Example of Batch Costing

The budgeted variable overheads of a company for the year of 2001 are as given as:

Department                Overhead (shs.)                                   Absorption base

A                                  150,000                                               15,000 direct labour hours

B                                  200,000                                               25,000 direct labour hours

C                                  120,000                                               20,000 direct labour hours

D                                  300,000                                               30,000 machine labour hours

Additional Information

1. Selling and administering overheads are changed at 10 percent of total production costs whereas the profit mark up is 25 of net costs:
2. An order for 2,000 units was obtained from a customer. The batch number of its order is 510. The given additional information in respect of its batch is given below as:
3. Direct materials - 87,000/-
4. Direct Labor - Dept A (150 direct labor hrs) - 12shs. Direct labor hour.
5. Dept B (40 direct labor hrs) @ 15shs. Per hr
6. Dept C (60 direct labor hrs) @20shs. Per hr
7. Dept D (100 direct labor hrs) @10shs. Per hr

A total of 50 machine hours were employed in this job

Required

a) Calculated the net cost of the batch

b) Cost/Unit

c) Selling Price of the batch

d) Selling Price unit

 Solution