Professional Documents
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Chapter 12 Cost Sheet (Or) Statement of Cost
Chapter 12 Cost Sheet (Or) Statement of Cost
Materials
Labour
Direct
Indirect
Direct
~
Other Expenses
Indirect
Indirect
Direct
Overheads
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
(2)
31/
(3)
Cost of Production
(4)
=
=
312
(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.
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)
(4)
(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
xxx
xxx
xxx
xxx
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
Total Cost
Rs.
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
314
Particulars
Sample and Free Gifts
Bad debts, Debt Collection Expenses
Cost of sales (5)
Profit I Loss (6)
Sales
Total Cost
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:
Amount Rs.
20,000
5,00,000
5,20,000
75,000
3,80,000
50,000
Amount Rs.
4,45,000
4,30,000
8,75,000
80,000
10,000
90,000
15,000
75,000
9,50,000
60,000
10,10,000
50,000
10,60,000
50,000
315
Particulars
Amount Rs.
Amount Rs.
10,10,000
30,000
10,40,000
1,60,000
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.
Amount Rs.
20,000
12,000
32,000
2,000
34,000
6,800
= 40,800 x
=2000 Units)
2,000 }
20,000
40,800
4,080
36,720
7,200
43,920
10,080
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
Solution:
Cost Sheet for January 2003
Paniculars
Total Cost
Rs.
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
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
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
Solution:
Cost Sheet for the year
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
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 :
318
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.
1,00,000
8,00,000
40,000
9,40,000
80,000
8,60,000
3,00,000
2,75,000
40,000
3,15,000
70,000
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
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.
9.10
2.90
1.10
1,82,000
58,000
22,000
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
~8.()()("
80
100
[3.08.400 ,
10
100
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.
50,000
1,70,000
80,000
10,000
1,50,000
320
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.
50,000
1,70,000
10,000
2,30,000
80,000
Add:
Add:
Add:
1,50,000
1,50,000
30,000
3,30,000
20,000
10,000
1,000
3,000
11,400
8,000
=4
53,400
3,83,400
Amount
Rs.
=6
1,000
200
5,000
1,800
4,000
12,000
3,95,400
321
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)
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:
=
=
=Rs. 1,75,500
= Rs. 3,70,416.67
Indirect manufacturing cost
=
= Rs. 1,48,166.67
322
Schedule of Computations
Rs.
20,000
2,50,000
2,70,000
94,500
1,75,500
2,22,250
3,97,750
1,48,166.67
5,45,916.67
40,000
5,85,916.67
67,891.67
Less:
WIP 31.10.2003
Add:
5,18,025
37,750
Less:
5,55,775
30,775
5,25,000
Alternatively:
Finished goods inventory 31.10.2003
Rs.
30,775
Rs.
67,891.67
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
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
323
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)
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
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
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.
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