CHAPTER 12
Cost Sheet (or) Statement of Cost
ELEMENTS OF COST
Introduction
Elements of cost are necessary to have a proper classification and analysis of total cost. Thus,
elements of cost provide the management with necessary information for proper control and management
decisions. For this purpose, the total cost is analysed by the elements or nature of cost, i.e., material,
labour and overheads. The various elements of costs may be illustrated as below:
Elements of Cost
~
t
Materials
Labour
~
~
r
Direct
l
Indirect
l
Direct
~
Other Expenses
l
Indirect
l
~
l
Indirect
Direct
1
1
Overheads
t
l
, Production or
Factory Overhead
Administration
Overhead
Selling Overhead
l
Distribution
Overhead
By grouping of the above elements of cost, the following divisions of cost are obtained:
(1)
Prime Cost
=
Direct Materials + Direct Labour + Direct Expenses
(2)
Works Cost (Factory)
=
Prime Cost + Factory Overhead
31/
Cost Sheet (or) Statement 01 Cost
(3)
Cost of Production
(4)
Cost of Sales (or) Total Cost
=
=
Factory Cost + Office and Administrative Overhead
Cost of Production + Selling and
Distribution Overhead
(I) Materials Cost
Materials Costs refer to cost of materials which are the major substances used in production and are
converted into finished goods and semi-finished goods. Materials are grouped as direct materials and
indirect materials.
Direct Materials: Direct materials are those that form part of a product. Raw materials, semifinished products, and finished products which can be identified with production of a product are known
as direct materials. Sugar cane, cotton, oilseeds, woods etc. are examples of direct materials. The cost of
materials involves conversion of raw materials into finished products.
Indirect Materials: Material costs, other than direct material cost are known as indirect material
cost. Indirect materials cannot be identified with a particular unit of cost or product. Indirect materials are
indirectly used for producing the products. Lubricating oil, consumable stores, fuel, design, layout etc. are
examples of indirect material cost.
(II) Labour Cost
In actual production of the product, labour is the prime factor which is physically and mentally
involved. The payment of remuneration of wages is made for their effort. The labour costs are grouped
into (a) Direct Labour and (b) Indirect Labour.
(a) Direct Labour: Direct labour cost or direct wages refer to those specifically incurred for or can
be readily charged to or identified with a specific job, contract, work order or any other unit of cost are
termed as direct labour cost. Wages for supervision, wages for foremen, wages for labours who are actually
engaged in operation or process are examples of direct labour cost.
(b) Indirect Labour: Indirect labour is for work in general. The importance of the distinction lies in
the fact that whereas direct labour can be identified with and charged to the job, indirect labour cannot be
so charged and has therefore to be treated as part of the factory overheads to be included in the cost of
production. Examples are salaries and wages of supervisors, store keepers, maintenance labour etc.
(III) Expenses
All expenses are other than material and labour that are incurred for a particular product or process.
They are defined by ICMA as "The cost of service provided to an undertaking and the notional cost of the
use of owned assets." Expenses are further grouped into (a) Direct Expenses and (b) Indirect Expenses.
,(a) Direct Expenses: Direct expenses which are incurred directly and identified with a unit of
output or process are treated as direct expenses. Hire charges of special plant or tool, royalty on product,
cost of special pattern etc. are the examples of direct expenses.
(b) Indirect Expenses: Indirect expenses are expenses other than indirect materials and indirect
labour, which cannot be directly identified with a unit of output. Rent, power, lighting, repairs, telephone
etc. are examples of indirect expenses.
Overheads
All indirect material cost, indirect labour cost, and indirect expenses are termed as Overheads.
Overheads may also be classified into (a) Production or Factory Overhead (b) Office and Administrative
Overheads (c) Selling Overhead and (d) Distribution Overhead.
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A Textbook of Financial Cost and Management Accounting
(a) Production Overhead: Production Overhead is also termed as Factory Overhead. Factory
overhead includes indirect material, indirect labour and indirect wages which are incurred in the factory.
For example, rent of factory building, repairs, depreciation, wages of indirect workers, etc.
(b) Office and Administrative Overhead: Office and Administrative Overhead is the indirect
expenditure incurred in formulating the policies, establishment of objectives, planning, organizing and
controlling the operations of an undertaking. All office and administrative expenses like rent, staff salaries,
postage, telegram, general expenses etc. are examples.
(c) Selling Overhead: Selling Overhead is the indirect expenses which are incurred for promoting
sales, stimulating demand, securing orders and retaining customers. For example, advertisement, salesmen's
commission, salaries of salesmen etc.
(d) Distribution Overhead: These costs are incurred from the time the product is packed until it
reaches its destination. Cost of warehousing, cost of packing, transportation cost etc. are some of the
examples of distribution overhead.
COST SHEET
Meaning: Cost Sheet or a Cost Statement is "a document which provides for the assembly of the
estimated detailed elements of cost in respect of cost centre or a cost unit." The analysis for the different
elements of cost of the product is shown in the form of a statement called "Cost Sheet." The statement
summarises the cost of manufacturing a particular list of product and discloses for a particular period:
(I)
(II)
(III)
(IV)
Prime Cost;
Works Cost (or) Factory Cost;
Cost of Production;
Total Cost (or) Cost of Sales.
Importance of Cost Sheet
(1)
It provides for the presentation of the total cost on the basis of the logical classification.
(2)
Cost sheet helps in determination of cost per unit and total cost at different stages of production.
(3)
Assists in fixing of selling price.
(4)
It facilitates effective cost control and cost comparison.
(5)
It discloses operational efficiency and inefficiency to the management for taking corrective actions.
(6)
Enables the management in. the preparation of cost estimates to tenders and quotations.
SPECIMEN OF COST SHEET
Cost Sheet for the Period
Particulars
Total Cost
Rs.
Direct Materials :
Opening Stock of Raw Materials
Purchases
Carriage Inwards
xxx
xxx
xxx
Less: Closing Stock of Raw Materials
Direct Materials Consumed
Add : Direct Wages
Direct Expenses
xxx
xxx
xxx
xxx
Cost per Unit
Rs.
Cost Sheet (or) Statement a/Cost
313
Particulars
Prime Cost (1)
Add : Works or Factory Overheads:
Indirect Materials
Indirect Labour
Factory Rent and Rates
Factory Lighting and Heating
Power and Fuel
Repairs and Maintenance
Cleaning
Drawing Office Expenses
Cost of Research and Equipments
Depreciation of Factory Plant
Factory Stationery
Insurance of Factory
Factory or Work Manager's Salary
Other Factory Expenses
Total Factory Cost
Add: Opening Stock of Work in Progress
Less: Closing Stock of Work in Progress
Works Cost (or) Factory Cost (2)
Add: Office & Administrative Overheads:
Office Rent and Rates
Office Salaries
Lighting and Heating
Office Stationery
Office Insurance
Postage and Telegrams
Office Cleaning
Legal Charges
Depreciation of Furniture and Office
Equipments and Buildings Audit Fees
Bank Charges and Commission
Total Cost of Production (3)
Add: Opening Stock of Finished Goods
Less: Closing Stock of Finished Goods
Cost of Production (4)
Add: Selling and Distribution Overheads :
Showroom Rent and Rates
Salesmen's Salaries
Salesmen's Commission
Sales Office Rent and Rates
Travelling Expenses of Salesmen
Warehouse Rent and Rates
Advertisement Expenses
Warehouse Staff Salaries
Carriage Outwards
Sales Manager's Salaries
Repairs and Depreciation of Delivery Van
,
Total Cost
Rs.
Cost per Unit
Rs.
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
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A Textbook of Financial Cost and Management Accounting
Particulars
Sample and Free Gifts
Bad debts, Debt Collection Expenses
Cost of sales (5)
Profit I Loss (6)
Sales
Total Cost
Rs.
Cost per Unit
Rs.
xxx
xxx
xxx
xxx
xxx
Illustration: 1
From the following particulars, prepare a Cost Sheet showing (1) Cost of Materials Consumed (2)
Prime Cost (3) Factory Cost (4) Cost of Production and (5) Profit
Opening stock of raw materials
Opening stock of work in progress
Opening stock of finished goods
Raw materials purchased
Direct wages
Sales for the year
Closing stock of raw materials
Closing stock of work in progress
Factory overhead
Direct expenses
Office and Administrative overhead
Selling and Distribution expenses
Rs.
20,000
10,000
50,000
5,00,000
3,80,000
12,00,000
75,000
15,000
80,000
50,000
60,000
30,000
Solution:
Cost Sheet for the year ......
Particulars
Amount Rs.
Opening Stock of Raw Materials
Purchases
20,000
5,00,000
Less : Closing Stock of Raw Materials
5,20,000
75,000
Cost of Raw Materials Consumed (I)
Add : Direct Wages
Direct Expenses
3,80,000
50,000
Prime Cost (2)
Add : Factory overheads
Add: Opening stock of work in progress
Amount Rs.
4,45,000
4,30,000
8,75,000
80,000
10,000
90,000
Less: Closing stock of Work in Progress
15,000
75,000
Works Cost (or) Factory Cost (3)
Add: Office & Administrative Overhead
9,50,000
60,000
Cost of Production (4)
Add: Opening Stock of Finished Goods
10,10,000
50,000
Less: Closing Stock of Finished Goods
10,60,000
50,000
315
Cost Sheet (or) Statement 01 Cost
Particulars
Amount Rs.
Amount Rs.
10,10,000
30,000
Cost of Goods Sold (5)
Add : Selling and Distribution Overhead
Cost of Sales (6)
Profit (7)
10,40,000
1,60,000
Sales for the year
12,00,000
Illustration: 2
The following information relates to the manufacture of a product during the month of Jan. 2003:
Raw materials consumed
Direct wages
Machine hours worked
Machine hour rate
Office overhead
Selling overhead
Units produced
Units sold at Rs. 3 each; 18,000 units
Rs. 20,000
Rs. 12,000
1,000 hours
Rs. 2 per hour
20% on works cost
Re. 0.40 per unit
20,000 units
Prepare a Cost Sheet and show (a) Prime Cost (b) Work Cost (c) Cost of Production (d) Cost of Goods Sold
(e) Cost of Sales (f) Profit
Solution:
Cost Sheet for Jan. 2003
Particulars
Amount Rs.
Raw Materials Consumed
Direct Wages
Amount Rs.
20,000
12,000
Prime Cost (l)
Add: Factory Overhead 1000 x Rs. 2
32,000
2,000
Work Cost (2)
Add : Office Overhead 20% on Works Cost
34,000
6,800
Cost of Production (3)
Less: Closing Stock of Finished Goods (20000 - 18000
= 40,800 x
=2000 Units)
2,000 }
20,000
40,800
4,080
Cost of Goods Sold (4)
Add : Selling Overhead 18000 @ Re. 0.40
36,720
7,200
Cost of Sales (5)
Profit (6)
43,920
10,080
Sales 18000 Units
@
Rs. 3
54,000
Illustration: 3
The following information relates to the manufacture of a product during the month of Jan. 2003:
Direct raw materials Rs. 1,60,000
Direct wages Rs. 90,000
Machine hours worked 6000
Machine hour rate Rs. 6
3/6
A Textbook of Financial Cost and Management Accounting
Office overhead 15% of work cost
SeIling overhead Rs. 2 per unit
Units produced 5000 units
Units Sold 5,000 units @ Rs. 80 each
Prepare a cost sheet and show (a) Cost per unit and (b) Profit for the period.
Solution:
Cost Sheet for January 2003
Paniculars
Total Cost
Rs.
Total per Unit
Rs.
Direct Raw Materials
Direct wages
1,60,000
90,000
32.00
18.00
Prime cost
2,50,000
36,000
50.00
7.20
2,86,000
57.20
Add: Factory Overhead (6000 x Rs. 6)
Works Cost
Add : Office Overhead
{
2,86,000 x II~
}
42,900
8.58
3,28,900
10,000
65.78
2.00
Profit
3,38,900
61,100
67.78
12.22
Sales 5,000 x Rs. 80
4,00,000
80.00
Cost of Production
Add: Selling Overhead (5000 x Rs. 2)
Cost of Good Sold
Illustration: 4
From the following particulars calculate (1) Prime Cost (2) Factory Cost (3) Cost of Production and
(4) Cost of Sales:
Paniculars
Direct Raw Materials
Direct Wages
Direct Expenses
Factory Rent and rates
Indirect Wages (Factory)
Factory Lighting
Factory Heating
Power (Factory)
Office Stationery
Director's Remuneration (Factory)
Director's Remuneration (Office)
Factory Cleaning
Sundry Office Expenses
Factory Stationery
Water supply (Factory)
Factory Insurance
Office Insurance
Legal Expenses (Office)
Rent of Warehouse
Depreciation Plant & Machinery
.
Rs.
33,000
35,000
3,000
7,500
10,500
2,050
1,500
4,400
900
2,000
4,000
1,000
200
750
1,300
1,100
500
400
300
2,000
Paniculars
Depreciation of office building
Depreciation of delivery Van
Bad debts
Advertising
Salaries of salesmen
Up keeping of delivery Van
Bank charges
Commission on sales
Rent and rates (Office)
Loose tools written off
Output (tonnes)
(sales @ Rs.40 per unit)
Rs.
1,000
200
100
300
1.500
700
100
1.500
500
600
5,000
317
Cost Sheet (or) Statement of Cost
Solution:
Cost Sheet for the year
0
0
0
0
0
0
Rso
Particullus
Direct materials
Direct wages
Direct expenses
Prime Cost (l)
Add : Factory overheads
Factory rent and rates
Indirect wages
Factory lighting
Factory heating
Power (Factory)
Director's remuneration (Factory)
Factory cleaning
Factory stationery
Water supply (Factory)
Factory Insurance
Depreciation of Plant & Machinery
Loose Tools written off
Works Cost (or) Factory Cost (2)
Add: Office and Administrative Overhead:
Office stationery
Director's remuneration (Office)
Sundry office expenses
Office insurance
Legal expenses (Office)
Depreciation of office building
Bank charges
Rent and rates (Office)
Cost of production (3)
Add : Selling and Distribution Overhead:
Rent of warehouse
Depreciation of delivery van
Bad debts
Advertising
Salesmen salaries
Up keep of delivery van
Commission on sales
Total Cost of Sales (4)
Profit
Sales 5000 tones
0
@
Rs. 40 per unit
Rso
33,000
35,000
3,000
71,000
7,500
10,500
2,050
1,500
4,400
2,000
1,000
750
1,300
1,100
2,000
600
900
4,000
200
500
400
1,000
100
500
300
200
100
300
1,500
700
1,500
34,700
1,05,700
7,600
1,13,300
4,600
1,17,900
82,100
2,00,000
Illustration: 5
From the fpllowing particulars calculate: (a) Prime Cost; (b) Works Cost; (c) Cost of Production;
(d) Cost of Sales; (e) Profit; and (f) Cost per unit.
Pandey Industries manufacture a product A. On 1st January 2003 finished goods in Stock Rs. 50,000.
Other stocks such as :
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A Textbook of Financial Cost and Management Accounting
Work in progress (1.1.2002)
Raw materials (1.1.2002)
Rs.
Rs.
40,000
1,00,000
The information available from cOst records for the year ended 31 51 December, 2002 was as follows:
Direct materials
Direct wages
Carriage inward
Indirect wages
Factory cost
Stock on raw materials (31.12.2002)
Work in progress (31.12.2002)
Sales (1,20,000 units)
Indirect materials
Office and Administrative overhead
Selling and Distribution overhead
Stock on finished goods (31.12.2002)
Rs.
8,00,000
3,00,000
40,000
90,000
2,75,000
80,000
70,000
25,00,000
1,75,000
80,000
1,00,000
60,000
Solution:
Cost Sheet for the year ending 31S\ Dec. 2002
Paniculars
Amount
Rs.
Stock of raw materials (1.1.02)
Add: Direct materials
Carriage inwards
1,00,000
8,00,000
40,000
Less: Stock of raw materials (31.12.02)
9,40,000
80,000
8,60,000
3,00,000
Raw Materials Consumed
Add: Direct Wages
Prime Cost (1)
Add: Factory overhead
Add: Work in Progress (1.1.02)
2,75,000
40,000
Less: Work in Progress (31.12.02)
3,15,000
70,000
Work cost (or) Factory cost (2)
Add: Office & Administrative overhead
Cost of production (3)
Add: Stock of finished goods (1.1.02)
Less: Stock of finished goods (31.12.02)
Cost of goods sold (4)
Add: Selling and distribution expenses
Cost "of sales (5)
Profit (6)
Sales for the year
Total cost
Rs.
11,60,000
2,45,000
14,05,000
80,000
14,85,000
50,000
15,35,000
60,000
14,75,000
1,00,000
15,75,000
9,205,000
25,00.000
319
Cost Sheet (or) Statement o/Cost
Illustration: 6
The following particulars have been extracted from the books of Sharma & Co. Ltd., Chennai for the
year ended 31 51 March 2003
Raw Materials Consumed
Rs.
Direct Wages
Rs.
Other Direct Expenses
Rs.
Factory Overheads 80% of direct wages
Office Overheads 10% of Work Cost
Selling and distribution expenses Rs. 2 per unit sold
1,82,000
58,000
22,000
Units produced and sold during the month 20,000. You are required to prepare a cost sheet for the year 2003 and
also find the selling price per unit on the basis that profit mark up is uniformly made to yield a profit of 20% of the
selling price.
Solution:
Cost Sheet (units produced: 2000 units)
Per unit
Rs.
Particulars
Amount
Rs.
Raw Materials Consumed
Direct Wages
Other Direct Expenses
9.10
2.90
1.10
1,82,000
58,000
22,000
Prime Cost (1)
Add : Factory Overheads :
13.10
2,62,000
2.32
46,400
15.42
3,08,400
1.542
30,840
16.962
3,39,240
2.00
40,000
18.962
4.740
3,79,240
94,810
23,702
4,74,050
80% of direct wages
~8.()()("
80
100
]
Work Cost (2)
Add : Office Overheads :
10% of work cost
[3.08.400 ,
10
100
]
Cost of Production (3)
Add : Selling & Distribution Expenses
Cost of Goods Sold (4)
Add : Profit 20% of Selling Price (E)
Selling Price
Illustration: 7
From the following informations of Mani & Co. Ltd., for the year 2003 you are required to prepare:
(a) Prime Cost (b) Work Cost (c) Cost of Production (d) Cost of goods sold and (e) Net Profit
Rs.
Stock of raw materials (1.1.2003)
Purchase of raw materials
Stock of raw materials (31.12.2003)
Carriage Inward
Direct Wages
50,000
1,70,000
80,000
10,000
1,50,000
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A Textbook of Financial Cost and Management Accounting
Indirect Wages
Other Direct Charges
Office rent and rates
Factory rent and rates
Indirect consumption of materials
Depreciation on plant
Depreciation on office furniture
Salesmen salary
Salary to office supervisor
Other factory expenses
Other office expenses
General Manager's remunerations:
Office Rs.
Factory Rs.
SeIling Dept.
Other seIling expenses
Traveling expenses of salesmen
Carriage & Freight outward
Sales
Advertisement
20,000
30,000
1,000
10,000
1,000
3,000
200
4,000
5,000
11,400
1,800
4,000
8,000
12,000
2,000
2,200
2,000
5,00,000
4,000
Solution:
Statement of Cost
Particulars
Amount
Rs.
Stock of raw materials (1.1.2003)
Purchases
Carriage Inw~ds
50,000
1,70,000
10,000
Less: Stock of raw materials (31.12.2003)
2,30,000
80,000
Add:
Raw Materials Consumed (1)
Wages
Other Direct Charges
Add:
Add:
1,50,000
1,50,000
30,000
Prime Cost (2)
Factory Overhead: (3)
Indirect Charges
Factory rent and rates
Indirect Materials
Depreciation of Plant
Other factory Expenses
General Manager's remuneration
Factory Cost (2+3)
3,30,000
20,000
10,000
1,000
3,000
11,400
8,000
=4
53,400
3,83,400
Office & Administrative Overheads: (5)
Office rent and rates
Depreciation on office furniture
Salary to Office Supervisor
Other Office Expenses
General Managers remuneration
Cost of Production: (4+5)
Amount
Rs.
=6
1,000
200
5,000
1,800
4,000
12,000
3,95,400
321
Cost Sheet (or) Statement of Cost
Add: SeIling & Distribution Overheads: (7)
Salary to Salesmen
General Manager's Salary
Other Selling Expenses
Advertisement
Traveling expenses
Carriage and freight overhead
Cost of Goods Sold (8)
4,000
12,000
2,000
4,000
2,200
2,000
26,200
4,21,600
78,400
5,00,000
Profit (9)
Sales (10)
Illustration: 8
A fire occurred in the factory premises on October 31, 2003. The accounting records have been
destroyed. Certain accounting records were kept in another building. They reveal the following for the
period September 1, 2003 to October 31, 2003:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
. (ix)
(x)
Direct materials purchased
Work in process inventory, 1.9.2003
Direct materials inventory, 1.9.2003
Finished goods inventory, 1.9.2003
Indirect manufacturing costs
Sales revenues
Direct manufacturing labour
Prime costs
Gross margin percentage based on revenues
Cost of Goods available for sale
Rs.
2,50,000
Rs.
40,000
20,000
Rs.
Rs.
37,750
40% of conversion cost
Rs.
7,50,000
Rs.
2,22,250
Rs.
3,97,750
30%
Rs.
5,55,775
The loss is fully covered by insurance. The insurance Company wants to know the historical cost of the
inventories as a basis for negotiating a settieent, although the settlement is actually to be based on replacement cost,
not historical cost.
(i)
(ii)
(iii)
Required:
Finished goods inventory, 31.10.2003
Work-in-process inventory, 31.10.2003
Direct materials inventory, 31.10.2003
Solution:
(eA Inter, Nov. 2003)
Prime Cost (given) Rs.3,97,750
Direct material used
= Prime cost - Direct manufacturing labour cost
= 3,97,750 - 2,22,250
Conversion cost
=
=
=Rs. 1,75,500
Direct manufacturing labour cost
0.6
2,22,250
0.6
= Rs. 3,70,416.67
Indirect manufacturing cost
=
Rs. 3,70,416.67 - Rs. 2,22,250
= Rs. 1,48,166.67
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A Textbook of Financial Cost and Management Accounting
Schedule of Computations
Rs.
Direct materials 1.9.2003
Direct materials purchased
20,000
2,50,000
Direct materials available for use
Less: Direct material 31.10.2003
(Balancing figure)
Direct materials used
Add: Direct manufacturing labour cost
2,70,000
94,500
1,75,500
2,22,250
Prime costs (1)
Add: Indirect manufacturing cost
3,97,750
1,48,166.67
Manufacturing cost incurred during current period
Add: WIP 1.9.2003
5,45,916.67
40,000
Manufacturing cost to account for
5,85,916.67
67,891.67
Less:
WIP 31.10.2003
Add:
Cost of goods manufactured (2)
Finished goods 1.9.2003
5,18,025
37,750
Less:
Cost of goods available for sale 31.10.2003
Finished gods 31.10.2003
5,55,775
30,775
Cost of goods sold (70% of 7,50,000) (3)
5,25,000
Alternatively:
Finished goods inventory 31.10.2003
Rs.
30,775
WIP inventory 31.10.2003
Rs.
67,891.67
Raw material inventory 31.10.2003
Rs.
94,500
QUESTIONS
1.
2.
3.
4.
5.
6.
7.
What do you understand by 'cost sheet'? Briefly explain with specimen of cost sheet.
Explain the different elements of total costs.
Explain the importance of cost sheet.
Explain the different functional classification of overheads.
What items constitute (a) Prime Cost (b) Cost of Production and (c) Cost of Goods Sold.
Distinguish between :
(a) Direct material and Indirect material.
(b) Direct labour and Indirect labour.
(c) Direct expenses and Indirect expenses.
From the following particulars of a manufacturing firm prepare a statement showing:
(1) Cost of Materials Consumed
(2) Factory or Work Cost
Rs.
Cost of Production
Stock of materials on I" January 2003
Purchases during the period
Stock of finished goods on I" January 2003
Direct wages
Sales
Factory on cost
Office and Administrative Expenses
Stock of raw materials on 31 st December 2003
Stock of finished goods on 31" December 2003
Ans : (1) Rs. 20,00,000
80,000
22,00,000
1,00,000
10,00,000
48,00,000
30,00,000
2,00,000
2,80,000
1,20,000
(2) Rs. 33,00,000 (3) Rs. 35,00,000
323
Cost Sheet (or) Statement of Cost
8.
Mr. Ramesh furnishes the following data relating to the manufacture of a standard product during the month of
April 2003.
Raw materials consumed
Rs.15,OOO
Direct labour charges
Rs. 9,000
Machine hour worked
900
Machine hour rate
Rs.
5
Administrative overheads 20% on works cost
Selling and distribution expenses Re.0.50 per unit
Units Produced 17,100
Units Sold 16,000 at Rs.4 per unit
You are required to prepare a cost sheet from the above, showing: (a) the cost of production per unit. (b) Profit per unit
sold and profit for the period.
[Ans : (a) Rs. 2; (b) Rs. 1.50; and Rs. 24,000)
9.
From the following particulars of a manufacturing firm, prepare a statement showing: (a) Prime Cost (b) Works Cost
(c) Cost of Production (d) Cost of Sales and (e) Profit.
Rs.
Materials used in manufacturing
60,000
Materials used in primary packing
10,000
Materials used in selling the product
1,500
Materials used in the factory
750
Administrative expenses
1,250
Depreciation on office building
750
Depreciation on factory building
1,750
1,250
Materials used in the office
10,000
Wages - production
Wages - factory supervision
2,000
Indirect expenses - factory
1,000
Selling expenses
3,500
5,000
Freight on materials purchased
Advertising
1,250
Assuming that all the products manufactured are sold, what should be the selling price to obtain a profit of 20% on
selling price?
Ans: (1) Prime Cost Rs. 85,000; (2) Works Cost Rs. 90,500; (3) Cost of Production Rs. 93,750; (4) Cost of Sales
Rs. 1,00,000; (5) Profit Rs. 25,000; (6) Selling Price Rs. 1,25,000
10.
From the following particulars prepare a Cost Sheet showing production 4,000 units in 2002 and 6,000 units in 2003:
Rs.
Cost of materials
Wages
Manufacturing Expenses
Depreciation
Rent, Rates and Insurance
Selling Expenses
General Expenses
Sales
Actual Production in Units
The company plans to manufacture 6,000 units during 2003
3,20,000
4,80,000
2,00,000
2,40,000
40,000
1,20,000
80,000
16,00,000
4,000
Additional Information
(1) Price of materials is expected to rise by 20%
(2) Wage rates are expected to show an increase of 5%
(3) Manufacturing expenses will rise in proportion to the combined cost of materials and wages
(4) Selling expenses per unit will remain the same
(5) Materials sold to earn a profit of 10% on seIling price
[Ans: Production of 2,000 units: Prime cost Rs. 8,00,000; Total cost Rs. 14,80,000;
. Profit Rs. 1,20,000; Production of 3,000 units: Prime Cost Rs. 13,32,000;
Total Cost 22,04,000; Profit Rs. 2,63,000)
A Textbook of Financial Cost and Management Accounting
324
11.
Gowda & Co. Ltd. is Manufacturing a Sewing Machine and the following details are furnished in respect of its factory
operations for the year ended 31" December 2003.
Rs.
Rs.
1,02,000
Work in progress in the beginning
1,22,000
30,000
Manufacturing Expenses
Work in Progress at the end:
At Prime Cost
Manufacturing Expenses
90,000
18,000
1,08,000
Opening Stock of raw materials
4,50,000
Purchase of raw materials
9,54,000
Direct Labour
2,42,000
Manufacturing Expenses
1,68,000
4,08,000
Closing Stock of raw materials
On the basis of the above data, prepare a statement showing the cost of production
[Ans: Prime Cost Rs.13,50,OOO; works cost Rs.15,30,OOO]
12.
From the following particulars of a manufacturing firm prepare a statement showing:
(a) Cost of production of goods manufactured
(b) Cost of goods sold and
(c) Profit
Rs.
30,000
Stock of materials on I" January 2003
4,50,000
Purchase of raw materials
2,30,000
Wages paid
92,000
Works overhead
12,000
Work in progress (1-1-2003)
15,000
Work in progress (31-12-2003)
25,000
Stock of raw materials on 31" December 2003
60,000
Stock of finished goods (1-1-2003)
35,000
Stock of finished goods (31-12-2003)
20,000
Selling and distribution expenses
30,000
Office and administration expenses
9,00,000
Sales
[Aos : Cost of production Rs. 8,04,000
Cost of goods sold Rs. 8,09,000
Profit Rs. 70,000]
13.
Prepare cost sheet for the year 2003 from the following showing the total cost and cost per unit number of unit produced
2000 units:
Rs.
Raw materials 1.1.2003
20,000
Purchases
3,60,000
Direct wages
1,12,000
Indirect wages
96,000
Raw materials 31.12.2003
24,000
10,000
Work in progress 1.1.2003
Work in progress 31.12.2003
12,000
Factory overheads
52,000
Office overheads
90,000
Selling overheads
32,000
Stock of finished goods 1.1.2003 (100 units) 40,000 stock of finished goods 31.12.2003 120 units. DIo.ing :he year
2003, it is decided to increase the production to 2400 units. It is anticipated that:
(a) Material prices will increase by 10%
(b) Wages will reduce by 20%
(c) Other expenses will remain constant per unit (d) Expected profit 20% on sales
Ascertain selling price to be fixed per unit
[Aos : Productions 2000 units: Prime cost Rs.4,68,OOO; Cost of goods sold Rs. 7,33,760; Profit Rs.81,528; Production
2400 units: Prime Cost Rs. 5,77,440; Cost of goods sold Rs. 9,01,824; Profit Rs. 2,25,456]
325
Cost Sheet (or) Statement of Cost
14.
From the following particulars relating to the manufacture of a standard product during the 2003, you ate required to
prepare a statement of cost and profit per unit.
Raw materials used
Rs. 40,000
Direct wages
Rs. 24,000
Man hours worked
9,500 hours
Man hour rate
Rs. 4 per hour
Office overheads
20% on works cost
Selling overheads
Rs. 1 per unit
Units produced
20,000 units
18,000 @ Rs. 10 per unit
Units sold
[Ans: Prime cost Rs. 64,000; Cost of production Rs. 1,22,400 at Rs. 6.12 per unit; Cost of goods sold Rs. 1,28,160 at
Rs. 7.12 per unit; Profit Rs. 51,840 at Rs. 2.88 per unit]
15.
From the following particulars, prepare cost sheet
Opening stock of raw materials
Opening stock of finished goods
Closing stock of raw materials
Closing stock of finished goods
Purchase of raw materials
Opening stock of work in progress
Closing stock of work in progress
Sales during the year
Direct wages
Factory expenses
Office expenses
Selling expenses
Distribution expenses
[Ans : Prime cost Rs. 54,800
Cost of goods sold Rs. 1,05,400
Net Profit Rs. 72,000]
61,000
40,800
97,000
20,000
50,000
16,000
18,000
1,90,000
40,800
21,000
11,000
7,600
5,000
000