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

Which of the following best describes a situation where batch costing is the appropriate costing method?

Batch costing fits a firm producing a fixed quantity of identical garments as one lot, because costs are collected for the whole batch and then divided by the number of units. Continuous single-product output suits unit costing, bridges suit contract costing, and patient-days suit service costing.

  1. AA cement plant producing a single uniform product continuously throughout the year
  2. BA firm producing a fixed quantity of identical garments together as one lot, with costs accumulated for the whole lotCorrect
  3. CA construction company building one bridge under a specific contract
  4. DA hospital recording cost per patient-day

Explanation

Batch costing treats a group of identical units produced together as one cost unit, so costs are accumulated for the lot and divided by batch quantity. Option A suits unit (single/output) costing, option C contract costing, and option D service costing.

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