Discuss the four different methods of costing along with their applicability to manufacturing industry.

I am not aware of any classification of costing system
which classifies all the possible costing systems in just four different methods. The
costing systems or methods may be classified in many different ways depending on
different criteria like nature of product, nature of activity or operation,
classification of costs, and ways o ascertaining, apportioning and analysing costs.
However, I am giving below several different costing methods that are traditionally used
in manufacturing industries.

Job
Costing:

This is a product related
classification of costing system. The cost is ascertained for each job or work order
processed. This systems is used where most of the manufacturing activities are planned
and carried out for distinct jobs or customers. The utility of this method increases
when there is great variability in nature of jobs or work orders
processed.

Batch Costing
:

This method determines the cost associated
with each batch pf products manufactured. This differs from job or work order costing in
the variability of the production batches. In this case the production batches consist
of mostly standard products or components. What varies is mostly the size of batches and
the timing of their processing.

Process
Costing:

In this method of costing the costs
are determined for various different manufacturing activities or processes. These costs
are the assigned to different products on the basis of some criteria like quantity
processed or the time taken for processing. This method of costing is suitable for
manufacturing units that use continuous processes or mass production techniques. This
method is particularly suitable where there are many different products and process
routes, where output of one process becomes input for
another.

Operation
Costing:

This method is similar to the
process costing. However the products manufactured have limited variation. For example a
cement plant may use this method.

Multiple
costing:

Most of the organizations use a
combination of different costing method rather than just one method. Multiple costing
refers to such combinations of different methods.