In accounting terms, costing refers to a system of calculating the amount of money it takes to produce goods or operate a business. Generally, costs include variables like cost of labor, cost of materials, cost of distribution and selling, taxes and administrative costs.
It is important that managers figure out the manufacturing cost of a product before it goes into the production stage, according to Ohio State University. Establishing product costs helps in determining the selling price and break-even point of goods. This system of determining costs also helps companies set the profit margin percentage on goods sold to the market.