Example:

Expense details for a company manufacturing a product in the

previous month are as under:
Production and Sale-Units: 20,000
The Selling Price of the Product-Rs/unit. 58 BY NATURE
Interest from bank on Fixed Deposit 10,000
Classify the cost under all available heads and find out profit.
Cost elements Amount-Rs. Material cost Labour cost
Principal Raw Material 600,000 600,000
Other supporting raw materials 30,000 30,000
Packing Material 15,000 15,000
Direct labour 40,000 40,000
Indirect manu. labour 10,000 10,000
Donation 5,000
Bad debts 4,000
Marketing personnel Salary 100,000
Salary of Production Cost centre 100,000
Salary of Mnt. Personnel 90,000
Sales and Distri. Supervisor's salary 15,000
Telephones expenses 15,000
General Manager's Travelling 12,000
Direct expenses 8,000
Depreciation on Plant and Machinery 4,000
for processing main material
Printing, Stationery 4,000
Depre. on Office building 3,000
Depre.on Office vehicle 1,000
Depre. on Depot furniture 1,000
Depre. on Plant and Machinery for
providing support service to the
Production 2,000
Total 1,059,000 645,000 50,000
645,000 50,000
61% 5%

Classification of Cost-01 By Nature or Element

Particulars Qty Amount-Rs. Rs/unit

Sales Realisation 20,000 1,160,000 58.00

Cost
Material Cost 645,000 32.25
Labour Cost 50,000 2.50
Expenses 355,000 17.75
Total Cost of Sales 1,050,000 52.50
Profit 110,000 5.50

FINANCIAL PROFIT & LOSS

Sales Realisation 1,160,000
Add: Income from interest on Fixed Depos 10,000
Total Revenue 1,170,000
Less:
Total Expenses 1,059,000
Profit 111,000

Reconciliation of Costing Profit/Loss with Financial Profit/Loss

Profit as per Costing Profit/Loss Working 110,000

Add-Income not considered 10,000
Less- Expenses not considered
Donation 5,000
Bad debts 4,000
Profit as per Financial Accounts 111,000

Alternatively,
Profit as per Financial Accounts 111,000
Add- Expenses not to be considered
Donation 5,000
Bad debts 4,000
Less- Income not to be considered -10,000
Profit as per Cost Accounts 110,000
Expenses Irrelevant cost

5,000
4,000
100,000
100,000
90,000
15,000
15,000
12,000
8,000

4,000
4,000
3,000
1,000
1,000

2,000
355,000 9,000
355,000 9,000
34% 1%

% on Sales % on Cost

100.00

55.60 61.43
4.31 4.76
30.60 33.81
90.52 100.00
9.48 10.48
Suggested
Answer Difference
1,160,000 -

645,000 -
50,000 -
 355,000 -
1,050,000 -
110,000 -
Example:
Expense details for a company manufacturing a product the
previous month are as under: CLASSIFICATION AS PER TRACEABILITY
Production and Sale-Units: 20,000
The Selling Price of the Product-Rs/uni 58
Interest from bank interest on Fixed D 10,000
Classify the cost under all available heads and find out profit.
Cost elements Amount-Rs. Direct cost Indirect cost
Principal Raw Material 600,000 600,000
Other supporting raw materials 30,000 30,000
Packing Material 15,000 15,000
Direct labour 40,000 40,000
Indirect manu. labour 10,000 10,000
Donation 5,000
Bad debts 4,000
Marketing personnel Salary 100,000 100,000
Salary of Production Cost centre 100,000 100,000
Salary of Mnt. Personnel 90,000 90,000
Sales and Distri. Supervisor's salary 15,000 15,000
Telephones expenses 15,000 15,000
General Manager's Travelling 12,000 12,000
Direct expenses 8,000 8,000
Depreciation on Plant and
Machinery for processing main 4,000
material 4,000
Printing, Stationery 4,000 4,000
Depre. on Office building 3,000 3,000
Depre.on Office vehicle 1,000 1,000
Depre. on Depot furniture 1,000 1,000
Depre. on Plant and Machinery for
providing support service to the
Production 2,000 2,000
Total 1,059,000 697,000 353,000
697,000 353,000
0

Classification of Cost-02 By Traceability

Particulars Qty Amount-Rs. Rs/unit

Sales Realisation 20,000 1,160,000 58.00

Cost
Direct Cost 697,000 34.85
Indirect Cost 353,000 17.65
Total Cost of Sales 1,050,000 52.50
Profit 110,000 5.50
ON AS PER TRACEABILITY

Irrelevant cost

5,000
4,000

9,000
9,000
0

% on Sales % on Cost

100.00
60.09 66.38
30.43 33.62
90.52 100.00
9.48 10.48
1,160,000 0
 697,000 0
353,000 0
1,050,000 0
110,000 0
Example:
Expense details for a company manufacturing a product the
previous month are as under: CLASSIFICATION OF COST AS PE
Production and Sale-Units: 20,000
The Selling Price of the Product-Rs/unit. 58
Income from bank interest on Fixed Deposit (Not a 10,000
Classify the cost under all available heads and find out profit.
Cost elements Amount-Rs. Variable cost
Principal Raw Material 600,000 600,000
Other supporting raw materials 30,000 30,000
Packing Material 15,000 15,000
Direct labour 40,000 40,000
Indirect manu. labour 10,000
Donation 5,000
Bad debts 4,000
Marketing personnel Salary 100,000
Salary of Production Cost centre 100,000
Salary of Mnt. Personnel 90,000
Sales and Distri. Supervisor's salary 15,000
Telephones expenses 15,000
General Manager's Travelling 12,000
Direct expenses 8,000 8,000

Depreciation on Plant and Machinery for 4,000

processing main material
Printing, Stationery 4,000
Depre. on Office building 3,000
Depre.on Office vehicle 1,000
Depre. on Depot furniture 1,000

Depre. on Plant and Machinery for providing

support service to the Production 2,000
Total 1,059,000 693,000
693,000
65%

Classification of Cost-03 By Variability

Particulars Qty Amount-Rs.

Sales Realisation 0
Cost
Variable Cost 693,000
Fixed Cost 357,000
Total Cost of Sales 1,050,000
Profit -1,050,000
ASSIFICATION OF COST AS PER BEHVRIOUR OF COST

Fixed cost Irrelevant cost

10,000
5,000
4,000
100,000
100,000
90,000
15,000
15,000
12,000

4,000
4,000
3,000
1,000
1,000

2,000
357,000 9,000
357,000 9,000
34% 1%

Variability

Rs/unit % on Sales % on Cost

#DIV/0!

#DIV/0! #DIV/0! 66.00

 #DIV/0! #DIV/0! 34.00
#DIV/0! #DIV/0! 100.00
#DIV/0! #DIV/0! -100.00
1,160,000 ###

693,000 -
 357,000 -
1,050,000 -
110,000 ###
Example:
Expense details for a company manufacturing a product the
previous month are as under:
Production and Sale-Unit 20,000
The Selling Price of the P 58
Interest from bank intere 10,000
Classify the cost under all available heads and find out profit.

Factory Administration
Prime cost = overheads= overheads =
Primary Production Administration
Cost elements Amount-Rs. Function function
Expenses function
Direct material incurred for Expenses for
+ Direct labour production administration
+ Direct upto packing of the
expenses stage organisation
Principal Raw Material 600,000 600,000
Other supporting raw mat 30,000 30,000
Packing Material 15,000 15,000
Direct labour 40,000 40,000
Indirect manu. labour 10,000 10,000
Donation 5,000
Bad debts 4,000
Marketing personnel Sala 100,000
Salary of Production Cost 100,000 100,000
Salary of Mnt. Personnel 90,000 90,000
Sales and Distri. Superviso 15,000
Telephones expenses 15,000 15,000
General Manager's Travell 12,000 12,000
Direct expenses
Depreciation on Plant 8,000 8,000
and Machinery for
processing main 4,000
material 4,000
Printing, Stationery 4,000 4,000
Depre. on Office building 3,000 3,000
Depre.on Office vehicle 1,000 1,000
Depre. on Depot furnitur 1,000

Depre. on Plant and

Machinery for providing
support service to the
Production 2,000 2,000
Total 1,059,000 693,000 206,000 35,000
693,000 206,000 35,000
Classification of Cost-03 By Function

Particulars Qty Amount-Rs. Rs/unit % on Sales

Sales Realisation 0 #DIV/0!

Cost
Prime Cost 693,000 #DIV/0! #DIV/0!
Factory Overheads 206,000 #DIV/0! #DIV/0!
Administration Overheads 35,000 #DIV/0! #DIV/0!
Selling & Distribution Overheads 116,000 #DIV/0! #DIV/0!
Total Cost of Sales 1,050,000 #DIV/0! #DIV/0!
Profit -1,050,000 #DIV/0! #DIV/0!

SECTIOIN-C
SESSION-3
8-9-2021

Administration
An activity/function
A nature of expense
 Selling and
Distribution
overheads =
Selling and
distribution Irrelevant
function cost
Selling, Not
maketing and related to
distribution products,
activity services

5,000
4,000
100,000

15,000

1,000

116,000 9,000
116,000 9,000
% on Cost

66.00 697,000
19.62 202,000
3.33 35,000
11.05 116,000
100.00 1,050,000
-100.00 110,000
 0

-4,000
4,000
0
0
0
-1,160,000
SECTIOIN-C
SESSION-3
8-9-2021

METHODS OF COST ACCOUNTING TECHNIQUES OF COST ACCOUNTING

1. JOB COSTING Historical costing
1-a Batch Costing Absorption costing
1-b Contract Costing Marginal costing (To absorb only variable cost)
Estimated costing
2. PROCESS COSTING Standard costing
2-a Operation Costing Uniform costing
Differential costing
3. COMPOSITE COSTING Incremental costing
Combination of Job and Process Costing Activity Based Costing (ABC)

All techniques are applicable in above

methods

PRODUCTION - KG
RAW MAT COST
DIRE LABOUR
DIRECT EXP
OTHER VARIABLE COST
TOTAL VARIABLE COST
MARGINAL COST PER UNIT
FIXED COST OF BOTH THE PRODUCTS
TOTAL COST OF SALE
FIXED COST AS A % OF MARGINAL COST
PRODUC-APRODUCT-GRAND TOTAL
1000 2000

40000 55000 95000

40 27.5
65000
160000
Example:
Expense details for a company manufacturing a product the
previous month are as under:
Production and Sale-Units: 20,000
The Selling Price of the Product-Rs/unit. 58
Interest from bank interest on Fixed Deposi 10,000
Classify the cost under all available heads and find out profit.
Cost elements Amount-Rs. Prime cost
Principal Raw Material 600,000
Other supporting raw materials 30,000
Packing Material 15,000
Direct labour 40,000
Indirect manu. labour 10,000
Donation 5,000
Bad debts 4,000
Marketing personnel Salary 100,000
Salary of Production Cost centre 100,000
Salary of Mnt. Personnel 90,000
Sales and Distri. Supervisor's salary 15,000
Telephones expenses 15,000
General Manager's Travelling 12,000
Direct expenses
Depreciation on Plant and Machinery for 8,000
processing main material 4,000
Printing, Stationery 4,000
Depre. on Office building 3,000
Depre.on Office vehicle 1,000
Depre. on Plant and Machinery for
Depre. on support
providing Depot furniture
service to the 1,000
Production 2,000
Total 1,059,000 -
693,000

Classification of Cost-03 By Statistical Division

Particulars Qty Amount-Rs.

Sales Realisation 0
Cost
Prime Cost 0
Conversion Cost* 0
Selling & Distribution Overheads 0
Total Cost of Sales 0
Profit 0

* Some units consider Material Cost (RM +PM) and all else as Conversion cost.
This is so when a material is sent for jobwork outside the premises to some other
processor.
 Inputs = direct expenses
conveted to output, the expenses other than direct expenses are known as conversion cost
Output is disposed of. Cost of such disposal is the Selling and distribution cost.

Selling and
ut profit. Converesion Distribution Irrelevant
cost cost cost

- - -
241,000 116,000 9,000

Statistical Division

Rs/unit % on Sales % on Cost

#DIV/0!

#DIV/0! #DIV/0! #DIV/0!

#DIV/0! #DIV/0! #DIV/0!
#DIV/0! #DIV/0! #DIV/0!
#DIV/0! #DIV/0! #DIV/0!
 #DIV/0! #DIV/0! #DIV/0!

Conversion cost.
mises to some other
1,160,000 -1,160,000

693,000 -693,000
242,000 -242,000
115,000 -115,000
1,050,000 -1,050,000
110,000 -110,000
Example:
Expense details for a company manufacturing a product the
previous month are as under:
Production and Sale-Units: 20,000
The Selling Price of the Product-Rs/unit. 58
Interest from bank interest on Fixed Deposit 10,000
Classify the cost under all available heads and find out profit.
Cost elements Amount-Rs.
Principal Raw Material 600,000
Other supporting raw materials 30,000
Packing Material 15,000
Direct labour 40,000
Indirect manu. labour 10,000
Donation 5,000
Bad debts 4,000
Marketing personnel Salary 100,000
Salary of Production Cost centre 100,000
Salary of Mnt. Personnel 90,000
Sales and Distri. Supervisor's salary 15,000
Telephones expenses 15,000
General Manager's Travelling 12,000
Direct expenses
Depreciation on Plant and Machinery for 8,000
processing main material 4,000
Printing, Stationery 4,000
Depre. on Office building 3,000
Depre.on Office vehicle 1,000
Depre.
Depre. on Depotand
on Plant furniture
Machinery for providing 1,000
support service to the Production 2,000
Total 1,059,000

Classification of Cost-03

Particulars Qty

Sales Realisation
Irrelevant Revenue -Rs.
Cost
Relevant Cost
Irrelevant Cost -Rs.
Total Cost of Sales
Profit
d find out profit.
Relevant cost Irrelevant cost

- -
1,050,000 9,000

By Relevance

Amount-Rs. Rs/unit % on Sales % on Cost

0 #DIV/0!

0 #DIV/0! #DIV/0! #DIV/0!

#DIV/0! #DIV/0! #DIV/0!
0 #DIV/0! #DIV/0! #DIV/0!
0 #DIV/0! #DIV/0! #DIV/0!
1,160,000 -1,160,000

1,050,000 -1,050,000

1,050,000 -1,050,000
110,000 -110,000