Question

a. Explain the purpose and type of costs in a project ging an example of each b. Explain in your own word the different types of costing methods applied by

Answer 1

The purpose of costs in a project is to estimate and track expenses. There are different types of costs, including direct, indirect, fixed, and variable. Costing methods include job order costing, process costing, and activity-based costing.

Step-by-step explanation:

The purpose of costs in a project is to accurately estimate and track the expenses associated with carrying out the project. This helps in budgeting, decision-making, and cost control. There are different types of costs in a project:

1. Direct Costs: These are costs that can be directly attributed to the project, such as materials, labor, and equipment.
2. Indirect Costs: These are costs that are not directly tied to the project but still contribute to its overall expenses, such as administrative overhead or utilities.
3. Fixed Costs: These are costs that remain constant regardless of the project's activity levels, like rent or insurance.
4. Variable Costs: These costs fluctuate based on the project's activity levels, such as raw material costs or hourly wages.

As for costing methods, there are various approaches used:

1. Job Order Costing: This method is used when a company produces customized or unique products or services, where costs are assigned to each specific job or project.
2. Process Costing: This method is employed when a company produces standardized or homogeneous goods or services in large quantities, and costs are spread evenly across all units produced.
3. Activity-Based Costing (ABC): ABC focuses on allocating costs based on the activities that drive those costs within an organization, providing a more accurate reflection of resource consumption.