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

Which statement about batch costing is correct?

In batch costing, the total cost of a batch is accumulated like a job and divided by the number of units in that batch to get the cost per unit. It suits lot-wise production, unlike continuous single-product unit costing.

  1. AIt is suitable where production is of a single homogeneous product continuing without breaks
  2. BCost per unit is found by dividing the total batch cost by the number of units in the batchCorrect
  3. CEach batch is treated as a process and costs are averaged over opening stock
  4. DIt cannot be used where products are made in lots to stock

Explanation

In batch costing, a batch of identical units is treated like a job, and its total cost is divided by the units in the batch. Single continuous production describes unit costing, and batch costing is commonly used for making lots to stock, such as components or garments.

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