Batch costing is another form of job costing which is adopted in case of manufacturing of a large number of components of machines or of other articles. Since a large number of them are manufactured together and pass through the same process of manufacture, it is convenient to collect their cost of manufacture together.
Batch costing is used for calculating total cost of each batch. Batch is small group of units which is produced for production purposes. 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.
Batch costing is used in following industries:
- Manufacturing industry for ready made garment
- Manufacturing industry for toys 3. Manufacturing industry for tyre & tube