Example
The following example will help you understand the method in greater detail. Assume that a product is manufactured in 3 batches (Batch 1, Batch 2, Batch 3) during the year. Let the number of items manufactured per batch be 2,000 pieces, 1,500 pieces, 1,700 pieces respectively and the total cost of production be $8,000, $7,000, $7,700 respectively.