Batch costing


Published on

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Batch costing

  1. 1. Costing<br />Job, Batch, Contract & Process costing<br />Sujoykrpaul<br />
  2. 2. JOB COSTINg<br />Order costing/ production Order Costing/ Specific Order Costing<br />Determine the cost of specific jobs or lots of production, work order or project separately,<br />Manufacturing firm like presses, machine-tool and non-manufacturing concern general engg. Workshop & Auto Repair shop,<br />Followed by accounting cycle for jobs,<br />Flow of production is different in every department<br />
  3. 3. Objectives<br />Determine profit or loss of each job, the actual costs are compared with the estimated costs, so to ascertain correct estimation & separate the profitable jobs from the unprofitable ones.<br />Helps in minimising the losses & maximising profits,<br />Cost per unit can be ascertained<br />
  4. 4. features<br />Jobs are ascertained against the order of customers,<br />Production is not meant for stock or future sale,<br />Not a continuous process,<br />Different degrees of attention & skills are required for different jobs,<br />Nature of the job decides the process of each job so, no uniformity in the flow of production,<br />Separate cost sheet for each job<br />
  5. 5. advantages<br />Distinguish profitable from the unprofitable jobs,<br />Assist in preparing the estimation,<br />Detailed analysis of cost elements & functions,<br />Helps in future production planning,<br />Cost data helps in preparing budgets,<br />Spoilage & defective work can be discovered,<br />Facilitates in cost plus contracts,<br />Helps management in fixing SP of special orders,<br />Useful for statistical purpose in determining the trends of jobs<br />
  6. 6. Disadvantages<br />Demand excellent production material & labor,<br />Expensive & laborious as it involves more clerical work,<br />Historical costing in nature, so it doesn’t give the prompt remedial measures,<br />Costing of minute jobs may leads to inaccurate results,<br />Non-comparable,<br />More chance of mistakes,<br />Not much use for control purpose. <br />
  7. 7. Batch Costing<br />“the form of specific order costing which applies where similar articles are manufactured in batches either for sale or for use within the company”-ICMA<br />This system to be utilized when a firm manufacture products in readily identifiable batches or definite lots.<br />“A batch is a cost unit which consist of a group of similar articles, which maintain its identity throughout one or more stages of production”<br />
  8. 8. Features<br />Variant of job costing<br />Job costing is tailored to meet the customers’ specifications whereas batch costing produced inventory for future sale to customers.<br />Furniture making, Small tool making, clothing & toys and food processing undertakings.<br />
  9. 9. Contract Costing<br />Variant of job costing,<br />Applies to construction works,<br />Individual cost unit (individual jobs)& cost centre (department or process),<br />
  10. 10. PROCESS COSTING<br />ICMA London “that form of operation costing, where standardized goods are produced”<br />Charles T. Horngren “process costing deals with the mass production of like-units that usually pass in continuous fashion through a series of production of production steps called operation & steps”<br />Process costing is a method of costing which is used to ascertain the cost of output at each stage of production <br />
  11. 11. features<br />Sequential process,<br />Each process is deemed as a cost centre<br />Cost are accumulated separately,<br />Chances of process of loss of input<br />Process are divided with the units of output to get the average,<br />Completed & semi-finished output are to be expressed in common terms,<br />Two or more products are given equal importance.<br />
  12. 12. Advantages<br />Cost can be computed weekly or daily,<br />Cost control & control over production are more effective because of uniform output,<br />Simple cost ascertainment,<br />Less expensive<br />Indirect expenses can be allocated more accurately,<br />Reliable data can be obtained,<br />Quotations become more easy due to standardized processes.<br />
  13. 13. Disadvantages<br />Cost obtained at the end of process<br />Historical costs & their utility for cost control & managerial decision-making is not significant,<br />Inefficiencies in processes can be concealed,<br />Apportionment of joint costs to common products may lead to irrational pricing decisions<br />