Cost Accounting · Batch Costing

How to Prepare a Batch Cost Sheet and Cost per Unit

Updated 10 October 2026 · Fact-checked

Batch costing treats a group of identical units as one job. You collect materials, labour, direct expenses and overheads for the batch, add them to get the total batch cost, divide by units produced for cost per unit, then add profit to find the selling price. Cost sheet format must be followed.

Understand Cost Sheet and Accounting for a Batch

A batch is a lot of identical units produced together, for example 500 school bags or 1,000 tablets. Each batch gets its own batch number. Costs are collected against that number, just as a job cost sheet collects costs for one job.

The difference from job costing is the last step. In a job, the whole cost belongs to one customer order. In a batch, the total cost is spread over all the units in the batch, so you get a cost per unit.

Costs are collected in the usual order. Direct materials come from material requisitions. Direct labour comes from job or batch time tickets. Direct expenses, such as special tool hire for the batch, are charged directly. Overheads are absorbed using a predetermined rate, for example a percentage of direct wages or a rate per labour hour.

Some costs are incurred once per batch, not per unit. Setting-up cost is the main example. It is a batch cost, so it is added to the batch total and then spread over the units. This is why larger batches give lower cost per unit.

The batch cost sheet shows prime cost, factory cost, cost of production, cost of sales and profit in that order. If a question gives selling price or profit margin, you also work out the profit per unit.

Key rules to remember

Prime cost of batch: Prime cost = Direct materials + Direct labour + Direct expenses; Include setting-up labour or materials if they are traceable to the batch.
Factory (works) cost: Factory cost = Prime cost + Factory overheads absorbed; Adjust for opening and closing work in progress if given.
Cost of production: Cost of production = Factory cost + Administration overheads absorbed; Use the basis of absorption stated in the question.
Cost of sales: Cost of sales = Cost of production + Selling and distribution overheads; Selling overheads are usually charged on units sold.
Cost per unit: Cost per unit = Total batch cost ÷ Units produced (good units); If normal spoilage exists, divide by good units.
Overhead absorption: Overhead absorbed = Rate × Base (for example % of direct wages, or rate per hour × hours); Use the base given for that batch.
Profit and selling price: Selling price = Cost of sales + Profit; Profit on cost = % × cost; Profit on sales = % × selling price; Check whether the profit is on cost or on sales.

How to solve Cost Sheet and Accounting for a Batch questions

Use this order for any batch costing question. It keeps your answer in the format that earns step marks.

1Read the question and note the batch size, units sold or completed, and the basis for profit.
2Write the cost sheet heading with the batch number and number of units.
3List direct materials, direct labour and direct expenses. Add setting-up costs that belong to the batch. Total them as prime cost.
4Compute factory overhead using the given rate and base. Add to get factory cost.
5Add administration overhead, then selling and distribution overhead, each on the given basis, to reach cost of production and cost of sales.
6Divide the total by units to get cost per unit. Use good units if there is normal spoilage.
7Add profit as asked, on cost or on sales, to find selling price and per-unit price.
8Show working notes for each overhead and each rate below the statement.

Quickest way: Column method with one total line

When to use it: Use it when the question has many cost items and little time, and wants only total cost and cost per unit.

Make two columns: Total (₹) and Per unit (₹).
Fill the total column first, line by line, in cost sheet order.
Compute overheads in a side box as you reach them.
Divide each subtotal by the units once at the end, not for every line.
Check: the per-unit column multiplied by units should equal the total.

Common mistakes in Cost Sheet and Accounting for a Batch

Dividing setting-up cost by one unit instead of the batch.
Students treat every cost as a per-unit cost.
Fix: Treat setting-up as a batch cost. Add it to the total and then divide by units.
Using the wrong base to absorb overheads.
Rates are given for direct wages, hours and materials, and students mix them.
Fix: Underline the base in the question and apply the rate only to that base for that batch.
Confusing profit on cost with profit on sales.
The two phrases look alike in a hurry.
Fix: For profit on sales of 20%, cost is 80% of price, so price = cost ÷ 0.80. For profit on cost of 20%, price = cost × 1.20.
Dividing by units started and not units completed.
Both numbers appear in the question.
Fix: Use good output. If spoilage is normal, its cost is spread over good units.
Charging selling overhead on units produced instead of units sold.
Students stop at the batch total.
Fix: Charge selling and distribution overhead on units sold, unless the question says otherwise.
Leaving out working notes.
Students rush to the final answer.
Fix: Show each overhead calculation below the statement. Step marks depend on it.

Worked examples

Example 1

Batch No. 21 of 400 units had the following costs: direct materials ₹80,000; direct wages ₹40,000; setting-up cost ₹4,000 (direct to batch). Factory overheads are absorbed at 50% of direct wages and administration overheads at 10% of factory cost. Prepare the batch cost sheet and find the cost per unit.

Show the solution

Prime cost = 80,000 + 40,000 + 4,000 = ₹1,24,000.
Factory overhead = 50% × 40,000 = ₹20,000.
Factory cost = 1,24,000 + 20,000 = ₹1,44,000.
Administration overhead = 10% × 1,44,000 = ₹14,400.
Cost of production = 1,44,000 + 14,400 = ₹1,58,400.
Cost per unit = 1,58,400 ÷ 400 = ₹396.

Answer: Total batch cost is ₹1,58,400. Cost per unit is ₹396.

Example 2

Batch No. 7 produced 500 units at a total cost of production of ₹2,50,000. 400 units were sold. Selling and distribution overhead is ₹10 per unit sold. The firm wants a profit of 20% on sales. Find the cost per unit produced, the total cost of sales for the units sold, and the selling price per unit.

Show the solution

Cost per unit produced = 2,50,000 ÷ 500 = ₹500.
Cost of production of 400 units sold = 400 × 500 = ₹2,00,000.
Selling overhead = 400 × 10 = ₹4,000.
Cost of sales = 2,00,000 + 4,000 = ₹2,04,000.
Cost per unit sold = 2,04,000 ÷ 400 = ₹510.
Profit on sales is 20%, so cost is 80% of price. Selling price = 510 ÷ 0.80 = ₹637.50.
Check: total sales = 400 × 637.50 = ₹2,55,000. Profit = 2,55,000 − 2,04,000 = ₹51,000, which is 20% of 2,55,000.

Answer: Cost per unit produced is ₹500. Cost of sales is ₹2,04,000. Selling price per unit is ₹637.50.

Exam tips

Write the cost sheet in the standard order with subtotals. Marks are given for the layout.
Read the profit wording twice: on cost or on sales.
Show overhead rate working notes under the statement.
In MCQs, check whether the question wants the total or the per-unit figure before picking an option.
Look for setting-up cost, it is the most common batch-specific item.

Practice questions from Batch Costing

Cost Sheet and Accounting for a Batch in other exams

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

CA IntermediateBatch Costing

Cost Sheet and Accounting for a Batch: frequently asked questions

What is the difference between batch costing and job costing?

A job is one customer order, so its whole cost goes to that order. A batch is a lot of identical units, so you find the total cost of the batch and then divide by units to get cost per unit.

How do you calculate cost per unit in batch costing?

Add all costs charged to the batch, including setting-up and absorbed overheads. Divide the total by the number of good units produced.

Is setting-up cost a batch cost or a unit cost?

It is incurred once for the batch, so you add it to the batch total. It becomes a per-unit cost only after you divide by the units in the batch.

Do I charge selling overhead on units produced or sold?

Charge it on units sold unless the question gives another basis. Unsold units remain in stock at cost of production.