Multiple Costing

We have discussed operation costing's two part, one is unit cost of operation and other is service costing.
Now, we discussing multiple costing. Multiple Costing is to calculate the cost of product's units which are produced after processing in different operations. When units of a product transfers from one operation to anther. Its cost is calculated and like this each operation's cost is calculated. After this, we calculate the total each operation cost.

For instance, an article passes through five hand operations as follows :

The factory works a 40 hours week and the production target is 600 dozen per week. Prepare a statement showing for each operation and in total the number of operators required, the labour cost per dozen and the total labour cost per week to produce the total target output.

If we know the cost of labour per dozen, first we have to calculate no. of operators required

Total  production target per week =  600 X 12 = 4800

If we divide it with 40 hours, we know production target per hour = 4800 /40 = 180

Now If we want to calculate No. of operator, we will make target production proportion with time

In first operation = 180 X 15 minutes/ 60 minutes = 45 operators

Total labour cost per week for first operation = 45 workers X 40 hours per week X 0.65 wage rate per hour = Rs. 1170

Total labour cost per dozen = 1170 /600 = Rs. 1.95  per dozen

Like this, we will calculate labour cost per dozen for second, third, fourth and fifth operation and then we will add all labour cost per dozen in each operation for finding total cost of labour per dozen in all operations.