everything from raw materials to machines of a business or organization is understood as maintenance cost.

Costing by job order, as explained for a cake manufacturing enterprise,

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I was ordered to a cake making factory. I must keep some of the benefits from the cake I make. I will calculate the working hours and all expenses as my personal opinion. Here I will calculate the cost of the necessary materials and take a fee for the amount of work that needs to be done. Take flour, baking powder, sugar, milk, and other necessary equipment as ingredients for making cake.

I allotted 10 hours to complete my work. I claim 12$ as my hourly rate. So here is my remuneration with dividends, 10$x12$=120$. Here I have calculated my remuneration. At the same time I mentioned a calculation of the amount of money spent on making the cake. Let's calculate the necessary ingredients for making the cake and the tools for making the cake. Cost of cake making materials and equipment is 38$. Of course I want to earn 9$ per cake to add my business profit compared to cost. If I can complete 45 cakes per month then my monthly income will be, 45$x9$=405$ Which Bangladeshi Taka is about 48000 Taka. All in all my cake will cost $38.

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SLC | S21W3 | Costos para emprendedores - Métodos de Costeo.