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

In batch costing, the cost per unit of a batch is obtained by:

In batch costing, unit cost equals total batch cost divided by good units produced in that batch. The batch is the cost unit, so all its material, labour and overheads are accumulated and spread over the output. Prime cost alone or a per-batch average would misstate unit cost.

  1. ADividing the total batch cost by the number of good units produced in the batchCorrect
  2. BDividing the total cost of all batches by the number of batches
  3. CDividing the batch cost by the number of units ordered by customers
  4. DDividing only the prime cost of the batch by the units in the batch

Explanation

A batch is treated as a cost unit, so its total cost is accumulated and divided by the good units produced to give the per-unit cost. Prime cost alone omits overheads, and averaging over batches ignores batch size.

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