2.8 Batch Costing
2.8.1 Meaning and definition
2.8.1. Meaning
Batch costing is a variant of Job Costing. This method is applicable under the
following situations: production is done in lots/batches containing a certain number
of units. The number of these units depends on the order received by the industry
from its customers. In certain cases such production may be done either for stock
purposes or during lean season.
A batch itself is a cost unit consisting of several identical number of units. The total
cost of the batch is calculated and the cost per unit is calculated by dividing the
total cost of the batch by the number of its units.
Cost per unit = Total cost of the batch/number of units in the batch
Batch costing is typically used for mass produced goods such as foot wear,
pharmaceuticals etc. The size of the batch is the most economical number of units.
For example: A 1,000 bricks, 100 shirts etc.
Definitions
“Batch cost is a cluster of costs incurred when a group of products or services is
produced which cannot be identified to specific products or services within the
group.”
– Accounting Dictionary
“Batch costing is the identification and assignment of those costs incurred in
completing the manufacture of a specified batch of components. Having arrived at
the batch cost, the unit cost is simply derived by dividing it by the number of
components in the batch.”
– Venture Line
“Batch cost is the fact of stating the price of a product as based on the cost of
producing a batch of the product rather than on the cost of producing a single
item.”
– English Dictionary
