Unit, Job & Batch Costing (Cambridge (CIE) AS Accounting): Revision Note

Unit costing is where the cost of producing a single unit of product or service is calculated 

It is used when production is continuous and identical products are produced 

STEP 1

Calculate the direct materials cost per unit

• Multiply the cost per direct material unit (e.g. cost per metre) by the amount of direct materials used per unit

STEP 2

Calculate the direct labour cost per unit

• Multiply the hourly rate by the hours spent per unit

• These may have different hourly rates for each department

  • E.g. machining department, assembly department

STEP 3

Calculate overheads per unit

• Multiply the overhead absorption rate by machine hours or labour hours used per unit

  • Machine hours for machine-intensive departments

  • Labour hours for labour-intensive departments

Job costing is where the cost of a special order is calculated 

It is used when each job is customised or made to order

A cost statement using job costing is prepared to determine the total cost and cost per job

STEP 1

Calculate the direct materials cost

STEP 2

Calculate direct labour cost

STEP 3

Calculate manufacturing overheads

• Add to direct costs to get total production cost

STEP 4

Calculate administrative and selling and distribution overheads

• Add to total production cost to get total cost of job

Batch costing is where the cost of producing a batch of identical products is calculated 

It is used when products are produced in batches rather than individually or continuously 

STEP 1

Determine the batch size

• Batch size = Total units produced in the batch

STEP 2

Calculate direct material cost

STEP 3

Calculate direct labour cost

STEP 4

Calculate factory overheads

STEP 5

Calculate total cost of batch

• Add total direct costs and factory overheads