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The costing methods by the scope of product cost coverage are;

• Full Costing Method

• Normal Costing Method

• Variable Costing Method

• Direct Costing Method

• Throughput Costing Method

In this method, expenditures for all manufacturing related factors are included in the product cost.

In variable costing method, only the variable manufacturing costs are included in the product cost.

Direct costing method accepts only direct costs (direct materials cost and direct labor cost)

Throughput costing method, which is also called as super variable costing, does not have widespread use in practice. Under this method, only the direct material cost is the product cost, while all other manufacturing related expenditures are considered as period expenses to be reported in the income statement.

In this method, expenditures for all manufacturing related factors are included in the product cost (Lazol, 2011: 131). Direct materials cost, direct labor cost, and manufacturing overhead costs are all included in the product cost with their total lump sum amount. In other words, product cost covers all direct costs and all indirect costs, irrespective of whether these factors are really used in production at full capacity or not.

As the name states, in variable costing method, only the variable manufacturing costs are included in the product cost (Lazol, 2011: 132), irrespective of whether the cost in question is direct or indirect. Within the scope of variable costing method, all fixed costs are considered as period expenses, suggesting that fixed costs would still exist even if there were no production and this makes those factors irrelevant for calculating the manufacturing cost. Only the variable manufacturing costs are treated as product costs under variable costing method, variable non-manufacturing costs are excluded despite their variable nature.

Throughput costing method, which is also called as super variable costing, does not have widespread use in practice. Under this method, only the direct material cost is the product cost, while all other manufacturing related expenditures are considered as period expenses to be reported in the income statement.

Materials requisition records are the records containing information about the cost of direct materials used on a specific job and in a specific department.

Peanut butter costing is the name given to a costing system that broadly averages or spreads the cost of resources uniformly to cost objects

Depending on the nature of the product/production process, management chooses among costing methods that differ in the extent of product cost definition. All manufacturing related factors are considered as part of product cost within the scope of the most extensive method, whereas the definition of the product cost includes only the cost of direct materials used, in the least extensive one. The costing methods by the scope of product
cost coverage are;
• Full Costing Method
• Normal Costing Method
• Variable Costing Method
• Direct Costing Method
• Throughput Costing Method

Actual Costing Method
In actual costing method, product cost is calculated at year-end by using the cost data that incurred during the year. In order to calculate the product cost, it is necessary that the production is completed and all related expenditures have incurred. Direct costs (direct material and direct labor) incur in parallel to the production process and they are traced to products, so they can be measured on time. However, for determining the actual manufacturing overhead cost per unit, an allocation is required, and this is possible only at the end of the year, when all
overhead for the year can be measured.

Depending on the product type, managers can choose among different costing systems for assigning costs to products. These systems, in fact, are separately applicable, but with the help of technological improvements, it became easier to collect and process cost data; which makes it possible to combine these methods and reach a more accurate costing system by dedicating the same amount of resources in terms of cost and effort. Fundamentally, there are two main costing systems that differ in costing style:
• Job Costing
• Process Costing

To calculate the unit cost, there is a five-step procedure of process costing. The steps are as follows:
1. Summarize the flow of physical units of output
2. Compute output in terms of equivalent units
3. Summarize the total cost to account for
4. Compute the cost per equivalent unit
5. Assign total cost to completed units and ending work-in-process inventory

Peanut butter costing is the name given to a costing system that broadly averages or spreads the cost of resources uniformly to cost objects. Producing higher variety of products causes companies to incur a higher variety of costs, as different products need different resources. In other words, every product does not use the same resources. This means that the cost of each unit should include only the cost of resources used in it’s production. Therefore, averaging the total cost to each unit (with the name given to it “peanut butter costing”) does not result in accurate cost calculation anymore.

Product-cost cross-subsidization is the term used to define the situation in which over-costing in one or more products results in under-costing in other products.

A refined costing system provides a more detailed analysis of cost assignment (rather than broad averaging), especially in terms of indirect costs’ allocation. In order to succeed in this, there are some key points, such as increasing the share of direct costs in total, increasing the number of indirect cost pools, and using more allocation bases for more diversified activities, etc

Activity-based costing (ABC) is a refined version of simple costing system, with increased number of cost pools and allocation bases. In an ABC system, the whole process is considered as a chain of activities and individual activities are the fundamental cost objects. With the most basic definition of the system, costs of individual activities are calculated at first, and then each of these costs are assigned to products to the extent the relevant activities are needed for their production.

Activity can be defined as any event or task that is carried out in order to meet a specific goal, such as designing, assembling, testing, etc.

Equivalent unit is a derived measure of output that reflects the number of completed units that could be produced with the same quantity of input consumed for both finished goods and workin-process inventories.