Output Costing

This guidance has been withdrawn.

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Improving Output Costing: Guidelines and Examples highlights the areas that operational and financial managers in departments should focus on when reviewing their costing systems.

Contents Page Range

Part One: Guidelines for Improving Output Costing#

Chapter 1: Introduction and Scope#

Chapter 2: Objectives of Cost Accounting Systems#

Chapter 3: Output Costing#

Chapter 4: Does Your Costing System Need Improving?#

  • Success indicators
  • Symptoms of out-dated systems

Chapter 5: How to Improve the Costing System#

  • Costing system development
  • Reviewing and refining a costing system

Chapter 6: Working with Costs#

  • Defining cost objects
  • Classifying costs
  • Assigning costs to outputs
  • Directly assigning costs to outputs
  • Indirectly assigning costs to outputs ,
  • Organisation structure
  • Conventional two-stage process
  • First-stage assignment
  • Inter-cost centre charging
  • Second-stage assignment
  • Modified two-stage process
  • Common problems in cost assignment


Chapter 7: Documenting Costing Practice#

Chapter 8: Example of Disclosure of Cost Accounting Policies#


Part Two: A Sample Output Costing Report#

Chapter 9: Background#

Chapter 10: Costing System Changes#

Chapter 11: Recommendations#

Chapter 12: Scope and Assumptions#

Chapter 13: Cost Classification#

Chapter 14: Costing Method: Example 1#


Chapter 15: Costing Method: Example 2#

Chapter 16: Monitoring, Reporting and Responsibility#

Chapter 17: Costing System Design#


  • A: Suggested cost groupings for general ledger cost items
  • B: Activity analysis
  • C: Floor space analysis
  • D: Software licence analysis

Glossary of terms#




Continual improvement in costing systems is as important to meet the increasing demand for better management information in the public sector as it is in the private sector.

The Treasury has designed this booklet to highlight the areas that operational and financial managers should focus on when reviewing their costing systems. I hope that it will stimulate departments to seek continual improvement in the quality of cost information and costing systems.

This booklet has been divided into two parts:

  • Part 1: Guidelines for Improving Output Costing
  • Part 2: A Sample Output Costing Report.

Part 1 is concerned with understanding the role output costing plays in the public sector, and identifying areas for improving costing systems.

Part 2 sets out an example of an internal costing system report in a hypothetical department.

Although this booklet has been prepared primarily for managers in departments, I hope it will also be useful to other government agencies.

Murray Horn
Secretary to the Treasury