No.

1 for CA/CWA & MEC/CEC MASTER MINDS

1. COST SHEET
SOLUTIONS TO ASSIGNMENT PROBLEMS
Problem No. 1
Cost Sheet
Particulars Rs. Rs.
Direct materials (consumed) (W.N - 1) 97,000
Direct labour (manufacturing wages) 50,000
Direct expenses (Royalty) 10,000
Prime cost 1,57,000
Add: Factory Overhead (W.N - 2) 37,000
Gross Factory Cost / Gross Works Cost 1,94,000
Add: Opening Work-In-Progress -
Less: Closing Work-In-Progress - 0
Net Factory Cost / Net Works Cost 1,94,000
Add: Administration Overhead (W.N - 3) 43,000
Cost of Goods Produced 2,37,000
Add: Opening finished goods 20,000
 2,37,000 
Less: Closing finished goods  1,000 
 5,000  (47,400) (27,400)
Cost of Goods Sold 2,09,600
Add: Selling & Distribution Overhead (W.N - 4) 30,000
Cost of Sales 2,39,600
Profit (b/f) 1,54,400
Sales 3,94,000

Note: Since the entire opening stock has been sold, the closing stock represents current month production.

W.N - 1: Calculation of Direct Materials Consumed:

Particulars Amount
Opening stock 20,000
Purchase of Raw Material 82,000
Less: Closing stock 10,000
Less: Scrap sales (A1) 2,000
Less: Abnormal loss 3,000
Customs duty (A2) 10,000
Direct Materials Consumed 97,000

W.N - 2: Calculation of Factory Overhead:

Particulars Amount
Depreciation on plant 15,000
Factory rent, taxes 12,000
Excise duty 10,000
Factory Overhead 37,000

W.N - 3: Calculation of Administration Overhead:

Particulars Amount
General Charges 15,000

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Data processing cost 5,000

Salaries 20,000
Stock insurance Premium 3,000
Administration Overhead 43,000

W.N - 4: Calculation of Selling & Distribution Overhead:

Particulars Amount
Sales tax 10,000
Marketing expenses 15,000
Branch office expenses for after sales service 5,000
Selling & Distribution Overhead 30,000

W.N - 5: Items to be ignored:

Particulars Amount
Loss on sale of plant – (Non Cost Related Item) 8,000
Discount on sales – (Items of Pure Finance) 10,000
Advance Income tax – (Items of Pure Finance) 20,000
Donations – (Non Cost Related Item) 5,000
Interest on loan received – (Items of Pure Finance) 5,000
Normal loss – (already included in Direct Material) 5,000
Returnable packing – (not included in cost of material) 4,000
Transfer to debenture Redemption reserve. (Non Cost Related Item) 5,000
Purchase of computers (Capital Expenditure) 50,000

Assumptions:
 Scrap sales relates to Raw Materials.
 Customs duty is incurred for importing of Raw Material.
 Excise Duty relates to Factory Overhead (Indirect expense).

a. Changes that occur in cost sheet when 200 units of entire opening stock remained unsold:

Particulars Units Amount Amount

Cost of Production 5,000 - 2,37,000
Add: Opening finished goods 1,000 20,000
Less: Closing finished goods (W.N – 6) 1,000 41,920 21,920
Cost of Goods Sold 2,15,080
Add: Selling & Distribution Overhead 30,000
Cost of Sales 2,45,080
Add: Profit 1,48,920
Sales 3,94,000

W.N – 6: Calculation of Value of Closing Finished Goods:

Particulars Amount
Opening Stock included in Closing Stock (200 units @ Rs. 20 each) 4,000
Closing Stock of 800 units @ Rs. 47.4 each (47,400 / 1,000) x 800 37,920
Value of Closing Finished Goods 41,920
Therefore, Profit will decrease by Rs.5,480 (47,400 - 41,920)

b. Changes that occur in cost sheet when closing stock included units of opening stock but the units
were not known:
Particulars Units Amount Amount
Cost of Production 5,000 - 2,37,000
Add: Opening finished goods 1,000 20,000
Less: Closing finished goods (W.N – 7) 1,000 42,833 22,833

IPCC_34.5e_Costing _ Cost Sheet_ Assignment Solutions_______________________2

No.1 for CA/CWA & MEC/CEC MASTER MINDS

Cost of Goods Sold 2,14,167

Add: Selling & Distribution Overhead 30,000
Cost of Sales 2,44,167
Add: Profit 1,49,833
Sales 3,94,000

W.N – 7: Calculation of Value of Closing Finished Goods:

Particulars Amount
Cost of Production (5,000 units @ Rs. 47.4 each) 2,37,000
Opening Finished Goods (1,000 units @ Rs. 20 each) 20,000
Cost of Goods Sold (6,000 units @ Rs. 42.83 each) 2,57,000
Closing Finished Goods (1,000 units @ Rs. 42.83 each) 42,833

Therefore, Profit will decrease by Rs.4,567 (47,400 - 42,833).

THE END

IPCC_34.5e_Costing _ Cost Sheet_ Assignment Solutions ______________________3