Chapter 6

Unit Costing

• It is a simple method of costing employed in industries where the production is continuous and uniform. Cost per Unit = Total Cost Number of Units Produced .Introduction • Unit costing is a method of costing based on units of production. • The output is measured in acceptable physical units. and a single article is produced in two or more grades. • It is also known as output costing or single costing.

• The cost sheet prepared under single or output costing method shows the following: – Total cost – Cost per unit – Previous period’s total cost and cost per unit .

and is being sold. of automobiles .Cost Unit • Cost Unit should be the unit of measurement in which production is measured. • For example: • • • • Breweries– Barrel Cement – Tone Cable – Meter Automobiles – No.

Features of Unit Costing • • • • Average cost unit computation Single product involved Word-in-progress ignored Applicable to non-continuous manufacturing process industries .

Procedure Of Unit Costing • • • • Collection of Costs Cost of Materials Cost of Labour Overheads .

Treatment Of Stocks • Stock of Raw Materials Opening stock of raw material Add: Purchase of raw material Less: Closing stock of raw material = Cost of raw material consumed .

Treatment Of Stocks • Treatment of W-I-P: Valued at either prime cost or work cost. Valuation at prime cost Direct material Add: Direct wages Add: Direct expenses Add: Opening work-inprogress Less: Closing working progress = PRIME COST Valuation at work cost Prime cost Add: Factory overheads = WORK COST . • Generally. the w-I-P is valued at work cost.

Waste and Defectives . Scraps.Treatment Of Stocks • Stock of Finished Goods Work costs Add: Administrative and establishment overheads = Cost of production Add: Opening stock of finished goods Less: Closing stock of finished goods = Cost of finished goods sold • By product.

. • This statement is called as a production or output account. stocks.Cost Sheet And Production Account • Cost sheet or cost statement is prepared at periodic intervals to record the costs incurred to produce a certain number of units during a given period of time. an exhaustive cost statement is prepared to include item of sales. a statement showing the various elements of cost is prepared. and profit. • For the determination of total cost of production. • This statement is called as the statement of cost or cost sheet. • Sometimes.

• It may be based on actual data or estimated data. .Features Of Cost Sheet • It relates to a particular product. • It may show the total cost as well as the unit cost. • It relates to the costs incurred during a particular period.

. by studying the cost elements in detail. • It provides data to compare the costs incurred during different periods and with projection or estimation. • It facilitates preparation of tenders or quotations. • It controls costs. It highlights the area where cost control is needed. • It enables the management to fix up the selling price.Purposes Of Cost Sheet • It gives the breakup of total cost under different elements of costs. • It shows total cost as well as cost per unit.

Divisions Of Cost • Prime Cost = Direct Material + Direct Labour + Direct Expenses • Works Cost / Factory Cost = Prime Cost + Factory Overheads • Cost of Production = Factory Cost + Administrative Expenses • Total Cost = Cost of Production + Selling and Distribution Expenses • Selling Price = Total Cost + Profit(Loss) .

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