AN EVALUATION OF THE APPLICATION AND RELEVANCE OF COSTING TECHNIQUES IN SERVICES ORIENTED ORGANIZATION

CHAPTER ONE

INTRODUCTION

1.1     BACKGROUND OF THE STUDY

The services oriented organizations are the foundations of industrialization of any nation. Since the introduction of money, people have been concerned with cost. They think of how to manage money. Costing system was first recognized in manufacturing industries with the aim of finding the cost of production or cost of a product, presently, the system is used very widely in other establishments such as transport companies, schools, governmental organizations, hospitals, banks, etc. these examples includes both profit making and non-profit making organizations. The profit making organizations main aim of adopting costing system may be to determine the cost of their products or services among others. The main aim of adopting the system by non-profit making organizations like government offices is to determine the cost of their operations and e cost of carrying on their activities such as the cost of buying stationery for their office work.

Costing system is also applied in house holds. A housewife will list items to be bought from the market and cost them before going to the market. The analysis will help her to know the amount she will take to the market. Costing system is important and is applied in our day to day activities.

It is also known that costing is the act of analyzing, classifying, collecting and accumulating past costs using standard methods, while costing techniques are the ways or dimensions of generating a variety of information from cost data for management decision making, there are different types of costing techniques: these includes: standard costing, marginal costing, absorption costing, uniform costing  and cash flow analysis. The management determine their use by calling for such information. Looking at al these, the writer strongly believe that the costing techniques mentioned above can lead on firm through the hers economic situations.

Cost accounting was introduced to avoid the shortcoming of the financial accounting. It is only to avoid the possible losses arising from the mis handling of the financial data. Cost accounting also attempts to assist the management by reporting the operating result at regular intervals at different levels of a activities. It has also to meisue the responsibility of the actual performance against planned performance.