The management of a company manufacturing electrical components is considering introducing an historic batch costing system into its factory.

Required:

(a) Outline the information and procedures required in order to obtain the actual direct material cost of each batch of components manufactured. (7 marks)

(b) Identify the elements which could make up a direct operative’s gross wage and for each element explain, with supporting reasons, whether it should be regarded as part of the prime cost of the components manufactured.

(10 marks)

ACCA Level I Costing LO1