Batch Costing

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REVIEW OF THE LITERATURE
BATCH COSTING

INTRODUCTION

Historically, because of the industrial background of cost accounting, specific order costing has tended to centre around the manufacturing environment. Given the developments both in cost accounting and performance evaluation over the last 20 years or so, cost accounting is now being applied in manufacturing, non manufacturing , service and even in non profit making organizations.

Cost Accounting is usually considered only as it applies to manufacturing operations. In today’s economy, however every type and size of organization should benefit form the use of cost accounting concepts and techniques. For example financial institutions, governmental agencies and NGO’s may apply cost accounting principles. In specific order costing products are made according to the orders of the clients. Every product has different style than the other. There is another method, which is process costing in which products are made simultaneously without differentiation.
What we are dealing with when we are considering a batch is a group of items that are closely related, and are being made for a single customer, or are being made all at the same time; and the key point for our purposes is that the group of items maintains its identity as a batch, serial numbers, product numbers, production numbers, all identify the goods as a batch.
The accumulation and recording of costs under batch costing is very similar to the techniques used with job costing.
Before we get into the detail of Batch Costing, let me advise anyone who reads this page who has never been inside a factory or who has never been inside an office ... and who has never thought about the cost accounting aspects of any of that, to consider undertaking either Project 1 and/or Project 2 below.
The biggest problem that many people experience when studying cost accounting is that it is meaningless for them: this is because they can't relate to it ... factories and offices

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