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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
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
Particulars
Shs.
D Materials
D Labour:
Dept A (150 x 12)
1,800
Dept B (40 x 50)
6000
Dept C (60 x 20)
1,200
Dept D (100 x 10)
1,000
Prime Cost
Variable Overheads:
Dept A -15,000/15,000 x 150
1,500
Dept B - 200,000/25,000 x 40
320
Dept C - 120,000/20,000 x 60
360
Dept D - 300,000/300,000 x 50
500
Total Production Cost
94,280
Selling and admin costs - 10% (94,280)
9,428
Total Costs
103,708
Mark-up: Mark-up @ 25% x 103,708
25,927
Cost/Unit = 103,708/2000 units = 51.854
Selling Price unit = 129,635/2,000 = 64.8175
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