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In MA1 BPP book a line was written as,
“If a batch of items is made to order then the costing method is classified as job costing.”
In MA2, I have studied that batch costing is also as per customer’s order.
I was confused in these two. That either batch is not as per requirement of customer or what is the difference between two. And how Batch is classified as specific order costing?I think it is something that the BPP book didn’t need to say as it simply complicates matters.
Let’s say that you wanted to order 1000 litres of paint of a unique colour, made just for your retail outlets. The paint will be sold in 1l tins.
The production of the 1,000 litres is a job specially for you and can be specifically costed. That is job costing.
However, to get the cost of a 1l tin of paint, you would use a calculation like:
Cost per 1l tin = Cost of the 1,000 l/ expected output of 1l tins
That is now applying batch costing principles.
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