Elements

of Costing
UCOM-403

Scope of Cost Accounting

C1/P9/2 Feb 2022
 Prayer

Class - 9 Slido.com – Not today

Re cap Class 8
Plan for this week P8 to P11

Chapter Contents Ref No Day Date

Concept of Cost, Cost Unit, Cost Centre, Types C2/P6 Thursday 27 Jan 22

Costing techniques, systems and methods C2/P7 Friday 28 Jan 22

Cost classificaiton under various bases C2/P8 Monday 31 Jan 22

Cost Analysis Elements of cost and cost sheet pro-forma 1 C2/P9 Wednesday 2 Feb 22
and Cost
Elements of cost and cost sheet pro-forma 2 C2/P10 Thursday 3 Feb 22
Classification
Simple problems on cost sheet - 1 C2/P11 Friday 4 Feb 22

Simple problems on cost sheet - 2 C2/P12 Monday 7 Feb 22

Simple problems on cost sheet - 3 C2/P13 Wednesday 9 Feb 22

Cost Sheet - Specimen

S No Particulars Total Cost Cost Per Unit

1 Direct Materials
2 Direct Labour
3 Direct Expenses
Total Prime cost
4 Add : Works overheads
Total Works Cost
5 Add : Administrative Overheads
Total Cost of Production
6 Add : Selling & Distribution overheads
Total Cost of Sales
Elements of Cost and Cost Sheet pro-forma

❑Materials

❑Labour

❑Other Expenses
Elements of Cost
Material Costs

Direct Material Costs

Directly attributable as an ingredient
Raw materials
Materials specific for the job
Components or parts produced/purchased
Primary packing materials

Indirect Materials
Consumables
Lubricants
Brooms & maintenance materials
Cleaning chemicals
Spares
Tools & tackles
Direct Labour Cost

• Identified directly attributable for

specific product / service / job / process

▪ Labour engaged on the actual production / service

▪ Labour engaged in aiding the manufacture – supervision,
maintenance, material movements, tools setting, packing, dispatch
from factory
▪ Inspectors, analysts specially required for production/service
Direct Expenses

Direct (chargeable) expenses

o Directly attributable to product / job / services

o Royalty, Excise, GST, Hire Charges for Plant & Machinery

o Repairs & Maintenance of manufacturing equipment

o Expenses in connection with a particular job, product, service

Overheads

▪ Not directly attributable to product or job or service

▪ General organization expenses

Manufacturing overheads
Administrative overheads
Selling overheads
Distribution Overheads
Manufacturing Overheads

Manufacturing / Production / Works Overheads

▪ Indirect expenses of operating the manufacturing / services

▪ Depreciation on production equipment
▪ Insurance on Plant & Machinery & other assets in a factory
▪ Repairs & maintenance of manufacturing equipment
▪ Power & Fuel
▪ Rent, rates & taxes on factories
▪ Welfare relating to factory
Administrative Overheads

▪ Indirect overheads – running the office

▪ Office rent, electricity, salaries, professional &

consultancy, communication, travel
Selling Overheads

▪ Overheads associated with marketing & selling

▪ Sales office expenses, rentals, show room expenses

▪ Salaries of sales and marketing

▪ Samples, free gifts, tender, advertising & promotions

 Distribution Overheads

▪ Expenses for primary movements of finished goods & services

▪ Warehouse rent, insurance
▪ Salaries of warehouse team
▪ Delivery vans
▪ Outward freight
▪ Special packing, re-despatch
▪ Reconditioning & repacking expenses
Research & Development Overheads

▪ Costs associated with research for new formulation, new products

▪ Development costs – new process, new product,

Expenses excluded from costs
S No Cost Group Examples

1 Purely Financial Loss on sale of assets

Charges t Loss on investments
Discounts on shares & debentures
Interest on loans etc
Expenses relating to share transfers
Penalties, Damages, Fines
Interest on capital
2 Appropriation of Donations, Charity
profits Taxes on Profits
Dividends
Transfers to Reserves
Additional provisions for depreciation / PDD
Capex charged to revenue
3 Write Offs – Intangible Goodwill, patents, copyrights
& Fictitious Assets Preliminary expenses
Underwriting expenses
Expenses excluded from costs
S No Cost Group Examples

1 Purely financial Rent received

income Profit on sale of assets
Transfer fees received
Interest received on deposits
Dividends received
Brokerage received
Discounts and commission received

2 Abnormal gains and Abnormal wastage of materials

losses Wages of abnormal idle time
Cost of abnormal idle facilities
Excessive depreciation
Abnormal gain on manufacturing
Capex charged to revenue
Cost Sheet - Specimen

S No Particulars Total Cost Cost Per Unit

1 Direct Materials
2 Direct Labour
3 Direct Expenses
Total Prime cost
4 Add : Works overheads
Total Works Cost
5 Add : Administrative Overheads
Total Cost of Production
6 Add : Selling & Distribution overheads
Total Cost of Sales
Re Cap

❑Elements of Cost & Cost Proforma Sheet

❑Materials

❑Labour

❑Other Expenses
Questions ?
 Quote – Class 9

“The more I do,

the more I can do! ”

- Christopher Reeve