PROJECT REPORT ON:

COST SHEET

REGD. NO CHSE ROLL NO: __________________

 PROJECT :
 VIVA- VOCE :
 Total. :

(Internal Examiner) ( External Examiner)

 ACKNOWLEDGEMENT

I would like to express my special gratitude to my Cost Accounting

teacher who has give her valuable guidance and support in
completing my project.

I would like to extend my gratitude to the principal Sir for

providing me with all the facility that was required.

Date:- Mr.

CHSE ROLL NO:-

 CERTIFICATE
Name of the teacher –

Designation – lecture in commerce

Name of college –

Certified that (Name of the student) of +2 commerce Roll No

___________________ has completed his project under my Supervision.

I certify that project in accordance with the guidelines issued by CHSE.

(Name of the teacher)

Mrs. Mary Rose Lakra

Signature

CONTENTS

1. Meaning of Cost Sheet

2. Advantages of Cost Sheet
3. Element of Cost
 4. Prime Cost
5. Overheads
6. Expenses Excluded from cost
7. Purpose (or advantages) of cost sheet
8. Performa of Cost Sheet
9. Practical Problems
10. Conclusion
11. References

MEANING OF COST SHEET

Cost sheet is a statement which presents detailed information relating to the

various stages of cost. It also shows the total cost of the product manufactured
during a particular period of time. Thus, the cost sheet is prepared for a particular
period of time monthly, quarterly, yearly etc. The expenses of a product are
analyzed under different heads in the form of statement. This statement is called
Cost Sheet.
Advantages of a Cost Sheet are:

a. It discloses the total cost and the cost per unit of the units produced during
the given period.
b. It enables a manufacturer to keep a close watch and control over the cost of
production.
 c. By providing a comparative study of the various elements of current cost
with the past results and standard costs, it is possible to find out the cause
of variations in costs and to eliminate the adverse factors and conditions
which go to increase the total cost.
d. It acts as a guide to the manufacturer and helps him in formulating a definite
useful production policy.
e. It helps in fixing up the selling price more accurately. Element of cost:

Element of cost are Material, Labour and Expenses. Each of these three
elements can be direct and indirect. i.e., direct materials and indirect materials,
direct Labour and indirect Labour, direct expenses and indirect expenses.

Direct Material

Material

Indirect Material

Direct Labour

Labour

Indirect Labour
 Direct Expenses

Expenses

Indirect Expenses

Direct Material:-

Direct materials are those materials which can be identified in the product.
They can be conveniently measured in direct charged to the product. Thus, these
materials directly enter the product and form a part of the finished product.
Following are the normally classified as direct materials:
1. All raw materials like jute in the manufacture if gunny bags, pigs iron in
foundry, and fruits in canning industry.
2. Materials specifically purchased for a specific job, process or order like glue
for book binding, starch powder for dressing for dressing yarn.
Indirect Material:-Indirect materials are those materials which cannot be identified
in direct product. They cannot be conveniently measured and directly charged to
the product.
These materials either
i. Do not form part of the product; e.g., lubricating oil, grease, sand paper, coal,
fuel, cotton waste, stationary, etc., or
ii. If found in the finished product, are of nominal value; e.g., sewing thread in
readymade garment, nails in sofa set etc.

Direct Labour:
Direct Labour is that Labour which can conveniently identify or attributed wholly
to a particular job, product or process or expended in converting raw materials in
to finished goods. Wages of such Labour are known as direct wages.
Indirect Labour:
The wages of the Labour which cannot be allocated but which can be apportioned
to or absorbed by cost centers or cost units is known as indirect Labour.
Direct Expenses:
All expenses which can be identified to a particular call center and hence directly
charged to the centre are known as direct expenses. In other words all expenses
(other than direct material and direct material) incurred specially for a particular
product, job, department etc.
Some examples are:
a) Hire charges of special plant used for a job.
b) Royalty on products.
c) Cost of special patterns, designs or plans for a particular job or work order,
etc.
Indirect Expenses:
Indirect expenses are expenses other than indirect material and indirect Labour,
which cannot be directly identified with units of output, job, process or operation.
These expenses are incurred commonly for jobs and processes. E.g., rent, power,
lighting, depreciation, bank charges, advertising, etc.
Prime Cost
Prime costs are a firm’s expenses directly related to the materials and Labour used
in production. It refers to a manufactured product’s costs, which are calculated to
ensure the best profit margin for a company. The prime cost calculates the direct
costs of raw Materials and Labour, but does not factor in indirect expenses, such as
advertising and administrative costs.
Overheads:

Overheads may be defined as the aggregate of the cost of indirect materials,

indirect Labour and such other expenses including services as cannot conveniently
be charged direct to specific cost units.

The main groups into which overheads may be subdivided are:

i. Manufacturing Overheads
ii. Administration Overheads
iii. Selling Overheads iv. Distribution Overheads
v. Research and Development Overheads
(i) Manufacturing or Production or Works Overhead:
It is the indirect expense of operating the manufacturing divisions of a concern
and covers all indirect expenditure incurred by the undertaking from the receipt of
the order until its completion ready for dispatch either to the customer or to the
finished goods store. Example of such expenses are: depreciation and insurance
charges on fixed assets like plant and machinery, works, building, electric
equipment’s and floating assets like stores, finished goods etc (ii) Administration
Overhead:

It is the indirect expenditure incurred in formulating the policy, directing the

organization, controlling and managing the operations of an undertaking which is
not related directly to a research, development, production or selling activity or
function. It consists of all expenses incurred in the direction, control and
administration (including secretarial, accounting and financial control) of an
undertaking. Examples are the expenses in running the general office e.g. office
rent, light , heat, salaries and wages of clerks, secretaries and accountants, credit
approval, cash collection and treasurer’s department, general managers, directors,
executives; legal and accounting machine services; investigations and experiments
and miscellaneous fixed charges.

(iii) Overhead:

It is the cost of seeking to create and stimulate demand and of securing orders and
comprises the cost of soliciting and recurring orders for the articles or commodities
dealt in and of efforts to find and retain customers. It refers to those indirect costs
which are associated with marketing and selling (excluding distribution) activities.
Examples are sales office expenses; salesmen’s salaries and commission ;
showroom expenses; advertisement charges; fancy packing to attract sales;
samples and free gifts; after sales service expenses; demonstration and technical
advice to potential customers; cost of marketing information system and costs of
catalogues and price lists.

(iv) Distribution Overhead:

It is the expenditure incurred in the process which begins with making the packed
product available for dispatch and ends with making the reconditioned return
empty package, if any available for reuse. It comprises all expenditure incurred
from the time the product is completed in the works until it reaches its destination.
Under these would be included warehouse rent; warehouse staff salaries,
insurance etc; expenses on delivery van and trucks; expenses on special packing for
bulk transport like bales, crates, chests etc.
(v) Research and
Development Overhead:
Research overhead is the cost of searching for new and improved products,
new applications of materials or products, and new applications and improved
methods. Development overhead is the cost of the process which begins with the
implementation of the decision to produce a new or improved method and ends
with the commencement of formal production of that product or by that method.

By grouping the above elements of cost, the following divisions of cost are
obtained:
1. Prime Cost = Direct Materials + Direct Labour + Direct Expenses
2. Works or Factory Cost = Prime Cost + Works or Factory Overheads
 3. Cost of Production = Works Cost + Administration Overheads
4. Total Cost or Cost of Sales = Cost of Production +Selling and Distribution
Overheads
Expenses Excluded from cost
The total cost of a product should include only those items of expenses which are
a charge against profit. Items of expenses which are relating to capital assets,
capital losses, payments by way of distribution of profits and matters of pure
finance should not form a part of the cost.
Following are the items which are not included in cost accounts:
(a) Purely Financial charges. (i) Loss arising from the sale of fixed assets, (ii) Loss
on investments, (iii) Discount on shares and debentures, (iv) Interest on bank
loan ,mortgages and debentures, (v) Expenses of the company’s share
transfer office, (vi) Damages payable, (vii) Penalties and fines, (viii) Losses
due to scrapping of machinery, (ix) Remuneration paid to the proprietor in
excess of a fair reward for services rendered,(x) Interest on capital, (xi)
Expenses of raising capital, (xii) Cost discount.

(b) Appropriations of profits. (I) Donations and Charities, (ii) Taxes on income
and profits, (iii) Dividend paid, (iv) transfer to reserves and sinking funds, (v)
Additional provision for depreciation on fixed assets and for bad debts, (vi)
Capital expenditure specially charged to revenue.

(c) Writing off Intangible and Fictitious Asset. Goodwill, Partner and
Copyrights, Advertisement, Preliminary Expenses, Organization Expenses,
Underwriting Commission, Discount on Issue of Shares/Debentures.

(d) Purely Financial Incomes. (I) Rent receivable, (ii) Profits on the sale of fixed
assets, (iii) Transfer fees received, (iv) Interest received on bank deposits, (v)
Dividend received, (vi) Brokerages received, (vii) Discount, commission
received.
 (e) Abnormal Gains and Loss. (i) Abnormal wastage of material, (ii) wages of
abnormal idle time, (iii) cost of abnormal idle facilities, (iv) excessive
depreciation, (v) abnormal gain on manufacturing. Performa of Cost Sheet

Cost Sheet or Statement of Cost

Total Cost per unit
Cost

Opening stock of raw material

Purchase of raw material
Purchase of Expenses
Less: Closing stock of raw material
Raw material consumed
Direct Labour
Direct Expenses
Prime Cost
Factory Overheads
Add: Opening stock of raw material WIP
Less: Closing stock of WIP
Work Cost
Office Overheads
Cost of Production
Selling and Distribution Overheads
Total Cost of Sales

Practical Problem
1. From the following particulars prepare a Cost Sheet showing Prime Cost,
Factory Cost, Cost of Production, Total Cost for the period ended 31 st dec,
2017:

Raw Material – 33,000 Office Insurance – 500

Rent and taxes (office) -500 Legal Expenses – 400
Productive wages – 38,000 Rent of Warehouse – 300
Water supply (works) – 1,200 Delivery Van- 200
Depreciation of Bad debts
-Plants and Machinery – 2,000 Advertising – 300
-Office Building – 1,000 Office stationery – 900
Unproductive wages – 10,500
Factory Insurance – 1,100
Factory rent and taxes – 7,500
Estimating Expenses (works) – 800
Director’s fees (Works) – 1,000 Sundry
office expense – 200
Loose tools written of-600
Directors of (office)-2,200
Factory Stationery – 750
Haulage (works) – 3,000
Bank Charges – 50
Factory cleaning – 500
Motive Power – 4,400

Statement of Cost
 Amount
Raw materials 33,000
Productive wages 38,000
Prime Cost 71,000
Unproductive wages 10,500
Factory rent and taxes 7,500
Motive Power 4,400
Haulage (works) 3,000
Director’s fees 1,000
Factory Cleaning 500
Estimating expenses (works) 800
Factory stationery 750
Loose tools written of 600
Factory Insurance 1,100
Water supply (works) 1,200
Deprecation on plant and machinery 2,000
Work Cost 1,04,350
Director’s Fees (Office) 2,000
Sundry office expenses 200
Office stationery 900
Rent and taxes (Office) 500
Office Insurance 500
Legal expenses 400
Depreciation of Office building 1,000
Bank Charges 50
Cost of Production 1,09,900
Rent of warehouse 300
Delivery van 200
Bad debts 100
Advertising 300
Total Cost 1,10,800
 Conclusion
A cost sheet analyzes the components of cost in order to show the per- until cost
for a given product. Business managers use cost sheets as reference documents to
help manage purchasing and production costs, and to find the right selling prices
for products and services. While there are other ways to manage costs, most
companies choose to use cost sheets because it’s an efficient ways to track and
control different kinds of costs.