The pros of batch costing are as follows:

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Consider a company that makes 1000 units of bulbs. The business calculates the production budget for the entire batch to estimate the cost per bulb. The costs include labour, materials, and overhead costs. It is then divided by 1000 units. If we consider the cost of one bulb as Rs.100, then the total cost of production of the lot is Rs. 1,00,000. This allows the company to determine the gain when one bulb is sold. It enables them to adjust the pricing and quantity of production for better gains.

Example 2
Suppose a car manufacturing company produces cars in batches known as production runs; they estimate the total prediction budget that includes all raw materials, labour, and overhead costs. This is divided by the number of units produced to determine the price per unit. It helps them determine the selling price along with estimating the gain.

Pros and Cons of Batch Costing

This metric is crucial for companies that produce products in batches as guatemala phone number list they assign a certain cost to every batch. It makes cost traceability easier and helps determine which batch is expensive.
This metric is also handy for companies that make different products, as it allows them to track the cost of every product’s production. This data can be used to determine the selling price and make other business decisions.
It is a simple method and does not need much information to be tracked. It is easy to maintain and implement.
It provides crucial information useful in decision-making.
The cons of batch costing are listed below:

This method can be time-consuming and expensive as every batch needs estimation.
Tracking of direct and indirect costs can be a challenge.
It creates opportunities for the organisation to manipulate costs to improve their department’s performance.
It distorts the decision-making process.