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Installation of costing systems is not a expense 
but an investment as the rewards are much 
greater then the expense incurred. The cost 
system is for the business and not the 
business for a systems of cost. Therefore ,the 
system has to be designed as to meet the 
specific need of the enterprise.
Page 2


Installation of costing systems is not a expense 
but an investment as the rewards are much 
greater then the expense incurred. The cost 
system is for the business and not the 
business for a systems of cost. Therefore ,the 
system has to be designed as to meet the 
specific need of the enterprise.
A. General Consideration for 
Installing Costing System 
1. Objective of Installation the System.
2. Area of Operation.
3. Collection Data and Prompt Information.
4. Cost Records in Cost Book.
5. Control System of Cost.
6. Types and Methods of costing. 
Page 3


Installation of costing systems is not a expense 
but an investment as the rewards are much 
greater then the expense incurred. The cost 
system is for the business and not the 
business for a systems of cost. Therefore ,the 
system has to be designed as to meet the 
specific need of the enterprise.
A. General Consideration for 
Installing Costing System 
1. Objective of Installation the System.
2. Area of Operation.
3. Collection Data and Prompt Information.
4. Cost Records in Cost Book.
5. Control System of Cost.
6. Types and Methods of costing. 
B. Specific Consideration of Installing 
Costing System 
1. Size and Nature of Business
2. Products 
3. Organization
4. Functional Study
(like; manufacturing, administration, selling & 
distribution) 
Page 4


Installation of costing systems is not a expense 
but an investment as the rewards are much 
greater then the expense incurred. The cost 
system is for the business and not the 
business for a systems of cost. Therefore ,the 
system has to be designed as to meet the 
specific need of the enterprise.
A. General Consideration for 
Installing Costing System 
1. Objective of Installation the System.
2. Area of Operation.
3. Collection Data and Prompt Information.
4. Cost Records in Cost Book.
5. Control System of Cost.
6. Types and Methods of costing. 
B. Specific Consideration of Installing 
Costing System 
1. Size and Nature of Business
2. Products 
3. Organization
4. Functional Study
(like; manufacturing, administration, selling & 
distribution) 
1. Lack support of top Management
2. Non-cooperation by other staff 
3. Shortage of trained staff
4. Heavy cost of installation and operation of 
costing system.
Page 5


Installation of costing systems is not a expense 
but an investment as the rewards are much 
greater then the expense incurred. The cost 
system is for the business and not the 
business for a systems of cost. Therefore ,the 
system has to be designed as to meet the 
specific need of the enterprise.
A. General Consideration for 
Installing Costing System 
1. Objective of Installation the System.
2. Area of Operation.
3. Collection Data and Prompt Information.
4. Cost Records in Cost Book.
5. Control System of Cost.
6. Types and Methods of costing. 
B. Specific Consideration of Installing 
Costing System 
1. Size and Nature of Business
2. Products 
3. Organization
4. Functional Study
(like; manufacturing, administration, selling & 
distribution) 
1. Lack support of top Management
2. Non-cooperation by other staff 
3. Shortage of trained staff
4. Heavy cost of installation and operation of 
costing system.
Principles Of Smooth Working
• The system should be simple & easy to operate.
• It should be flexible.
• Minimum disturbance in the existing system, 
should only be done when desirable.
• Desired changes should be introduced gradually.
• Confidence be created in the minds of 
management and executives regarding the use of 
system.
Read More
106 videos|173 docs|18 tests

FAQs on PPT - Installation of Costing system - Cost Accounting - B Com

1. What is a costing system?
Ans. A costing system is a set of procedures and methods used by a company to determine the cost of producing its products or services. It involves tracking and allocating costs to various activities and cost objects, such as products, services, or departments. The costing system provides valuable information for decision-making, pricing, budgeting, and analyzing profitability.
2. Why is it important to install a costing system?
Ans. Installing a costing system is important for several reasons: - It helps in determining accurate product costs, which is essential for pricing decisions and to ensure profitability. - It enables effective cost control by identifying cost drivers and areas where costs can be minimized. - It provides valuable information for budgeting, planning, and forecasting. - It helps in identifying and eliminating non-value-added activities and improving operational efficiency. - It assists in evaluating the performance of different products, services, or departments and helps in making informed decisions for resource allocation.
3. What are the steps involved in installing a costing system?
Ans. The installation of a costing system typically involves the following steps: 1. Identify the objectives: Determine the purpose and goals of implementing the costing system, such as improving cost control, pricing decisions, or performance evaluation. 2. Select the costing method: Choose an appropriate costing method, such as job costing, process costing, activity-based costing, or standard costing, based on the nature of the business and its requirements. 3. Identify cost drivers: Identify the factors that drive costs within the organization, such as labor, materials, overheads, or activities. 4. Collect data: Gather relevant data on costs, activities, and cost drivers. This may involve analyzing financial statements, invoices, payroll records, and other sources of information. 5. Allocate costs: Allocate the collected costs to different cost objects, such as products, services, or departments, based on the chosen costing method and cost drivers. 6. Review and analyze: Review the results of the costing system, analyze the cost allocation, and assess the accuracy and reliability of the information generated. 7. Implement controls: Implement necessary controls to ensure the accuracy and consistency of cost data, such as regular audits, monitoring of cost drivers, and training of employees. 8. Continuous improvement: Continuously review and improve the costing system to adapt to changes in the business environment and to meet evolving needs.
4. What are the challenges in installing a costing system?
Ans. Installing a costing system can pose several challenges, including: - Identifying appropriate cost drivers and allocating costs accurately to cost objects. - Dealing with the complexity of the organization's operations and the interdependencies between different activities. - Gathering reliable and relevant data for cost analysis. - Overcoming resistance to change from employees who may be accustomed to existing cost accounting practices. - Integrating the costing system with the organization's existing financial and management information systems. - Ensuring that the costing system is flexible enough to adapt to changes in the business environment. - Allocating indirect costs and overheads in a fair and consistent manner. - Balancing the level of detail in cost analysis to avoid excessive complexity or oversimplification. - Ensuring that the benefits of installing a costing system outweigh the costs involved in its implementation.
5. What are the different types of costing systems commonly used?
Ans. There are several types of costing systems commonly used, including: - Job costing: Used when products or services are customized or produced in small batches. Costs are assigned to specific jobs or projects. - Process costing: Used when products are manufactured in a continuous or repetitive process. Costs are averaged over the entire production process. - Activity-based costing (ABC): Focuses on activities that consume resources and assigns costs based on the activities performed. It provides a more accurate allocation of costs to cost objects. - Standard costing: Involves setting standard costs for materials, labor, and overheads, and comparing actual costs against these standards to identify variances. - Marginal costing: Focuses on the variable costs of production and calculates the contribution margin for each unit. Fixed costs are treated separately. - Absorption costing: Allocates both variable and fixed costs to products or services. It provides a more comprehensive view of costs but may be affected by changes in production levels.
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