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Fundamental principles of costing

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Costing : meaning and definition

"The techniques and process of ascertaining costs is known as costing."
Costing relates to the determination of cost of a product manufactured or service rendered in order to ascertain cost, it involves system, methods and techniques of accumulation, classification and analysis of cost.
The techniques refers to principles and rules which are applied for ascertaining cost. There are various techniques of ascertaining costs, such as historical or absorption costing, marginal costing, standard costing, uniform costing, etc., which can be applied for specific purposes.
The process of ascertaining cost includes the day to day routine of determining cost through the process related to allocation, apportionment and absorption of costs, besides the presentation of statement of cost, showing how the costs have been arrived at.
Cost allocation: allocation is the process whereby cost items are charged direct to a cost unit or cost center, i.e, a cost can be specifically identified with a department that cost is allocated to that department.
Cost apportionment: apportionment is the process of division of costs among two or more cost centers on estimated basis of benefit received.
Cost absorption: it is the process of ascertaining the charge of indirect cost per unit of production or service. In the words, the overhead is observed by the physical units manufactured or units of services rendered during a period or for specific job. 
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