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Cost Accounting

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Multiple Costing

Under this system the costs of different sections of production are combined after finding out the cost of each and every part manufactured. The system of ascertaining cost in this way is applicable where a product comprises of many assembled parts, e.g. motor cars, engines, machine tools, typewriters, radios, cycles etc.

As various components differ from each other in a variety of ways such as price, materials used and manufacturing process, a separate method of costing is employed in respect of each component. It is multiple costing in the sense that more than one method of costing is employed.

It is to be noted that basically there are only two methods of costing viz. job costing and process costing. Job costing is employed in cases where the items of prime cost (i.e. direct material, direct labour and direct expenses) are traceable to specified jobs or orders, e.g. house building, ship building etc. But where it is impossible to trace the items of prime cost to a particular order because their identity is lost in manufacturing operations, process costing is used. For example, in a refinery where several tonnes of oil are being produced at the same time, the prime cost of specific order of 10 tonnes cannot be traced. The cost can be found out only by finding out the cost per tonne of total oil produced and then multiplying it by ten. It may therefore, be concluded that the methods of batch, contract and cost plus costing are only the variants of ‘job costing’, while the methods of unit, operation and operating costing are only the variants of ‘process costing’.