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CA Intermediate · Cost and Management Accounting · Unit & Batch Costing

In batch costing, if a batch of 1,000 units is completed and 40 units are found defective, which are reworked at a cost attributable to a specific customer's special requirements, how is the rework cost treated?

The rework cost is charged to that specific batch or job, because it arises from the special requirements of that particular order. Only rework caused by general, normal factors is spread across production as factory overhead.

  1. ACharged to that specific batch or jobCorrect
  2. BSpread over all factory output as normal overhead
  3. CCredited to the costing profit and loss account
  4. DIgnored until the units are sold

Explanation

Rework cost caused by the special requirements of a particular order is charged directly to that job or batch. Rework due to normal, general causes is treated as factory overhead.

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