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    Batch Costing

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    Naveen Prajwalit Dang
    Batch costing is a variant of job costing where the cost of producing a batch of similar products is determined. For each batch, a separate cost sheet is maintained to record all costs associated with that batch, including material, labor, and overhead costs. The total cost is then divided by the number of units in the batch to determine the cost per unit. Batch costing is useful when multiple similar items are produced for each customer order or when a single order contains components used for other products. An example is provided to demonstrate how to calculate the total cost of a batch of dough and the per unit cost.

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    Batch Costing

    Uploaded by

    Naveen Prajwalit Dang
    828 views10 pages
    Batch costing is a variant of job costing where the cost of producing a batch of similar products is determined. For each batch, a separate cost sheet is maintained to record all costs associated with that batch, including material, labor, and overhead costs. The total cost is then divided by the number of units in the batch to determine the cost per unit. Batch costing is useful when multiple similar items are produced for each customer order or when a single order contains components used for other products. An example is provided to demonstrate how to calculate the total cost of a batch of dough and the per unit cost.

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    Batch costing is a variant of job costing where the cost of producing a batch of similar products is determined. For each batch, a separate cost sheet is maintained to record all costs associated with that batch, including material, labor, and overhead costs. The total cost is then divided by the number of units in the batch to determine the cost per unit. Batch costing is useful when multiple similar items are produced for each customer order or when a single order contains components used for other products. An example is provided to demonstrate how to calculate the total cost of a batch of dough and the per unit cost.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    828 views10 pages

    Batch Costing

    Uploaded by

    Naveen Prajwalit Dang
    Batch costing is a variant of job costing where the cost of producing a batch of similar products is determined. For each batch, a separate cost sheet is maintained to record all costs associated with that batch, including material, labor, and overhead costs. The total cost is then divided by the number of units in the batch to determine the cost per unit. Batch costing is useful when multiple similar items are produced for each customer order or when a single order contains components used for other products. An example is provided to demonstrate how to calculate the total cost of a batch of dough and the per unit cost.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 10

    Batch Costing

    Presented By : Vinay Nadar (064) Sachin Bajaj (066) Mohit Sadhotra (080) Neha Singh (094) Siddharth Ray (098) Supriya Uchil (104) Ramakrishnan (107) Rahul Tamrakar (124)

    What is Batch Costing


    It is a variant of job costing.

    Under batch costing, a lot of similar units which

    comprises the batch may be used as a unit for ascertaining cost. In the case of batch costing separate cost sheets are maintained for each batch of products by assigning a batch number. Cost per unit in a batch is ascertained by dividing the total cost of a batch by the number of units produced in that batch.

    Difference between job costing and batch costing


    Accounting to job costing, costs are collected and

    accumulated according to job. Each job or unit of production is treated as a separate entity for the purpose of costing. Job costing may be employed when jobs are executed for different customers according to their specification. Batch costing is a form of job costing, a lot of similar units which comprises the batch may be used as a cost unit for ascertaining cost.

    Uses of Batch Costing


    Where a business produces a product to meet a

    customer specification but where a number of similar items are made for each order Where a business produces a single item to meet a customers specification but where the product being made contains components that are also used in other products Such a method of costing is used in case of pharmaceutical industry, readymade garments, industries manufacturing parts of TV, radio sets etc.

    Batch Cost Sheet


    Cost of each batch is recorded on batch cost cards

    or batch cost sheets Batch cost sheet records all costs for a single batch A separate cost card or sheet will be opened for each new batch
    Record:
    1)For finished jobs the total direct cost 2)For unfinished batch jobs the total cost recorded till date to give work-in-progress figure 3)Cost of materials purchased specifically for the batch 4)Cost of materials drawn from stores per batch 5)Cost of direct wages 6)Direct expenses

    Determination of Batch Costing


    The determination of economic batch quantity involves two

    type of costs viz, (i) set up cost and (ii) carrying cost. With the increase in the batch size, there is an increase in the carrying cost but the set-up cost per unit of the product is reduced; this situation is reversed when the batch size is reduced. Thus there is one particular batch size for which both set up and carrying costs are minimum. This size of a batch is known as economic or optimum batch quantity
    EBQ Where :-

    2 AS/C ^1/2

    A= annual requirements of the product S = setting-up costs per batch C = carrying cost per unit of inventory per annum

    Example
    We make a batch of dough using the following

    weights:
    1) FLOUR 100 pound 2) WATER 66 pound 3) SALT 2 pound 4) YEAST 1.5 pound A simple arithmetic tells us that we are making 169.5 pound of dough. We now consider the cost per pound of our ingredients: 1) FLOUR = $.18 per pound 2) WATER = $.00 per pound

    3) SALT = $.09 per pound


    4)YEAST = $.56 per pound

    Note that although we are considering the water to be free, it is still included

    in the dough weight. Now we compute the entire batch cost:


    1. FLOUR $.18 X 100=$18.00 2. WATER $.00

    3. SALT $.09 X 2=$.18


    4. YEAST $.56 X 1.5=$.84 5. BATCH COST $19.02 We now know that it has cost us $19.02 in ingredients to make 169.5# of

    dough. To compute the cost of one pound of dough, we divide the batch cost by the dough weight:
    1. 19.02/169.5=$.112 2. BATCH COST per unit = 1.2 per pound of dough.

    References
    http://www.accountingclassroom.com/images/Job

    Batch_Costing_ACCAPartD_F2_QN05.pdf http://www.rapidpdfs.com/doc/batch+costing Cost Accounting by Jawahar Lal & Seema Srivastava www.icai.org/resource_file/19070comp_sugans_p e2_costacc_cp7.pdf

    Thank you

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