Method of costing is the process and practice of ascertaining cost. But types of costing is the technique of analyzing and presenting cost in such a manner that helps in controlling cost and taking managerial decision. The types of costing generally are as follows:

Absorption Costing

Under this type of costing full cost, irrespective of its nature, type and behavior, is charged to the production. Whether fixed or variable, direct or indirect, j all costs are included in the total cost of product.

Historical Costing


It refers to that system of cost accounting where cost of a product or service is ascertained only after the cost has actually been incurred. It implies determination of cost on the basis of actual cost and not on the basis of standard or pre-determined cost. This system of accounting for cost is used by most of the organisations.

Marginal Costing

Marginal costing technique divides cost into fixed cost and variable cost. It calculates cost of a product or job only by taking variable cost into account. Fixed costs do not form a part of the total cost. It allocates variable cost, i.e., direct material, direct labour, direct expenses and variable overheads to the product or job. This is also known as ‘variable costing’.

Standard Costing


Cost of a product or job determined in advance on the basis of certain pre­determined standard is known as standard costing. This is the cost under a given set of operating conditions. Periodical comparison of standard cost with the actual cost is made to detect variance, if any, between the two and causes are analyzed for remedial measures.