Example of Batch Costing
The budgeted variable overheads of a company for the year of 2001 are as given as:
Department Overhead (shs.) Absorption base
A 150,000 15,000 direct labour hours
B 200,000 25,000 direct labour hours
C 120,000 20,000 direct labour hours
D 300,000 30,000 machine labour hours
Additional Information
- Selling and administering overheads are changed at 10 percent of total production costs whereas the profit mark up is 25 of net costs:
- An order for 2,000 units was obtained from a customer. The batch number of its order is 510. The given additional information in respect of its batch is given below as:
- Direct materials - 87,000/-
- Direct Labor - Dept A (150 direct labor hrs) - 12shs. Direct labor hour.
- Dept B (40 direct labor hrs) @ 15shs. Per hr
- Dept C (60 direct labor hrs) @20shs. Per hr
- Dept D (100 direct labor hrs) @10shs. Per hr
A total of 50 machine hours were employed in this job
Required
a) Calculated the net cost of the batch
b) Cost/Unit
c) Selling Price of the batch
d) Selling Price unit
Solution
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Particulars
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Shs.
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D Materials
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D Labour:
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Dept A (150 x 12)
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1,800
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Dept B (40 x 50)
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6000
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Dept C (60 x 20)
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1,200
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Dept D (100 x 10)
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1,000
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Prime Cost
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Variable Overheads:
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Dept A -15,000/15,000 x 150
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1,500
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Dept B - 200,000/25,000 x 40
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320
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Dept C - 120,000/20,000 x 60
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360
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Dept D - 300,000/300,000 x 50
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500
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Total Production Cost
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94,280
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Selling and admin costs - 10% (94,280)
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9,428
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Total Costs
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103,708
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Mark-up: Mark-up @ 25% x 103,708
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25,927
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Cost/Unit = 103,708/2000 units = 51.854
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Selling Price unit = 129,635/2,000 = 64.8175
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