Job costing applies when each order is different: engineering fabrication, printing, repairs, tool rooms. Batch costing applies when identical units are made in lots: pharmaceuticals, components, garments.
The job cost sheet
| Element | Source |
|---|---|
| Direct materials | Material requisitions charged to the job number |
| Direct labour | Time sheets or job cards |
| Direct expenses | Subcontracting, special tooling for the job |
| Production overhead | Absorbed at machine hour or labour hour rate |
| Administration and selling overhead | Absorbed as a percentage of works cost |
| Total cost | Compared with the price quoted |
Comparing the cost sheet with the estimate after each job shows where quotations go wrong: underestimated hours, scrap, or rework.
Batch costing
The total cost of a batch is divided by the good units in it. Set-up cost (machine changeover, cleaning, trial runs) is incurred once per batch, so larger batches spread it more thinly but raise inventory holding cost.
Economic batch quantity
EBQ balances set-up cost against holding cost:
EBQ = √(2 × A × S ÷ C)
where A = annual demand in units, S = set-up cost per batch, C = annual holding cost per unit.
Example. A = 24,000 units, S = ₹1,500, C = ₹4 per unit per year.
EBQ = √(2 × 24,000 × 1,500 ÷ 4) = √18,00,000 ≈ 1,342 units, about 18 batches a year.
Practical points
- Open a job or batch number before work starts, so that costs are captured as they arise.
- Record rework and rejection separately; they are often the real cause of overruns.
- Close jobs promptly and review variances while the details are still fresh.