CMA Intermediate · Cost Accounting · Batch Costing
Which of the following is the most appropriate treatment of the cost of a special tool made exclusively for one batch and scrapped after its completion?
The tool cost should be charged directly to the batch, because it was incurred only for that batch and is traceable to it. Treating it as general overhead would burden other batches unfairly.
- ACharge it to the batch as a direct costCorrect
- BSpread it over all batches as factory overhead
- CTreat it as an abnormal loss
- DIgnore it in the cost sheet
Explanation
Costs identifiable with and incurred solely for a particular batch, such as a special tool, are traceable and so are charged directly to that batch. Spreading it over other batches would distort their costs.
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