Batch costing
Batch costing accumulates costs for a group of similar units produced together. It is a form of job costing in which the batch is the cost object, with cost per unit calculated by dividing the batch’s relevant total by its usable output. Set-up costs and batch size can affect unit cost, so distinguish costs incurred per batch from those incurred per unit. Allow for losses if the question specifies them.
Worked example
A batch costs $500 to set up plus $4 variable production cost for each of 250 good units. Total batch cost is $1,500 and cost per unit $6.
Common mistake
Do not spread a per-batch set-up cost as if it arises for each unit, or divide by input units when only fewer good units emerge.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | MA | Direct | September 2026–June 2027 |
| FIA | FMA | Direct | September 2026–June 2027 |