Batch costing a modified form of job costing. While job costing is concerned with producing articles according to customer’s requirements and specifications, batch costing is used where the articles are manufactured in a good number in definite batches. Component parts of watches, radio sets, television sets etc., are extensively produced under batch costing, for being assembled in the product. If one component of a special design is ordered by a customer for manufacture, it is Batch costing, Batch costing, therefore, is also known a “Lot Costing”.
A batch of workers is assigned to perform the task of producing a certain number of articles in a particular period. Thus the cost of production can be compared batch wise, and efficiency ascertained. Like job order system, one number is allotted to each batch. The material requisitions are prepared batch wise, labour is engaged batch wise, and the overheads are also charged batch wise. This it is a modified form of job costing.
The cost control in batch costing depends upon ascertainment of the optimum number of batch production. The Economic Batch Quantity can be decided on the same principle and same formula as applied to Economic Order Quantity is case of materials.
Cost comparison between the two batches is possible if both batches are allowed the same facilities, time to produce, and the same number of articles. The comparison can be fruitfully done with the help of cost sheets of the two batches.
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