The output of batch consists of a number of units and it is not economical to ascertain cost of every unit of output independently The procedure is very similar to job costing: (a) Each batch is treated a job and costs are calculated for total batch. (b) On completion of production cost per unit is found as Total Batch Cost Cost per unit Total Units in Batch DIFFERENCE BETWEEN JOB COSTING AND BATCH COSTING Job Costing Batch Costing It is carried out or a product is produced by specific The process of producing the product has a orders. continuous flow and product is homogeneous It is determined for each job. It is compiled on time basis. Each job is separate and independent of other jobs. Product lose their individuality as they are manufactured in a continuous flow 114 APPLICATIONS OF BATCH COSTING Batch costing is used for calculating total cost of each batch. Batch is small group of units which is produced for production purposes. We also identity batch of units in our production. All raw material is supplied on batch basis and other expenses are also paid on the basis of each batch. For instance, in the drugs industry, producer will make the batch of tablets instead of producing single tablet This will be easy to sell that batch in market. So, calculating cost of each batch, we will calculate material cost per batch, labour cost per batch and other expenses per batch. If we want to calculate cost per unit, we have to divide total batch cost with total batch units. It is used in following industries: 1. Manufacturing industry for readymade garment 2. Manufacturing industry for toys 3. Manufacturing industry for tyre & tube Illustration 5 ABC Limited manufactures ring binders which are embossed with the customers' own logo. A customer has ordered batch of 600 binders. The following illustrate the cost for a typical batch of 100 binders. Direct materials 60 Direct labour 20 Machine set up 6 Design and art work 30 Prime cost 116 Direct employees are paid on a piecework basis. ABC Limited absorbs production overheads at a rate of 20% of direct wages cost. 5% is added to the total production cost of each batch to allow for selling, distribution and administration overheads. ABC Limited requires a profit margin of 25% of sales value. The selling price for 600 binders (to the nearest penny) will be: A. 756 B. 3772.8 C. 806.4 D. 3 1008