BATCH COSTING

·         BATCH COSTING
COST ACCOUNTING

·         MEANING

1. ·         BATCH COSTING IS A FORM OF SPECIFIC ORDER COSTING
2. ·         WHERE THE OUTPUT OF THE JOB CONSISTS OF HOMOGENEOUS UNITS,  A LOT OF SIMILAR UNITS MAY BE USED AS COST UNIT FOR ASCERTAINING COST ,SUCH LOT OR COLLECTION OF UNITS IS CALLED BATCH COSTING
3. ·         SEPARATE COST SHEETS ARE MAINTAINED FOR EACH BATCH. EACH BATCH IS ASSIGNED A BATCH NUMBER.
4. ·         COST PER UNIT=

·         = (TOTAL COST FOR THE BATCH)/(NO OF ITEMS IN THE BATCH)

·         SUITABILITY

1. ·         WHERE THE OUTPUT OF JOB CONSISTS OF NUMBER OF UNITS AND IT IS NOT ECONOMICAL TO ASCERTAIN COST OF EVERY UNIT OF OUTPUT INDEPENDENTLY
2. ·         WHERE THE CUSTOMERS’ ANNUAL REQUIREMENT IS TO BE SUPPLIED IN UNIFORM QUANTITIES OVER THE YEAR
3. ·         PHYSICAL CHARACTERISTICS LIKE SIZE,COLOR,TASTE,QUALITY ARE REQUIRED SAME
4. ·         FOR SUPPLYING INTERNAL ORDER OF COMPONENTS

·         ASCERTAINMENT OF COST

·         MATIERALS:-ISSUES ON THE BASIS OF MATERIAL REQUISITION WHICH ARE PRICED IN THE COST DEPARTMENT. FURTHER MATERIAL COST IS ALLOCATED TO RELEVANT BATCH

·         LABOUR :-DIRECT WAGES ARE CHARGED TO BATCHES BY MULTIPLYING THE TIME SHEET AT THE APPROPRIATE RATE

·         OVERHEAD:-ABSORBED ON SUITABLE BASIS FOR EXAMPLE PERCENTAGE OF DL,LABOUR HOUR RATE

·         APPLICABILITY

1. ·         BISCUIT MANUFACTURING
2. ·         GARMENT MANUFACTURING
3. ·         SPARE PARTS MANUFACTURING
4. ·         PHARMACEUTICAL MANUFACTURING
5. ·         TELEVISIONS OR RADIO SETS INDUSTRIES MANUFACTURING ELECTRONIC PARTS

·         ECONOMIC BATCH QUANTITY

·         THE OPTIMUM QUANTITY FOR BATCH IS THAT QUANTITY FOR WHICH THE SETTING UP AND CARRYING COSTS ARE MINIMUM. IS KNOWN AS ECONOMIC BATCH QUANTITY

·         NECESSITY FOR DETERMINING ECONOMIC BATCH QUANTITY:-

·         EVERY TIME A COMPONENT/PRODUCT IS TO BE MADE,SETTING UP OF THE TOOL IS REQUIRED

·         REQUIRES ACCUMULATION OF INVENTORY AND COST RELATED THERE TO

·         TO REDUCE THE COST

·         FACTORS WHICH INFLUENCE:

·         SET UP COST

·         MANUFACTURING COST

·         INTEREST

·         STORAGE

·         RATE OF CONSUMPTION

·         TYPE OF COST

·         SET UP COST( PREPARATION COST): INCURRED IN CONNECTION WITH EACH BATCH PROCESSED AND ARE INDEPENDENT OF THE SIZE OF THE BATCH

·         CARRYING COST( HOLDING COST): THE LARGER THE BATCH,GREATER WILL BE THE NUMBER OF UNITS IN THE INVENTORY. ASSOCIATED WITH:_

·         SPACE OCCUPANCY

·         INTEREST

·         BATCH SIZE IS INCREASED SET UP COST WILL BE LESS OR VICE VERSA

·         ECONOMIC BATCH QUANITY

·         COMPUTE THE ECONOMIC BATCH QUANTITY

·         ANNUAL DEMAND FOR THE COMPONENT=30000

·         SET UP COST PER BATCH=120

·         CARRYING COST PER UNIT OF PRODUCT=0.30

·         √2 US/C

·         =√2 X30000X120/.30=√7200000/.30=√24000000=4899 UNITS

·         EXAMPLE

·         COST SHEET OF BATCH NO A-160