Cost and Management Accounting · Unit & Batch Costing

Unit Costing (Single or Output Costing) for CA Intermediate

Updated 4 October 2026 · Fact-checked

Unit costing, also called single or output costing, is a method used when a firm makes one uniform product in large volumes. You total all costs for the period in a cost sheet, then divide by units produced to get cost per unit. Add profit to find the selling price.

Understand Unit Costing (Single or Output Costing)

Unit costing is a costing method for industries that make identical units of one product, or a few grades of it, in a continuous flow. Every unit is the same, so every unit gets the same cost. The cost unit is fixed in advance, such as a tonne of cement, a tonne of steel, a thousand bricks or a litre of milk.

The method works because there is nothing to separate. You do not need job numbers or process accounts. You collect all costs for a period, group them in a cost sheet, and divide by the output of that period. The result is cost per unit.

The main features are: one standard product, a continuous and uniform production flow, a single measurable cost unit, costs collected period by period (month, quarter or year), and no need to track costs by job or batch.

It is used in cement, sugar, paper, bricks, coal mining, breweries, dairies, steel and power generation. Where products differ from order to order, use job costing instead. In job costing each order has its own cost sheet. In unit costing there is one cost sheet for the whole period.

The cost sheet shows costs in stages: prime cost, factory cost, cost of production, cost of goods sold, cost of sales, and then profit and sales. Each stage adds a new group of costs, so you can see where cost builds up.

Key rules to remember

Cost per unit: Cost per unit = Total cost ÷ Number of units produced; Use units produced for cost of production, and units sold for cost of sales per unit.
Prime cost: Prime cost = Direct materials + Direct labour + Direct expenses; Direct materials consumed = Opening stock + Purchases + Carriage inwards − Closing stock.
Factory cost: Factory cost = Prime cost + Factory overheads (adjusted for opening and closing WIP); Add opening WIP and deduct closing WIP at this stage. The sale value of normal scrap is credited to the relevant overhead (usually factory overheads) or deducted from the cost of production, as the question directs. Abnormal loss is shown outside the cost sheet at cost and written off to the Costing Profit and Loss Account.
Cost of production: Cost of production = Factory cost + Administration overheads (production-related); Adjust for opening and closing stock of finished goods to reach cost of goods sold.
Cost of sales: Cost of sales = Cost of goods sold + Selling and distribution overheads; Selling price = Cost of sales + Profit.
Selling price per unit: Selling price per unit = Total sales ÷ Units sold; If profit is given as a % of sales, profit = % × sales. If as a % of cost, profit = % × cost.

How to solve Unit Costing (Single or Output Costing) questions

Follow the same order for any unit costing question. It keeps the layout clean and earns step marks even if one figure goes wrong.

1Read the question and note the cost unit, units produced, units sold and any stock or WIP figures.
2Compute direct materials consumed: opening stock + purchases + carriage inwards − closing stock.
3Draw the cost sheet with columns for total cost and cost per unit. List direct materials, labour and expenses, and total them as prime cost.
4Add factory overheads. Adjust for opening and closing WIP. Credit the sale value of normal scrap to the relevant overhead (usually factory overheads) or deduct it from the cost of production, as the question directs. Keep abnormal loss outside the cost sheet; show it at cost and write it off to the Costing Profit and Loss Account. This gives factory cost.
5Add administration overheads to get cost of production. Adjust for finished goods stock, and work out cost of goods sold.
6Add selling and distribution overheads to get cost of sales. Divide by units to get cost per unit.
7Add profit, as per the question, to reach sales. Compute the selling price per unit if asked.
8Show workings for materials, units sold and any percentage figures as notes below the cost sheet.

Quickest way: Fast cost sheet under exam pressure

When to use it: Use this when the question gives many items in a list and asks for a cost sheet with cost per unit and selling price.

Tick each item in the list as you place it, so you do not miss one or use it twice.
Do the one-line working for materials consumed first. Items like closing stock and carriage inwards are easy to forget.
Skip items that are not costs, such as interest on loans, income tax, donations, and dividends. They stay out of the cost sheet.
Fill in the total column first, then divide each subtotal by units for the per-unit column. Do not compute per unit item by item.
For MCQs, find the one figure being tested, usually cost per unit or profit per unit, and work only that line. Check that the four options differ and pick the one matching your result. There is no negative marking, so always attempt every MCQ.

Common mistakes in Unit Costing (Single or Output Costing)

Dividing total cost by units sold instead of units produced for cost of production.
Students rush to the final per-unit figure and ignore closing stock.
Fix: Use units produced for cost of production per unit. Use units sold only for cost of sales per unit.
Forgetting to adjust opening and closing WIP and finished goods stock.
The adjustments sit in different places in the question and are easily overlooked.
Fix: Adjust WIP at factory cost stage. Adjust finished goods at cost of goods sold stage.
Including non-cost items like interest, income tax, dividend or loss on sale of an asset.
They appear in the same list as real expenses.
Fix: Include only costs of producing and selling. Mention in a note that financial and appropriation items are excluded.
Not deducting scrap sale value or treating abnormal loss wrongly.
Students are unsure where scrap is credited.
Fix: Credit the sale value of normal scrap to the relevant overhead (usually factory overheads) or deduct it from the cost of production, as the question directs. Take abnormal loss outside the cost sheet and write it off to the Costing Profit and Loss Account.
Calculating profit on the wrong base.
The question says profit is 20% on sales, but students apply it to cost.
Fix: Read the base. For profit of x% on sales, sales = cost ÷ (1 − x/100). For profit of x% on cost, sales = cost × (1 + x/100). Here x is the percentage figure, such as 20 for 20%.

Worked examples

Example 1

A cement plant produced 10,000 tonnes in a month. Costs: direct materials ₹12,00,000; direct wages ₹6,00,000; factory overheads ₹3,00,000; administration overheads ₹1,50,000; selling and distribution overheads ₹1,50,000. All units were sold at ₹290 per tonne. Prepare a cost sheet showing cost per tonne and profit.

Show the solution

Prime cost = 12,00,000 + 6,00,000 = ₹18,00,000.
Factory cost = 18,00,000 + 3,00,000 = ₹21,00,000. There is no WIP.
Cost of production = 21,00,000 + 1,50,000 = ₹22,50,000. There is no stock change, so cost of goods sold is also ₹22,50,000.
Cost of sales = 22,50,000 + 1,50,000 = ₹24,00,000.
Cost per tonne = 24,00,000 ÷ 10,000 = ₹240.
Sales = 10,000 × 290 = ₹29,00,000.
Profit = 29,00,000 − 24,00,000 = ₹5,00,000, which is ₹50 per tonne.

Answer: Cost of sales is ₹24,00,000, cost per tonne is ₹240, and profit is ₹5,00,000 (₹50 per tonne).

Example 2

A firm making bricks has: opening stock of materials ₹40,000; purchases ₹2,60,000; closing stock of materials ₹50,000; direct wages ₹1,20,000; factory overheads ₹80,000; administration overheads ₹40,000; selling overheads ₹30,000 (all relating to the 4,000 units sold). It produced 5,000 units, sold 4,000 units, and had no opening finished stock. Find cost of production per unit, cost of goods sold and cost of sales. The selling price is set to give 25% profit on cost of sales. Find the selling price per unit.

Show the solution

Materials consumed = 40,000 + 2,60,000 − 50,000 = ₹2,50,000.
Prime cost = 2,50,000 + 1,20,000 = ₹3,70,000.
Factory cost = 3,70,000 + 80,000 = ₹4,50,000.
Cost of production = 4,50,000 + 40,000 = ₹4,90,000. Per unit = 4,90,000 ÷ 5,000 = ₹98.
Closing finished stock = 1,000 units × 98 = ₹98,000. Cost of goods sold = 4,90,000 − 98,000 = ₹3,92,000.
The question states that the selling overheads of ₹30,000 relate to the 4,000 units sold, so cost of sales = 3,92,000 + 30,000 = ₹4,22,000.
Cost of sales per unit = 4,22,000 ÷ 4,000 = ₹105.50.
Profit = 25% × 4,22,000 = ₹1,05,500. Sales = 4,22,000 + 1,05,500 = ₹5,27,500. Selling price per unit = 5,27,500 ÷ 4,000 = ₹131.875.

Answer: Cost of production per unit is ₹98, cost of goods sold is ₹3,92,000, cost of sales is ₹4,22,000, and selling price is about ₹131.88 per unit.

Exam tips

Always draw the cost sheet with two columns: total (₹) and per unit (₹). Examiners award marks for layout and for each subtotal.
Show a working note for materials consumed, units in stock and any percentage calculation. Step marks come from these.
Read whether the question wants cost per unit on units produced or units sold. State your base in the answer line.
For theory, learn the features and the list of industries. A two-line contrast with job costing is a frequent short question.
In MCQs, check for items that must be excluded, such as interest and tax, before totalling.

Practice questions from Unit & Batch Costing

Unit Costing (Single or Output Costing) in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

CMA FoundationCost Unit and Units of Measurement

Unit Costing (Single or Output Costing): frequently asked questions

What is the difference between unit costing and job costing?

Unit costing is for uniform products made continuously, with one cost sheet for each period. Job costing is for work done to a customer's order, with a separate cost sheet for each job. The cost per unit in unit costing is an average, while in job costing it is specific to the job.

Which industries use unit costing?

Industries making a standard product in bulk use it, such as cement, sugar, paper, bricks, steel, coal mining, dairies and breweries. The cost unit is usually a tonne, a litre or a thousand pieces.

Is unit costing the same as single output costing?

Yes. Unit costing, single costing and output costing are different names for the same method. All refer to costing a single, uniform product or cost unit.

Do I deduct scrap value in a unit costing cost sheet?

Yes, the sale value of normal scrap is credited to the relevant overhead (usually factory overheads) or deducted from the cost of production, as the question directs. Abnormal loss is not part of normal cost. Show it outside the cost sheet at cost and write it off to the Costing Profit and Loss Account.