The single Costing method of the ascertainment of the cost of production is suitable for those industries in which manufacturing is continuous and units of output are identical. You will be able to understand the Single Costing based on the points given to them; introduction, the meaning of single costing, the definition of single costing, characteristics of single costing, and objectives of single costing. One operation costing method of costing by units of production and adopts where production is uniform and a continuous affair, units of output are identical and the cost units are physical and natural.
This article explains the topic of Single Costing: Introduction, Meaning, Definition, Characteristics, and Objectives.
The cost per single determines by dividing the total cost during a given period by the number of units produced during that period. This method of costing generally adopt where an undertaking engages in producing only one type of product or two or more products of the same kind but of varying grades or quality. The industries where this method of costing uses are the dairy industry, beverages, collieries, sugar mills, cement works, brick-works, paper mills, etc.
Meaning of Single Costing:
Single or Unit or Output costing is the method of costing in which cost is ascertained per unit of a single product in continuous manufacturing activity. Every Single or per unit, the cost calculates by dividing total production cost by several units produced.
This method knows as “Single costing” as industries adopting this method manufacture, in most cases, a single variety of products. This method also knows as “Unit costing”, as not only the cost of the total output but also the cost per unit of output ascertains under this method. Under this method cost units are identical. This method also calls “Output costing”, as the cost ascertains for the total output of a product.
Definition of Single Costing:
The following definitions below are;
According to J.R. Batliboi,
“Single or output cost system is used in businesses where a standard product is turned out and it is desired to find out the cost of a basic unit of production.”
The Institute of Cost and Management Accountants, London,
“output costing is the basic costing method applicable where goods or services result from a series of continuous or repetitive operations or processes to which costs are charged before being averaged over the units produced during the period.”
From the above definitions, it is clear that this costing is a method of costing under. Which there is the costing of a single product, which produces by continuous manufacturing activity. Though under this method of costing a single variety of product manufacturers. It may vary concerning size, grade, color, etc. The example of industries that make use of this method of costing is; brick, sugar, cloth, coal, cement, fisheries, food canning, quarries, plantation industries, etc.
Thus single costing adopts for cost ascertainment in those manufacturing organizations. Which is engaging in producing only one type of product or two or more products of the same kind but of varying grades or qualities? This method uses in industries like mines, quarries, oil drilling; breweries, cement works, brick-works, .sugar mills, steel manufacture and aluminum products, etc.
In all those industries where single costing uses, there is a standard or natural unit of cost. For example, a tonne of coal in collieries, one thousand bricks in brick-works, a quintal of sugar in the sugar industry, a tonne of cement in the cement industry, etc. In this costing, the cost of production usually ascertains by preparing a cost sheet or a cost statement.
Characteristic or Features of Industries Which Use Single Costing:
The following are the characteristics or features of the industries where the single costing method uses:
- The cost per unit of output, determined under a single. Costing enables the management to make a real comparison between different periods and between different firms within the same industry, as the unit of output is a common factor between different periods and between different firms within the same industry.
- Equality of cost is an important feature of this method. That is, under this method, identical cost units will have identical costs.
- Production is on a large scale and is continuous.
- The units of production are identical and homogeneous.
- One cost is the method of costing adopt in concerns where there is a production of a product. Or, a few grades of the same product differing only in size, shape or quality by the continuous process of manufacture. The units of production or output are identical and the costs of units are physical and natural.
- The cost units are physical and natural and capable of being expressed in a convenient unit of measurement.
- This method is the simplest method of all the methods of cost; in the sense that the cost collection and the cost ascertainment are quite simple.
- In most cases, the unit of measure is also the cost unit, viz., one unit (in the case of T.V., radio, camera), 1,000 units (in the case of bricks), one gross (in the case of pencils, slates, bolts, and nuts), one liter (in the case of paints), one tonne (in the case of coal, cement, and steel), one bale (in the case of cotton), etc.
Objectives of Single Costing:
Single costing is a very simple method of costing. Its principal objectives are as follows;
- To ascertain the per-unit cost of production by dividing the total cost of production by the number of units produced.
- To estimate per unit cost of production for the future and facilitate production planning.
- Help in the preparation of tenders and fixation of selling prices.
- To facilitate a comparison of the cost of production of two accounting periods.
- To control the cost of the product through the comparative study of the costs of any two periods. Or, the comparison of the actual costs with the Pre-determined standard cost.
- The analyze the expenditure by nature, classify them into the element of cost and know. The extent to which each element of cost contributes to the total cost.
- To ascertain the profit or loss of production.