CA Intermediate · Cost and Management Accounting · Unit & Batch Costing
Which one of the following industries is MOST suitable for the application of batch costing?
Readymade garment manufacturing is most suitable for batch costing because output is made in lots of a design, and each lot is treated as one cost unit. Cement and power are continuous production, and a bridge is a one-off contract, so they use other costing methods.
- ACement manufacturing, producing a uniform product continuously
- BReadymade garment manufacturing, producing lots of a design together before moving to the next designCorrect
- CConstruction of a single bridge under a contract
- DElectricity generation by a thermal plant
Explanation
Batch costing suits industries that produce identical units in lots, each lot being a cost unit, as in garments, biscuits or pharmaceuticals. Cement and electricity are continuous, homogeneous output suited to unit or process costing, and a single bridge is a contract.
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