Two costing systems are used to calculate material and service costs:
Periodic Costing: This system involves unit cost calculation by dividing the total production quantity within a given period to the total quantity of production within the same period. This method is used in companies involved in serial production such as textile and paper companies and small workshops.
Assuming that Unit production cost = BM,
Direct raw material and supply costs = IMM,
Direct labor costs = IG, and
Overheads = GG
BM= + Σ İMM + Σ İG + Σ GG+
Production Σ Production Quantity
Order Costing: The method used to calculate costs of products or services produced and/or provided based on orders. This method distributes a specific share of overheads to physical raw material and supply, material and actual employment labor expenses.
Assuming that Total order cost = SM,
Order raw material and supply costs = IMM,
Order employment expenses = IG, and
Overhead Share = GGP; the resulting formula is
SM= Σ İMM + Σ İG + Σ GGP