Shoy a understand Meaning ang a lab alculate Cost per unit by ¢ : ‘ “Pating Cog py : t sh testi orks cost, cost oF Production, Co ce " 0 v repare a statement SF quotation ni g < sol ,? duction accoy are produc! nt. prep INTRODUCTION aA costing is one Of the mo: “ommonly Us output c i vith j etd i ; manufacturing Of products with "eetica unin’ nie Pies Bee suction is ascertained b "Paring a “Ment ofcog peel bit of pr details of various Fe POnents of eta ie. s the 5 I crcduction, the cost of go cost 0 Py the "etistog : at ee he TOWN as oo she cost sheet ods Sold, the Cost OF sales and fn Ki 7” ANING AND APPLICABH apy oe sting refers to a met They 4 indy een ® Poduction of Unit cos s/identical products, 7) basic ature g wnitcostng shat ‘i homogeneous/ d, the cost per suis etme by dee 0 0 ; N ey ee Tastee Suitable for Industries Where only ety alo nits produced, is continous, homogenous and can be ne im . u cti Le i y ed (either w; Pits a tion is ofa single product a may be produc Pee ay S. This is also Though _ variants or a sind — re unit costing may be ap A whe industries hod of COSting use, stries ely or incidentally) © OF output costing, Examples of Ost estimation are given below:— known as singl h their unit of ¢Cost Units Per tonne of coal Industries : ie “ Ss Per tonne of minera} Works Per 1,000 bricks Brick Worl i Pr it Assembling work er ua Diari Per litre eects Per quintal Cement works Per tonne Paper mills Per Kg of paper Per quintal of sugar Sugar mills Note :— In large companies engaged in cement, paper, sugar works, etc., process g, ma more useful for ascertaining and exercising control over costs at each stage of Production ra 7.3 COST SHEET AND ITS COMPONENTS In unit costing, the cost per unit is calculated by dividing the total cost with the total Tumber ¢ produced. Total cost and cost per unit is ascertained by preparing a statement of ggg. tiny known as cost sheet. Hence, cost sheet can be defined as the statement of cost Prepared tg tla detail the break-up of total cost and cost per unit into its various components. The Various coh of cost are prime cost, factory cost, cost of production, cost of goods sold and cost Of sales cost. It is prepared at regular time intervals like on monthly, quarterly or half yearly or yeaty 5 When only one identical product is produced, cost ascertainment under unit Costing wil] invo} i 0I following two steps : Vey (i) Collection, classification and analysis of cost on functional basis. A cost sheet is pre Datei, ascertain the total cost. Gi) Division of total cost by the total number of units produced in order to determine its g “ay unit i.e., Bost A: Total Cost er unit = 4 P e Total No. of Units Produced Tt also shows under a separate column, cost per unit for each individual element of Cost, F purpose of cost analysis, comparison and control, the corresponding figures of the Preceding Pe are also shown in the cost sheet. However, when more than are variant or grade (either willingly or incidentally) is Produced various costs are required to be apportioned on some equitable basis so as to ascertain the ie each grade of production separately.costing. wat or) cosT BUILD-Up (Comp ty ; ot ponents of total costs Can be T Op com ‘ T id jose gt It consists of the cost of d Ned by ct C i" i gost Direct itera Consuined ia, ting pus nae ct Material Consumeg — 0, & Ost i Petting St on, (eg dy, wer Fae material . Ok of KO dj ‘ . Taw (0° Cost : It comprises Prime cog, any ; 10 oe duction overheads) T Story, oy, Fae" ks of pro The facto eth of WON facturing cost. To calculate it nua 85 TY cost *ad5 (ah, Sing an adj S also on ys als0 required. Hence, JUstMent of wiP: known as . ay ‘ ’ °Peing and ing ( Cost = Prime Cost + Factory Over, I We dl production : It includes factory i ing Wy ia <5 Cost f Production = Factory ‘Conte: Officg sing Wip ys Cost O Ot Oe and a Minis: Th tof Production of Goods Sold (or simply ¢ ministe, ative cos ‘, b Wi Y Cost F Goods sat Vetheads, heads, WS = ds Tt ef Goods Sold (COGS) = Cost o Cos ‘ie Can be ctlutaeg & finished goods stock, 7 Production Closing finishe a i E Je cost of opening finished 800dS ig 9; ei. stock from last year balance Shee Bein First Out (FIFO) method of ya irs mil a i Ailable as penin, aluation OF stock j Stock has 0 be vill be calculated on the be ‘ ‘di y Pening finisheg Bo0ds Stock 8 finisheg alculated, If, losing stock finished goods stock < 5, Cost of sales (or total cost) : It Comprises cost Of production of, "distribution overheads i.e., Cost of Sales = Cost of production Of goods sold + Selling ution Overheads are incurred and appl; _ applied ne been sold during the year Pied on those unis a Thus, the various components Of total cost are « (1) Prime cost (2) Works cost (3) Cost of production (4) Cost of Production of yoods sold (COGS) (5) Cost of sales These can be calculated sey Preparation of Cost Sheet ; ltpresents the cost data unde: Aspecimen of the Cost sheet This is because selling and distrib and distribution Overheads production which Parately in a statement of Cost called cost sheet, A cost sheet is a Statement show: ing various Components of total cost, T its various elements and components, classified n functional basis, is given below —PRIME COST Add : Opening Work-in-progress Less : Closing Work-in-progress — WORKS COST & Office and Administrative Overheads: Office salaries Office rent Office expenses, etc, COST OF PRODUCTION Add: Opening Stock of Finished goods units) ished Goods Less : Closing Stock of Fini. —— COST OF Goops SOLD Selling and Distribution Overheads : Salaries and commission1) costing a on oo ont ow 05 we expec Pai charges ise s, etc. Bad pH i ” cise’ seal and Estimated Cosy Sheaion jiorie Festi « eo8tsh aures oF OM the basis of &stimated Cost fin figu™ Thico, te, "4 This cost Sheet ig rep js of cost actually ineurreg during a meee Ont ie quarterly, half yearly, Or Yearly, ¢; “ll ily; Is 'Y St con, ar re . i the two periog¢ toby sl jorical Cost Sheet ; aflis Bonding Cost figures of: see? at period “ntptng pBudgeted/Estimated Cost Sheet ch ised in the i Sper a COS sh w ent of the period op rod Sheet is oy gonmencement oF I ri 2. q duction, The budgeteg 0 Prepared Prot 10 the Actual ; riodical intervals for the Purpose of COSt go, ON at St sheet MAY as irae 2d level ar 01 timated at the budgeted Jove} of output based op the n nt ee > actual figures op. 0 . he compared with the actual figures of Cost Meurred ay ince ction, Th Wi ake VOUrable ya Gi corrective action is taken for Unfavourable vations lated. N say Fslimated cost sheet is alsq Prepared chee leer, Fi gertin quantity of goods to the Prospective buyers, uc Aes ee ciel . ¢ eba estima : Commence al production on the basis of Estimated cogt figures a - curately as possible by takin bee sa lthistviedo edna hhe cost as acc’ cae He by 8 Ino account the Past cost trends an incorporatin fiture changes. Pre-determined Overhead absorption rate Can be us costs to these units o: f production as explained in profit can be added to determine the Price to be percentage of cost or as a Percentage of se} Usefulness of Cost Shee W) The actual total Cost of production for fi) Cost per unit of n ed to Sign Various Overhead Chapter of, Overheads, A quoted. Such, pro! lling price Following are fi may be added either as the main Advantages of cost sheet 4 particular period is ascertained 4 product can also be ascertained, ascerti Wise, This helps in Cost so Profit, is ined component. ttl) The cost so fined is presented ina classi ud cost is ascerta better cost analysis, comparison and cont ascert i ing of desired level of ‘ined can be used as a basis of price fixation and eaming of dsPRIME COST ; | | + Factory Overheads i LAID | , FACTORY/WORKSCOST =| “gig | Add: Office & Administrative Overheads 1 oun | Add : Selling & Distribution Overheads | 126969 | — TOTALCOSTICOST OF SALES | 7225060 | Profit 20h + Sales | SD Tb | 2 COST OF PRODUCTION TAG * 7 ~ a ~ ~ Example 2. The following particulars have been obtained from the cost records of Sp Manfacan Company Limited for the month of December 2014 - Output and Sales for the month O00 tinge 7 Stock of Raw Materials ay on 1.122014 Li Stock of Raw Materials as on 31.12.2014 ” ship Drawing Office Salaries sy Direct Wages paid SBN Direct Expenses ny Purchase of Raw Materials 9.20806 Carriage Inwards 30.0% Carriage Outwards 4505 cash Discount allowed y 10,55‘sting 4 Cos oar o wal ee stores oe ges wag n eet f factory ° en eae Machinery Pi it ; : ae jon on Plant & Machinery = ye use Interest. $5.09 we i : i of mae Fe“ es “ pit® ating Expense “* el 4g Salaries and Commission x " : beg q salaries vn bs Charges ‘ mn ertisememt = Ad nding Direct Wages “mn ‘ ceeds of Factory Scrap = gale Pro’ “a = . 30,099 ware required to prepare the Cog Sheet for the month " Of Deg — Yo ents of total and per unit cost an “me . Me the various £ SE Mciian: Cost sheet of SR Manufacturing ¢9, Ltd, forth ee sss aa em ane ‘onth of December O14 Ce Output: 1p, Ons sell Total Cost ¢ Cost "Cor py Costof Direct Materials Consumed : Cost of Opening Stock of Raw Materials t Add : Cost of Raw Materials purchased 920,000 | | i Add : Carriage Inwards 31160 | 9499 | Cost of Raw Materials available for use | ie | Less Cost of Closing Stock of Raw Material | 219000! gen ey)! a0 Cost of Direct Labour: aia | Direct Wages paid | 580,000 | | Add Outstanding Direct Wages | — 200) conto! sayy Cost of Direct Expenses | | | 200000 | 2m PRIMECOsT | | | iog00) Ting Add: Factory Overheads : | | | Consumable stores 40.00 | | Indirect Wages 110,000 | | Drawing Office Salaries ’ ea | Power Fe | Lighting of f Factory | 65,000 | Repairs | to Plant & Machinery : ~Depreciation on Plant & Machinery .. a esr earnre Cost Add ; Office & Administrative Overheads: Office Salaries Office Rent Directors’ Fees | Charges _ COST OF PRODUCTION Add: Selling & Distribution Overheads “Carriage Outwards Travelling Expenses Pr * Salesmen’s Salaries & Commission Advertisement COST OF SALES Profit Sales Note: Cash Discount allowed and Debenture Interest are items of purely financial nature ang are excluded from cost accounts. “thy 7.4 PREPARATION OF PRODUCTION ACCOUNT When the cost information as shown in the cost sheet is presented in the form of aT. Shapeq account then such an account is known as production account. This account also discloses break-up of total cost into its various components like prime cost, factory cost, cost Of produ + Cost of goods sold and finally cost of sales or total cost. In the last, balance in the account show Profit or loss, as the case may be. No separate column is shown for cost per unit, St Example 3. Based on data given in Example 2, prepare Production Account, Solution: Production Account of SR Manufacturing Co. Ltd. for the Month of December 2014 Dr. C Particulars Amt. (3) Particulars To Opening Stock of Raw Materials 1,50,000} By Closing Stock of To Raw Materials purchased 920,000] By Cost of Direct Materials used c/d To Carriage Inwards To Cost of Direct Materials used b/d 9,00,000} To Direct Wages 5,80,000 Add: Outstanding Direct Wages 20,000 6,00,000 To Direct Expenses By Prime Cost c/dy Ma in ve 5 40,000 y tore: 229 gh ne 1,10,000 no ie" ee salaries 90,000 Py qsumable Stores 1,20,009 Col yet pactOry $5,000 rie plant & Machinery 65,000 Sas tant 50,000 pe jon OF —— ool wee? 530,000 act Scrap 30,0 ae proceeds of Fact Serap 30,000 5.00009 me" 22.00,009 \ rory/ Works ia 22.00.00 By C, i, 4p Fa” Administration Overheads | ~ JY Cos, Of Producti 206,099 He oyice & El YO Pt 1,20,000 S200 N i Fes 60,000 roc ie Salaries 1,50,000 | eral charges 12,000 | 4,00,009| ction b/d | i cos of production bi 26,00.000 [BY Cost of Sale oid [2eonpoy ving & Distribution Overheads 30,00,000 nye is Bese Outward 45,000 Ping Expenses 75,000 | | e Salaries 1,80,000 y_salesmen's OD risement 100,000 | 40000 a 30,0,00) ham at) cost Sales b/d 30,00,000 [By sale (3200000 F 37,50,000 M Net Profit 50,000) ig” a (asa <-aiment of Scrap/Wastagi —— Treatment oe ee facturing jg oes Itisusually of small quan ' generally unavoidable and uncontrollable, a Theoost of scrap has to be borne by good Units of production, This means that the realisable value hy afserap should be deducted either from the cost of Material consumed or factory overhead or from werall factory/Works cost. However, if there is any abnormal loss then it should be excluded from theeost of production. This should be transfered to Costing profit and loss account, Adjustment for Opening and Closin ‘Work in Progress : Work-in-progress refers to partly finished iK pening, 4 i |Cost 4 7.10 or semi-finished goods. Work on such goods has already started but not yet finished 4; particular period, The cost of opening work-in-progress stock is added and of ill the progress is deducted to the factory overheads to find out factory/works cost. ‘ Sing nt Adjustment for opening and closing finished goods stock : Sometimes, the Cost of, i. of finished goods is not given. In that case, the same can be worked out by multiplyin, sing units in stock by current cost of production per unit as ascertained in the cost sheet ae ume method of vaulation of stock. The cost of opening stock of finished goods is usually giver neh it same is not given, it can also be worked out with the help of the cost of production per et in current period based on the assumption that cost of production per unit for the current st forge that of the preceeding period are the same. The opening stock of finished goods is addeq Tid ay closing stock is deducted from current cost of production to find out cost of goods sold. 5 ay Computation of Overheads Absorption (Recovery) Rates Sometimes, it is required to calculate overheads absorption rates based on the cost sheet Prepan the last period. These rates can be used for preparation of estimated cost sheet. Such nue calculated in respect of factory, administration and selling and distribution overheads, * (i) Factory overhead rate is usually calculated as a percentage of direct wages as follows: Factory Overheads : 100 - Direct Wages % of direct wages (ii) Administration Overhead rate is usually calculated as a percentage of works cost as follows Office Administration Overheads «100 Factory / Work Cost ie iii) Selling and distribution overheads rate may be computed either as a percentage of works cost s a percentage of sales.The following information io” the month of December h sy for Materials on 1-12-2014 one Materials Purchaseq | purchases O vork-in-progress on 1-12-2014 eof Se isienials on 31-12-3914 BI rogres on 3 1-122014 eof f Finished Goods op 4, : é stock 0! i i 8 of ock of Finished Goods on 31. if a erative Overheads 22014 i : vi 2 es Distribution Overheads sik z, required to prepare a Statement of n iv LW ing Stock of Raw Materials ang Ci Prof; : OSt Sheet 4 jon: a e rte Lae Raw Materials purchase | Add : Carriage on Purchase eg | “WS | \ 5.009 | ny me yc] ‘any arin 175 Less iaing Stock of Raw Materials Tae. | mae of Direct Labour Wi eC Fan at of Chargeable Expenses a | PRIME COST se 4id; Factory Overheads | Hp GROSS FACTOR} WORK Cosr 23000 4ai:Cost of Opening Stock o f Work in-progress “Tos000 | | ean las: Cost of closing stock or( Work. “progress | so ACTORY/Wonvenne | | 00 FACTORY WORKS Cost Taso Add: Office & Administrative Over Is “135009 COST OF PRODUCTION Tom Costof Opening Stock of Finished Goods | 1st “Sof Production of goods available for sale ‘950000 las:Costof Closing Stock of Finished Goods nw COST OF PRODUCTION OF GoODS SOLD ei Add Seling Distribution Overheads aa aehere was no stock of work-in-progress either at the beginning or at the end, Advertising aNd othe, u ‘costs were & 10 per unit. During the year 15,000 units of product R was produced. )) total the cost of production (b) 5 and work out (i) the Percentag D ion overheads on works cost, and (iii) the net profit per unit, Solution . Cost sheet of Product ‘R’ for the Year ending December 3 1,2014 Output: 15,055 ty Particulars z . Cost of Direct Materials consumed : Opening Stock of Raw Materials 1,00,000 Add: Raw Materials purchased *-6,00,000 Add: Carriage inwards “14,000 —— 7,14,000 Less: Closing Stuck of Raw Materials (64,000 ) 6599. Direct Wages Nap Direct Expenses Sin { PRIME COST 100, Add : Factory Overheads : we _— insurance > 80,000 ler Factory Overheads -1,40,000 2,20,000r jstrative Overheads in! A pr an COst gy er Works Cog, stock of Finished Good F PRO, ing - (om une Unite) ON (is posing Stock of finished Gogg, ion ay $ Unit 50, 000. 14,70,000 ite [i COsr gelling © Distribution Overheads Sop, Soy, 0 x unit @ 10) N b a COST oF i Say 3,54 Net Profit § 00g ‘ SALEs ~ ‘ation of Overhead Absorption Rate e Factory Overheads as a % of Direct Wage s =~ Direct Wages Administration Overheads ag q oy ti) 76 Of Works cog Administration Overheads re Work Cost a fi) Net Profit per Unit i let Profit “Number of Unitsold 7 Vos a flustration 3. ABC Ma anufacturing Co. Ltd, rece 8 an en products The cost accountant has submitted the in Wig en a 8S Of the cos he suply of 50009 units of ‘st for completing the on 1,00,000 Kgs @ % 20 per Kg Direect Wages : 25,000 Hours @ @%40 per hour, Variable Overheads Raw Materials : Factory @ % 24 per labour hour Selling & Distribution = 1,20,000 Fixed Overheads x Factory : 7 160,000 Office & Administration : = 4,00,000._ Selling & Distribution : & 1,00,000~ 6,00,000 ~1,60,000 FACTORY COST Overheads COST OF PRODUCTION Overheads 1,20,000 1,00,000 COST OF SALE Profit @ 20% on Cost Price : ‘ SELLING PRICE me ¢ following particulars relating to the year 2014 have been taken from th o ‘$, manufacturing and selling a chemical mixture : Finished Mixture Factory Stores Raw Materials~ Factory Stores — sales: Finished Mixture Factory Scrap — factory Wages — _ tion costs (Other than direct material nd direct wages, assumed to be normal) ower i epreciation on Machinery scenesefinshed mixture at the eng °f 2014 ne" ae price of raw materials Temaine fe statement giving the maximum Posi ea ; Coal Sheet ofacy gto” Is consumed : Direct Material BP ening Stock of Raw Materials c dd: Cost of Raw Materials purchase { tas Cost of Closing Stock of Raw Mati past of Direct Labour tof Direct Expenses e PRIME COST » patory Overheads : Cost of Factory Stores consumed Opening Stock Add : Purchase Closing Stock Power Depreciation of Machinery Factory Salaries Rectification cost Less: Sale of Factory Scrap WORKS COST Office & Adm. Overheads : Office Salaries Office Expenses COST OF PRODUCTION (1,51,000 kg) du eine ange rou Cost : ie: "neg betes ll Won, Or the Year ary 21 ean OU cog ANd its f a Orne 7 1p otal Cos, C 2] oper Uni a 4.10009 (san) 8 540) 371500 250 | 1192900 70 | 80,000 40,800 | 1,20,800 0.800 13,13,700 8.70014,67,280 3,50,720 18,18,000 tion during the year = Goods Sold + Closin : = 1,51,000 Kg, 1g Stock — Opening Stock = (1,51,509 4 : : 4,00,000 Value of Closing Stock of Raw Materials = 1,60,000 of Closing Stock of Finished Mixture 7.90 « 4,500 =% 35,550 For valuation of closing stock of materials, finished goods, assumed. «12,000 = % 30,000 FIFO method of valuation have ‘a Illustration 5. Work out in Cost Sheet form the Unit cost of production per ton of Special Paper Manufacture bya paper mill in December, 2014 from the following data: + » Direct Materials: Paper Pulp 500 tons @ % 500 per ton : Other Materials 100 tons @ 300 per ton Direct Labour: 4 Skilled men @ 7 500 per day for 25 days 8 Unskilled men @% 300 per day for 25 days Direct Expenses: Special Equipment %30,000 Special Dyes % 10,000 Works Overheads ; Variable @ 100% on direct Wages Fixed @ 60% on direct Wages Administrative Overheads @ 10% on works cost Selling and Distribution Overheads @ 15% on Works Cost. 400 tons of special Paper was manufactured and € 4800 was r course of manufacture. The Scrap value of the special eq ealised by the sale of Waste material duri Manufacture can be assumed as % 3200, uipment and Special dye after utilisation j tte eei Costing, pul iwi oa x%500 ts * ateia! 100% &300 sale of Waste Materials pes i | Labour | (ior 35002 \ ae | je Men 4 *€500> 25 Say} | mile Men=8 *%300 x 25 \ 2g, | uss | { dest enSES iy, | ty i est Eauipment Sy No | gpecial Dyes 4 | tg | r | ; | ve | | : yess: Serap value of dye and equipment | = \ | pnIMECOST hs a | . Works Overheads ~ Hay | i Fas | ey le (100% on direct wages) | ay tn | eg soon direct wages) Iu | oe WORKS COST they) { istrative or Overheads (10% on wy, "is | ministrative e ee de On Works Cost) ty | COST OF PR' J | Wea wr. ion Overheads (15% | galing & Distribution Overheads (1504 op Works Co) | 6a OSTORSALES 4 | | tony, tory incurred the fol ae “ans | Bes justration 6. Ir SENS Following expendi es thane 1 _ ture duri Ri | a | | r= Direct material consumed a Manufacturing wages | a Manufacturing overheads; 00000 Fined | Variable | 29 Gay a | | x ry Inthe year 2015, follow Ing changes are expected in Production and cost of production, (i) Production will increase due to Tecruitment of 60% more workers inthe factory Mil) Overall efficiency will dectine by 10% on account of recruitment of new workers. 5718 ol (iii) There will be an increases of 20% in fixed overhead and 60% in variable OVethcag i (iv) The cost of direct material will be decreased by 6%, (v) The company desire to earn a profit of 10% on selling price. Ascertain the cost of production and selling price. 4, = a Solution : Budgeted cost sheet for the Year 2015 Particulars cod 00,000 pk — (2, a } Direct material consumed : ica (44% increase due to increased output ( WN,) but 6% decrease due to decline in price) (> 00,000 x xian Direct wages (manufacturing) 100 (60% increase in wages due to recruitment of 60% more workers) Prime cost 120 — Manufacturing overheads : Fixed ( 60,000 x iz) 432,000 160 | Variable 2,50,000 x — 4,00,000 100 — Cost of production Profit (1/9 of cost or 10% on selling price) Selling price Workings : WN, > Calculation of Production level in 2015: Let Production level in 2014 =x | Production Level in 2015 due to increase in = 16x No. of Workers by 60% assuming same efficiency level Production Level in 2015 when overall efficiency decline by 10% = seal 1000 = ate Hence, increase in production in 2015 over 2014 = 44% ustraion 7. AB & Co, manufactures two types of pens P and QO. The cost data for the . 's yeai vember, 2014 is as follows: aan0 09 stray 4% the Sear en yd 2014 pirect materials pirect wages production overheag second that: se ie terials in type P Cost twigg 28 mg Hi sages for TYPE O Were 60% of ted ch cl te Mater. , pire io overhead was of same Fate fop see iy \ ie pr iti cqrative overhead for each 928 200, bath yy iB vine sts were 0.50 paise per Pen fp Re es during the year: : aypeP 40,000 ype 1,20,000 ing the year: pe oP 36,000 type 1,00,000 gelling prices were & 14 per pen for om rea Sta atement showing total and per u rately for two types of pen P and Q. oof Of "dj dlregy * bo tye "ln E810 Init Values of rag e ion, Statement of total and cost per unit an a a 1 ton, prof Oi and lee M4 tn Xs Yea eng Production units led Ny, =< Direct Direct wages (WN,) Prime Cost 4id: Production overheads Work Cost {dé: Administative overheads (200% of direct wages) Cost of Production | 424000 | * less: Closing stock (WN,) 42,400 faa 620 4 3 24, 0¢ (4000 units x % 10.60 and 20,000 x % 6.20) | | [2400 Cost of Goods Sold | 381,600. a oom ah | | =F60 000y + 1,20,000 x Too” = 224,000 => 40,000y + 72,000) = 2,24,000 => 1,12,000y = 2,24,000 => y = %2 Cost of wages for type of pen P = 22 per unit. o) 0=rt2 = 21.20 per unit. N,—> Closing stock of units Type P Bpe O Production during the year 40,000 1,20,000 We) Stlesduring the year 36,000 —1,00,000 Closing stock during the year 4,000 20,000 Mllusrtation 8. Mr. Rohit has a small furnitu ire factory, He specialises in the manufacture of small drays tables of standard size of which he can make 15,000 units a year. The cost per table worked Out as inde year 2013-14, when he made and sold 10,000 tables, = Materials 30 Labour 10 Overhead (fixed) Tecovered @ 50% of Material Cost 15 oie Price is fixed by adding a standard margin of 10% to the total cost arrived at as above, In2014-1$due to fall in the cost of materials, he has worked total cost as under: Materials 20 Labour 10 Overhead (fixed) Tecovered @ 50% of Material Cost 10 zySe 721 gin of 10% on the cog Of sales, Hh mal © has estimateg dard 2013-14, You are asked to; tHe Seles forthe Me -14, el as + the year 2013. 1058 £0 Mr. Rohit for the year 2014. rt : de b: 1S comect Not, revi a ould charge in 2014-15 tocar the € level oj te phe Ss je nich “ce Ww ri S€ the estimates and f profit OF loss.as in 2013-14, UCWA Inter Adapted\ Statement of Profit for the Year 2013-44 Ors Production: 10,000 Tables Per unit (2) 3,00,000 30.00 1,00,000 10.00 cost 4,00,000 40.00 Pom 1,50,000 15.00_ % on materials) 5,50,000 55.00 so TOTAL COST ’ 5.50 erhe@ TOT. ‘y 55,000 te tal Cos 60.50 (10% on ae LING PRICE 6,05,000 fit ais pro aes a t of Estimated Profit for the year 2014-15 n —~ .. Stateme — a Production: 10,000 Tables — Total (%) Per unit (2) : 00 ricul | 2,00,000 a sf —— 1,00,000 eri re 3,00,000 30. ran Labour PRIME COST ; ian eneen isan Bi Fixed at the level of 2013- oon ‘50 pverness oa TAL COST 55,000 5.50 ; 50.50 pa? kee RICE | 5,05,000 aicn2or" TED SELLING P profit © ESTIMATED § aTheoretical/Practical Questions Ss THEORETICAL QUESTION ; ; aes, mati 1, Define Unit Costing. Name some industries to which this me ft Costing is Pay, 2. What is a cost sheet? Describe in brief the various components of Total Cost, . , s me : z 3. What is a cost sheet? In what respect it differ from production account? i is (CA, Inter. Noy, 199g 4. Explain briefly Unit Costing Method of asertaining product cost. lay» (BCom), Delhi Univ. 2007; C4, tn y t Now. My PRACTICAL QUESTIONS 4 1, Youare the chief of the Cost Accounting Department of Leather Products India Ltd, Your at manufactures shoes. The following figures have been extracted from the account books relating production of shoes for the year 2014, to Raw Materials consumed (including abnormal wastage of € 10,000) slang Direct Wages paid 400K Paitory Overheads L000 Tools consumed 10 Depreciation of Machines (Factory) 50 Machines imported 100,009 Work Expenses (Misc.) 50,009 Office Expenses 25,009 Overheads for Office 40,009, Managing Director’s Salary 50,009 Stationery & Printing (Office) 5,000 Depreciation of Machines (Office) 1,009 Selling and Distribution Expenses 25,000 Entertainment of customers 20,000 Advertising 30,009 Dividend paid 1,00,009 Prepare a cost analysis statement after considering the follow ing : (i) The profit rate is 20% on sale (ii) Wages outstanding € 25,000, {Ans. + Prime Cost : %9,25,000; Factory Cost : % 10,90,000; Cost of production of goods produced %12,11,000; Cost of Sales : % 12,86.000. Profit ; % 3,21,500 & Sales + % 16,07,500z 75,000 91,500 52,500 1,000 28,000 35,000 66,000 5,000 2,500 1.000 ak ap of costs ad profit wy Production 3i) Stock of finished bear ype xe. (i) 20,000 bearings @ Ai oh of May, 2009 was 2,70,000 beari S ion during the m je (vii) Production 2009 was 15,000 bearings @ My q ‘ oul i f 4 ty] ‘ ‘rings of type «xp,/P® “x, i ‘XE’. Out of May’s output 25, bearings of type ‘X! 25,000 be: Ye lock on 31st May, 2009 which was y; and 4 type XE’ was remains in stock Ist May, i alued at og i, ay You are required to: in tion of each type of bearings, it showing cost of produc () Prepare a statement : ing price at which the bearings Would be mark i it showing the selling price at an (ii) Prepare a statement 4 d, desires @ 20 percent profit on selling price. a “sy Py 4. The following data are available from the Cost Ledger of Acme Industries ort z 4 Plant maintenance 25,000 \ Lighting 6,300 Depreciation on plant 8,100 Rates and taxes for the works 3,900 Staff salaries 32,000 Management salaries 22,000 Power (for this plant) 10,600 Rental for leasehold equipment 9,600 Indirect wages 37,100 Rectification cost of defectives (Normal) 8,400 Consumable stores 17,600 Selling expenses 30,000 General charges 15,600 Sale proceeds from scrap 4,200 during the year was sold out. With effect from January 1, 2015, the selling roduction could be enhanced during 2015 by 33 t additional selling expenses, ‘ou are required to Prepare statements showing: @ Actual Cost and profit for the year 2014. (ii) Estimated Cost and profit for 2015 ‘sumptions, if any, required to be made [Ans. Actual Cost of ‘age selling price was % 6 7S per unit an price was reduced to & 6.40 $ Per cent without incurring a Sales and Profit for the year 2014 are Estimated figures for 2015 are ° COst per unit was. d the entire quantity mist Per unit. It was e ‘ TWisaged y NY Overtime or ext Tashi Wo, ULCWA, Inter rs dune 13 2,000 and * 1,08 699 respecte %8,72,800 and 1,51.299 Pespecing; costing wt y ces of 8 machine cost Centre for en ext Pari B59 gq. ular er on 000: 1) POW ace and Repairs; Fe inten Wain % 10,099, a act? Operator's Wages: z i 2.009, (ie pervision® a | i)? jation: %49 , | (0) rec y 000, 0) cus are given below: ih Rat F _ 30 " °F Prodan A Nits Per houp Produc ; | 10 Units Fn B Uni Per houp Lag ‘mis c ia Per hour 500 | D its pep duction was t0 be offered tg Govern a yo” e 60; C: = 100 and D: % 399 OM Cog Ph Ai ‘ ving ‘ sis i ct ment showing product-wise “cost? and Ma of a state ‘offey Price "Fs oe : (Ans, Product-wise _ i icw, Offer Price A 856 9 A Ie, bg | "Ae 22964 citer tan ancy Toys Co. are manu aCturers oft I 16 0 29 Te Fg 3st Dec. 2014 were, NOD ois 8 0 ang 14g a tg on he Direct Materia) only Direct Wi *,00,009 Production Overheag mio as no work-in-progress atthe Deginning ora the ste 5 y “4 Direct material in type x costs twice S much as direct material ned ‘ ; The direct wages for type y were 60% of those for type » I type y, 5 Production Overhead w Per toy Of x and type, ‘Ach grade Was 200% of direc labour {¢) Selling Cost was 25 paise per toy for each {ype of toy, “) Administration Overhead for e: () Production during the year was; Type x—40,000 toys of which 36,0 Type —1,20,000 toys of which ig) Selling prices were % 7 “tolal cost per toy 000 were sold, 1,00,000 were sold, Per toy for type x ands for each type of toy and the profi Per toy for type y, Prepare a statement showing the fit made on each type of toy, (ICUA Ine, Adapea {Ans, Total cost er toy: Type-x 5.55; Typeey 33.35; Profit per toy: x-% 1.45: YR165) gga