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Hi John. Could you please help me with question 9a.6 from MA Kit book?
The following items may be used in costing batches.
(i) Actual material cost
(ii) Actual manufacturing overheads
(iii) Absorbed manufacturing overheads
(iv) Actual labour costWhich of the above are contained in a typical batch cost?
The answer is (i) (iii) and (iv). Could you please explain why (ii) is not contained in batch cost?
Thank you so much in advance.
It is because as far as overheads are concerned there is more likely to be a pre-determined absorption rate that will then be applied to all items produced – they might (for example) be producing batches of different products in the same factory. So normally we will include the actual material and labour costs, but then add on the overheads at the standard absorption rate (rather than try to determine the actual overheads).
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