How To Calculate The Cost Of Products Under Batches?

The batching method, also known as the order method, is a method of collecting production costs and calculating the cost of products according to the batch of products.

It is mainly applicable to multi-step production of small batch, single piece and management, which does not require cost calculation step by step.

The enterprises that use batch method to calculate the cost of products, the production cost subsidiary ledger should be set according to the product's batch or the order of the purchase unit, and the related cost will be collected to the production cost ledger of the batch product.

When calculating the cost at the end of the month, there is no question of the distribution of the cost between the finished product and the product.

The advantage of this method is that the cost calculation is consistent with the production cycle and the calculation method is relatively simple.

The general calculation procedure of batching method is as follows: (1) according to the various original vouchers or through the cost allocation summary table, and with the prescribed procedures and methods, the production costs are recorded in the production cost ledger set according to the batch of products.

(2) after the completion of a batch of products, the total cost and unit cost of the products are calculated according to the total cost cost and the number of finished products gathered from the production cost ledger.

(3) for a batch of products that are completed and sold on a fractional basis, the cost of the finished product can be calculated according to the planned unit cost, the fixed unit cost or the actual unit cost of the same product in the near future, which is pferred out of the product cost ledger.

In practice, the product cost is generally calculated by the simplified method of product cost calculation.

The simplified method of product cost calculation is also called the cumulative indirect cost allocation method.

In this way, the indirect costs occurring every month are not allocated between the batches of products per month. Instead, they are accumulated first and then allocated to the finished products after the completion of the product, according to the percentage of the accumulated work hours of the finished products.

The calculation formula is as follows: the total indirect cost allocation rate of all products is the cumulative indirect cost of all products. The cumulative cost of the whole product is the indirect cost charged by a certain batch of finished products = the cumulative working hours of the completed products and the total indirect cost allocation rate of all products. The total cost of production and the accumulated working hours (the actual working hours or the completed quota hours) of all the products of the enterprise or workshop are provided monthly, and the two cost accounts of the product cost must be set up.

In this way, the product cost ledger should be set up according to the product approval. However, before the completion of each batch of products, it is necessary to register the direct cost and production hours per month without having to allocate monthly and register the indirect costs, and calculate the cost of the products in each batch.

The total cost of all products is reflected in the two level of product cost.

Based on this method, the indirect cost is only allocated to the finished product, but not the cost of the product in batches. Therefore, it is also called batching method of product cost in batches.

This method can only be adopted at the same level of indirect cost in each month, otherwise it will affect the correctness of the monthly product cost calculation.