BatchCosting:Meaning,NeedandTypes(WithCalculations)
Batch Costing:
Meaning, Need
and Types (With
Calculations)
byAshishLodhaBatchCosting
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Meaning:
Batch costing is a form of specific order
costing. Job costing refers to costing of jobs
that are executed against specific orders
whereas in batch costing items are
manufactured for stock. A finished product
may require different components for
assembly and may be manufactured in
economical batch lots.
When orders are received from different
customers, there are common products
among orders; then production orders may
be issued for batches, consisting of a
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BatchCosting:Meaning,NeedandTypes(WithCalculations)
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BatchCosting:Meaning,NeedandTypes(WithCalculations)
NeedforDeterminingEconomicLot
Size:
The need for determining economic lot
size arises as:
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BatchCosting:Meaning,NeedandTypes(WithCalculations)
TypesofCostsinBatchCosting:
There are two types of costs involved in
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BatchCosting:Meaning,NeedandTypes(WithCalculations)
Batch Costing:
(i) Set up costs
(ii) Carrying costs.
If the batch size is increased, set up cost per
unit will come down and the carrying cost
will increase. If the batch size is reduced, set
up cost per unit will increase and the
carrying cost will come down. Economic
Batch quantity will balance both these
opponent costs.
Illustration 2:
Compute the economic batch quantity for
a company using batch costing with the
following information:
Illustration 3:
The annual demand of a product is 24,000
units. It is produced in batches and the
largest size of a single batch is 6,000 units.
After each batch is complete, the set up cost
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BatchCosting:Meaning,NeedandTypes(WithCalculations)
Illustration 4:
The demand of an item is uniform at a rate
of 25 units p.m. The set up cost is Rs. 30 each
time a production is made. The production
cost is Rs. 3 per item and the inventory
carrying cost is 50 paise per unit p.m. If the
shortage cist is Rs. 3 per item p.m.
determine how often to make a production
run and of what size? Also calculate reorder level.
DifferenceBetweenJobCostingand
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BatchCosting:Meaning,NeedandTypes(WithCalculations)
BatchCosting:
In case of job costing, work is undertaken as
an identifiable unit and cost of each job is
ascertained separately. Such a method of
costing is suitable in case of motor
workshop, printing press and where
manufacture of products is according to
customers specific requirements.
Batch costing is extension of job costing. Job
costing refers to costing of jobs that are
executed against specific orders whereas in
batch costing items are manufactured for
stock. In batch costing a batch may
represent a number of small orders passed
through the factory in batches. Each batch is
treated as a unit of cost and is separately
costed. Cost per unit is ascertained by
dividing the total cost of the batch by
number of items produced in that batch.
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