Cost Sheet

Basics and Format

030820
 Lecture Outcome
• Identify the cost incurred and bifurcate it on the basis of
different elements of cost
• Preparation of cost sheet
 Meaning
• Cost sheet is a document which provides for the
assembly of the estimated detailed cost in respect of a
cost center or a cost unit.
• It is a detailed statement of the elements of cost arranged
in a logical order under different heads. It is prepared to
show the detailed cost of the total output for a certain
period.
 A Cost Sheet depicts the following
facts:
• Total cost and cost per unit for a product.

• The various elements of cost such as prime cost, factory

cost, production cost, cost of goods sold, total cost, etc.

• Percentage of every expenditure to the total cost.

• Compare the cost of any two periods and ascertain the inefficiencies if any.

• Information to management for cost control

•
 Objects of Cost Sheet

1. For determining the selling price

2. Facilitating in managerial decision making

3. Preparation of budgets
 Elements of Cost

• Prime Cost: 
It comprises of direct material, direct wages, and direct
expenses. Alternatively, the Prime cost is the cost of
material consumed, productive wages, and direct
expenses.
 Elements of Cost
Factory Cost: 
• Factory cost or works cost or manufacturing cost or
production cost includes in addition to the prime cost the
cost in indirect material, indirect labor, and indirect
expenses.

• It also includes amount or units of WIP or incomplete units

at the end of the period.
 Elements of Cost
Cost of Production: 

• When Office and administration cost at the end of the

period are added to the Factory cost, we arrive at the cost
of production or cost of goods sold.

• Here, we make an adjustment for opening and Closing

finished goods.
 Step by step Method of preparing cost
sheet
Prime Cost =  Direct Material Consumed + Direct Labour + Direct Expenses
Step I Direct Material= Material Purchased + Opening stock of raw material-Closing
stock of raw material.

 Works Cost = Prime Cost + Factory Overheads (Indirect Material + Indirect

Step II Labour + Indirect Expenses)+opening Work in progress-Closing Work in
progress

Cost of Production = Works Cost + Office and Administration overheads +

Step III
Opening finished goods-Closing finished goods

Step IV Total Cost = Cost of Production + Selling and Distribution Overheads

Profit Sales – Total Cost

Types of Stock Categories
Raw Material Prime Cost

Work in Progress ( Semi finished ) Works Cost

Finished stock Cost of Production

 Prime Cost Calculation
Particulars Amount
Opening Stock of Raw Material ***
Add: Purchase of Raw materials ***
Add: Purchase Expenses ***
Less: Closing stock of Raw Materials (Raw Materials Consumed ) ***
Direct Wages (Labour) ***
Direct Charges/carriage inwards/ Octroi/ Custom duty ***
***

Prime cost (1)  

 Works Cost Calculation
Particulars Amount
Prime cost (1)  
Add :- Factory Over Heads: Factory Rent Factory Power Indirect Material  
***
Indirect Wages/unproductive wages
***
Drawing Office Salary Factory Insurance ***
Factory Asset Depreciation (Machinery/Factory Building/Factory furniture)
***
Consumable stores
Fuel and power
Grease and Oil

Works cost Incurred  

Add: Opening Stock of WIP ***
Less: Closing Stock of WIP ***
Works cost (2)  
Calculate work cost
. The total of all direct expenses is known as
a) Total cost
b) Overhead
c) Prime cost
d) Work cost
• c
 Calculate the prime cost from the following information:
Direct material purchased: Rs. 1,00,000
Direct material consumed: Rs. 90,000
Direct labour: Rs. 60,000
Direct expenses: Rs. 20,000
Manufacturing overheads: Rs. 30,000
a) Rs. 1,80,000
b) Rs. 2,00,000
c) Rs. 1,70,000
d) Rs. 2,10,000
• c
Depreciation is ...........expenditure.
a) Fixed
b) Direct
c) Indirect
d) Semi-variable
• d
• Any Query ???????????????