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A cost sheet is a report on which is accumulated all of the costs associated with a product
or production job. A cost sheet is used to compile the margin earned on a product or job, and can
form the basis for the setting of prices on similar products in the future. It can also be used as the
basis for a variety of cost control measures. Despite the name, a cost sheet can be c ompiled and
viewed on a computer screen, as well as being manually developed on paper. The costs listed on
the report are usually aggregated into three categories, which are direct materials, direct labor,
and allocated factory overhead. In some situations, a cost sheet may also include a line item for
allocated administrative overhead. In addition, the costs of shipping and handling, supplies, and
outsourced costs may also appear on a cost sheet in varying degrees of detail.
Sr.No Details of Activity Planned Start Planned Name of responsible
Date Finished Date Members
1.
2.
3.
4.
5.
6.
7.
3.
02 217
03 238
04 239
“Select Any Product And Prepare Its Cost Sheet”
A cost sheet is a report on which is accumulated all of the costs associated with a product
or production job. A cost sheet is used to compile the margin earned on a product or job, and can
form the basis for the setting of prices on similar products in the future. It can also be used as the
basis for a variety of cost control measures. Despite the name, a cost sheet can be compile d and
viewed on a computer screen, as well as being manually developed on paper. The costs listed on
the report are usually aggregated into three categories, which are direct materials, direct labor,
and allocated factory overhead. In some situations, a cost sheet may also include a line item for
allocated administrative overhead. In addition, the costs of shipping and handling, supplies, and
outsourced costs may also appear on a cost sheet in varying degrees of detail.
Classification Of Cost:-
Cost classification is the process of grouping costs according to their common features. Costs are to
be classified in such a manner that they are identified with cost center or cost unit.
On the basis of behaviour of cost
Behaviour means change in cost due to change in output. On the basis of behaviour cost is classified
into the following categories:
Fixed Cost:-
It is that portion of the total cost, which remains constant irrespective of output up to the capacity
limit.
It is called as a period cost as it is concerned with period.
It depends upon the passage of time.
It is also referred to as non-variable cost or stand by cost or capacity cost or ‘'period' cost.
It tends to be unaffected by variations in output.
These costs provide consitions for production rather than costs of production.
They are created by contractual obligations and managerial decisions. Rent of premises, taxes and
insurance, staff salaries constitute fixed cost.
Variable Cost:-
This cost varies according to the output
In other workds, it is a cost which changes according to the changes in output.
It tends of vary in direct proportion to output.
If the output is decreased, variable cost also will decrease
It is concerned with output or product. Therefore, it is called as a ‘product' cost.
If the output is doubled, variable cost will also be doubled. For example, direct material; direct
labour, direct expenses and variable overheads.
Semi-variable Cost:-
This is also referred to as semi-fixed or partly variable cost.
It remains constant upto a certain level and registers change afterwards.
These costs vary in some degree with volume but not in direct or same proportion.
Such costs are fixed only in relation to specified constant conditions,. For example, repairs and
maintenance of machinery, telephone charges, maintenance of building, supervision, professional tax
etc.
Direct Cost
It is the cost, which is directly chargeable to the product manufactured, it is easily identifiable. Direct
cost consists of three elements, which are as follows:
Direct Material
• It is the cost of basic raw material used for manufacturing a product.
• It becomes a part of the product
• No finished product can be manufactured without basic raw materials
• It is easily identifiable and chargeable to the product
• For example, leather in leather wares, pulp in paper, steel in steel furniture, sugarcane for sugar etc
• What is raw material for one manufacturer might be finished product for another.
• Direct material includes the following:
Indirect Cost
It is that portion of the total cost, which cannot be identified and charged direct to the product
It has to be allocated, apportioned and absorbed over the units manufactured on a suitable basis.
Indirect Material
• It is the cost of material other than direct material which cannot be charged to the product directly
• It can not be treated as part of the product,
• It is also known as expenses materials
• It is the material which cannot be allocated to the product but which can be apportioned to the cost
units. Examples are as follows:
Indirect Labour.
• It is the amount of wages paid to those workers who are not engaged on the manufacturing line, for
example, wages of workers in administration department, watch and ward department, watch and
ward department, sales department, general supervision.
Indirect Expenses
• It is the amount of expenses which is not chargeable to the product directly
• It is the cost of giving service to the production department
• It includes factory expenses, administrative expenses, selling and distribution expenses etc.
OVERHEADS OR ON COST OR BURDEN OR SUPPLEMENTARY COST
This cost cannot be associated with a particular product. The principal feature of overheads is the
lack of direct tractability to individual product. It remains relatively constant from period to period.
The amount of overheads is not directly chargeable i.e. it had to be properly allocated, apportioned
and absorbed on some equitable basis.
Classification of Overheads
1.Factory Overheads:
• It is the aggregate of all the factory expenses incurred in connection with manufacture of a product
• These are incurred in connection with running of factory
• It includes the items of expenses viz., factory salary, work manager's salary, factory repairs, rent of
factory premises, factory lighting, lubricants, factory power, drawing office salary, haulage (cost of
internal transport) depreciation of plant and machinery unproductive wages, estimation expenses,
royalties loose tools w/off, material handling charges, time office salaries, counting house salaries
etc.
4.Distribution expenses
• It includes all those expenses, which are incurred in connection with making the goods available to
customers. These expenses include the following:
a) Packing charges b) Loading charges c) Carriage on sales d) Rent of warehouse e) Insurance and
lighting of warehouse f) Insurance of delivery van g) Expenses on delivery van h) Salaries of
Godownkeeper, drivers and packing staff.
NON-COST ITEMS
Non-cost items are those items, which do not form part of cost of a product. Such items should not
be considered while ascertaining cost of a product. These are items included in profit and loss A/c as
per principles of Financial Accountancy but not related to product. For example, Income-tax paid,
provision for Income-tax, interest on capital, interest on loan, profit on sale of fixed assets, loss on
sale of fixed assets, transfer fees received, transfer to reserves, any other appropriation of profit,
commission to Managing Director or Partners, capital loss, donations, capital expenditure, discount
on shares and debentures, Goodwill written off, Preliminary expenses written off, brokerage, pure
financial expenses or losses and expenses not related to th business, wealth tax, bonus to directors
and employees, if it is based on profit, expenses of raising capital, penalties and fines.
COST SHEET
For determination of total cost of production a statement showing the various elements of cost is
prepared. This statement is called as a ‘statement of cost' or ‘cost sheet.' Cost sheet is a statement,
which provides for the assembly of the detailed cost of the total cost of job operation or order. It
brings out the composition of total cost in a logical order, under proper classifications and sub-
divisions. The period covered by the cost sheet may be a week, a month or so. Separate columns are
provided to show the total cost and cost per unit. In case of multiple products a separate cost sheet
may be prepared for each product. Alternatively, separate columns of total cost and unit cost may be
provided for each product in the same cost sheet. A cost sheet is prepared under output or unit
costing method.
Purposes of cost sheet
Cost sheet serves the following purposes:
1. It gives the break up of total cost under different elements.
2. It shows total cost as well as cost per unit
3. It helps comparison with previous years.
4. It facilitates preparation of tenders or quotations
5. It enables the management to fix up selling price
6. It controls cost.
DIVISIONS OF COST
Prime Cost : It comprises of all direct materials, direct labour and direct expenses. It is also known
as flat cost.
Prime Cost = Direct Materials + Direct Labour + Direct Expenses.
Works Cost :It is also known as factory cost or cost of manufacture. It is the cost of manufacturing
an article. It includes prime cast and factory expenses.
Works Cost = Prime Cost + Factory Overheads
Total Cost:It represents cost of production plus selling & distribution expenses
Total Cost = Cost of production + Selling & distribution - expenses
Selling Price: It is the price, which includes total cost plus margin of profit or minus loss, if any.
Selling Price = Total Cost + Profit (-Loss)
COSTING OF HINDUSTAN PETROLEUM (HPCL)
Hindustan Petroleum Corporation Limited (HPCL) is the result of a successful convergence of four
established companies. Today the second largest integrated oil refining and marketing company in
India, HPCL was born of the merger of ESSO, Lube India Ltd, Caltex Oil Refining India Ltd and
Kosan Gas Company Ltd.
The Company was first incorporated as Standard Vacuum Refining Company of India Limited, on
July 5, 1952, and later named ESSO India Limited, on March 31, 1962. On July 12, 1974, when Esso
and Lube India were nationalised, the Company was renamed Hindustan Petroleum Corporation
Limited with effect from July 15, 1974. The undertakings after nationalisation were then vested in
HPCL. The Government of India also nationalised the Caltex undertakings in the year 1976, which
were subsequently merged with HPCL in 1978. In the following year, the undertakings of Kosan Gas
Company Ltd, the concessionaires of HPCL in the domestic LPG market, were merged with HPCL.
Thus, the various amalgamations, at different points in time, have given rise to HPCL that has ever
since been growing from strength to strength.
HPCL had a humble beginning in 1974 with one refinery at Mumbai that had a refining capacity of
3.5 million metric tonnes per annum (MMTPA). The Lube oil refinery at Mumbai stood around
165000 Tonnes per annum. The sales turnover in that year was only Rs. 3.67 billion, and the net
profit Rs. 58 million. But over the years, the Corporation has made judicious use of its assets to
achieve tremendous growth. Dedicated and well - experienced manpower, strategically located
refineries at Mumbai and Visakh and a widespread marketing network have enabled the company to
carve a niche in the Indian oil industry today.
Vision
"To be a leading world class company in hydrocarbons and energy related sectors with a global
presence.
Mission
HPCL, along with its joint ventures, will be a fully integrated company in the hydrocarbons sector of
exploration and production, refining and marketing;
focussing on enhancement of productivity, quality and profitability; caring for customers and
employees; caring for environment protection and cultural heritage.
It will also attain scale dimensions by diversifying into other energy related fields and by taking up
transnational operations."
COST SHEET
“Cost Sheet for Hindustan Petroleum Corporation Ltd for the year 2003-2004”
Rs./ Crores
R.M Consumed 15,017.04
Direct Labour (See Assumption 1) 280.055
Direct Expense
-Excise Duties 5993.47
Prime Cost 21290.565
Factory Overheads
Packages Consumed 79.15
Transshipping Expenses 1228.97
Duties Applicable to Products 317.61
Repairs and maintenance to Plant 165.68
Rent (See Assumption 3) 28.65
Repair and maintenance to other assets (See Assumption 2) 1.633
Electricity and Water 94.93
Power and Fuel 9.17
Rates and Taxes 21.20
Equipment Hire Charges 0.30
Consumption of stores, spares and chemicals 71.08
Depreciation:
-Transport Equipment (See Assumption 4) 2.335
-Roads and Culverts 7.16
-Leasehold Property 2.45
-Railway siding and Rolling stock 12.42
-Plant and Machinery 536.24 560.605 2578.978
Work Cost (Gross) 23869.543
Administrative Overheads
Security Charges 16.67
Depreciation
- Building 17.25
-Furniture, fixtures and equipments 26.39 43.68
Office appliances--- Printing & Stationary 7.69
Rent (See Assumption 3) 28.65
Repair and maintenance to building 11.7
Repair and maintenance to other assets (See Assumption 2) 1.634
Insurance 40.08
Consultancy and Technical charges 37.26
Sundry Expenses and Charges 163.04
Office Salaries (See Assumption 1) 280.055 630.459
Total Cost 24514.989
Add: Opening Finished Goods 3777.2
Add: Purchase of Finished Goods 30583.9 34361.1
Assumptions
A bifurcation between factory wages and office salaries has not been given. However the
annual report says that HPCL has 11088 employees of which 3594 are management employees and
7494 are non-management employees. Let us assume this to be the distribution of office and factory
staff. However, the management employees have higher salaries. Thus, I have divided Wages,
Salaries and Bonus equally between Direct Labour and Administrative overheads.
Repairs and Maintenance to other assets has been equally divided between Factory overheads,
Administrative overheads and Selling and Distribution overheads since the assets have not been
mentioned.
Rent is equally distributed as Factory rent and Office rent.
We assume that Transport equipment is used for both Factory and Selling and Distribution purposes.
Thus depreciation on transport equipment is equally divided between Factory overheads and Selling
and Distribution overheads.
Resources Required
3.
This micro-project is expected to develop the following skills for the industry identified
Competency :
1. Basic knowledge.
2. Observation skill.
3. Leader ship.
4. Management skill.
5. Communication Skill.
Conclusion
Cost accounting is a system of recording and analyzing the cost of products or services in order to
contribute towards strategic planning and improve cost efficiency. It’s important for many parties
involved in a business, including management, employees, and consumers. Although cost accounting
and financial accounting are interrelated, they provide different results. Cost accounting tells you
about the cost of producing individual items, while financial accounting shows you profit and loss
for the company as a whole. While there are advantages to using a dedicated cost accounting system,
a company that’s efficient enough to track its own costs can manage all its records without having a
formal system in place.
Title of the Micro-Project: Select Any Product And Prepare Its Cost Sheet.
………………………………………………………………………………………………….
Dated signature………………………………
Annexure-IV
Micro-Project Evaluation Sheet
Title of the Micro-Project: Select Any Product And Prepare Its Cost Sheet.
………………………………………………………………………………………………….
Dated signature………………………………
Annexure-IV
Micro-Project Evaluation Sheet
Title of the Micro-Project: Select Any Product And Prepare Its Cost Sheet.
………………………………………………………………………………………………….
Dated signature………………………………
Annexure-IV
Micro-Project Evaluation Sheet
Title of the Micro-Project: Select Any Product And Prepare Its Cost Sheet.
………………………………………………………………………………………………….
Dated signature………………………………