,t Costing (Cost Sl,at)

a,11 or O!!!f' 5.13

:;-,-
......hi r1l 5.4
~ of a factory the following particulars have been extracted for the yea1 2017 :
Lil respel1
l'
eost of materials 6,00,000
WageS 5,00,000
Fctol'Y overheads 3,00,000
:dJ1linistiation charges 3,36,000
Selling charges 2,24,000
Distribution charges 1,40,000
Profit . 4,20,000
Awork order has to be executed m 2018 and the estimated expenses a1e : Materials ~ 8,000,
wages
t 5,000.
,Assuming that in 2018, the rate of factory overheads has gone up by 20%, distribution charges
have gone down by 10% and selling and administration charges have gone each up by 15%,
at what
price should the product be sold so as to earn the same rate of profit on the selling price as in 2017
?
Factory overheads are based on wages and administration, selling and distribution overheads on
factory cost. (B. Com., Bangalore)
Solution :
Statement of Cost
for the year 2017

t
Direct Materials 6,00,000
Wages 5,00,000
Prime Cost 11,00,000
Factory Overheads 3,00,000
Factory or Works Cost 14,00,000
Administration Charges 3,36,000
Cost of Production 17 ,36,000
Selling Charges 2,24,000
Distribution Charges
1,40,000
Total Cost or Cost of Sales 21,00,000
Profit 4,20,000
Sales 25,20,000

Calculation of Rates:

1. Factory overhead as a percentage of wages 3,00,00 0

=
5,00,000 X 100 = 600/o

2· Adminis 3,36,00 0
tration charges as a percentage of factory cost = X 100 = 240/o
14,00,000
3 2,24,000
· Selling charges as a percentage of factory cost = X 100 = 16°/o
14,00,000
5.14 - - - - - - - - - -~C!!_o:st Ace
------------------- ~ fltih,
~
1,40,000
4. Distribution charges as a percentage of factory cost 14,00,000 x
100 '"' 10%

4,20,000
5. Profit as a percentage of total cost = 21,00,000 x 100 • 20%

r in 2018
Statement of Estimated Cost and Profit on Work Orde
Materials 8,00)
Wages
Prime Cost ~
13,~
72%)
Factory Overheads (60% of wages, increased by 20%, i.e., 3,6())
F'actory Cost
-:----:
16,6())
15%, i.e., 27 .6%)
Administration Charges (24% of factory cost, increased by 4,581
~
Cost of Production 21,1a1
18.4%)
Selling Charges (16% of factory cost, increased by 15%, i.e., 3,05;
--....:
i.e., 9%)
Distribution Charges (10% of factory cost, decreased by 10%, 1.49;
Cost of Sales 25,71!
Profit (20% on cost of sales)
Price to be quoted - 5,140
30,8)1
--c

¥ ose the following information for the siI

The accounts of a machine manufacturing company discl
months ending 31st Dec., 2017.
t
1,50,000
Materials used
1,20,000
Direct wages
24,000
Factory overhead expenses
17,640
Office expenses
price which the company should quote for
Prepare a Cost Sheet of the machines and calculate the
ed at ( 1,250 and expenditure on productive
the manufacture of a machine requiring materials valu
20% on the selling price.
wages of t 750, so that the price may yield a profit of
head as a percentage of direct wages ano
For the purpose of price quotation, charge factory over
charge office overhead as a percentage of works cost. · xamraJ)
(B.B.M. Bangalore; B. Com., Ma durai
 . Ot1tp1tt Costing (Cost Sheet)
'0
u,iit
~
or 5.15

solution :
, Cost Sheet
fo r the period of six months ending 31st Dec. 2017
{
Materials used 1,50,0 00
~·~ Direct wages
Prime Cost
1,20,0 00
2,70,00 0
~13,~
Factory overhead expenses
Works or Factory Cost
24,000
2,94,00 0
office and general expenses
~
17,640
Cost of Production 3,11,6 40
16,6~

~
21
.
% of factory overhead to direct wages= Factor
.
y overheads 24,000
x 100 = - - - x 100 = 20%
,111 Duect wages 1,20,000
~ Office overheads
% of office overhead to factory cost= - - -- 17,640
l,411 - - x 100 = - - - x 100 = 6%
Factory cost 2,94,000
25,111
5,1% Statement showing the Quotation of Price of a Machine

---
~
-...::::: Materials
~
1,250.00
Wages 750.00
Prime Cost 2,000.00
:hesu Factory overhead (20% on wages) 150.00
Factory Cost 2,150.00
Office overhead (6% on factory cost)
129.00
Total Cost or Cost of Production 2,279.00
*Profit (25% of total cost)
569.75
Selling Price 2,848.75
*Profit of 20% on selling price is equal to 25% of total cost.

tefor Proble@ --t(

1ctive The following extracts of costing information relate to commodity X for the
year ending
31-12-2017.
; ano
Purchases of raw materials
Direct wages 6,000
1110)) 5,000
Rent, rates and insurance
Carriage inwards -- 2,000
Stock (1-1-2017) : 100
Raw materials
1,000
Finished products - 200 tonnes
Stock (31-12- 2017) : Raw materials 800
1,100
Finished products - 400 tonnes ➔ @ C{rf
Cost of factory supervision
400
Sale of finished products
15,000
h Advertising and selling cost is 40 paise per tonne sold. 3,000 tonnes of the commo
dity were sold during
t e year. Prepare a Cost Sheet. (B.B.M. Bangatore. Adapted)
 ,,

Cos t Accou
5.16 ~
::,

Solution:
et for the year ending 31s t Dec., 2017 '1

Cost She
1,000 !1

6,000
Raw Materials: Opening stock
Add: Purchases 100
Add: Carriage inwards 7,100 I:

1,100
5
Less: Closing Stock 6,000
Cost of materials consumed
Direct wages ~11,0
Prime Cost 00
'
Factory Overheads : 2,000
Rent, insurance, etc. 400
Factory supervision ~13,4QQ
I

Cost of Production '!

800 1,

Add: Opening stock of finished goods 14,200

. ed goods ( Rs. 13,400 x 400 tonnes

· g stock of fi n1sh
L ess: Cl0s1n
J 1,675
-
3,200 tonnes
Cost of Goods Sold 12,525
1,200
selling overhead (@ 40 paise per tonne sold for 3,000 tonnes)Cost of Sales 13,725
Profit 1,275 I

Sales 15.000
 5.18

Problem ✓ t)
E Ltd furnish the followu,g infonnation for 10,000 units of a produc
t manufactured dutin
year 2017.:
9 t~.
{
Material 90,000
Direct wages 60,000
Power and consumable stores 12,000
Indirect wages 15,000
Factory lighting 5,500
Cost of rectification of defective work 3,000
Clerical salaries and management expenses 33,500
Selling expenses
5,500
Sale proceeds of scrap
2,000
Repairs, maintenance and depreciation of plant
11,500
The net selling price was t 31.60 per unit sold and all units were sold.
As from 1-1-20 18, the selling price was reduced tot 31 per unit.
It was estimated that productj
c<J 1~d be increased in 2018 by 50% due to spare capacity.
on
Rates for materials and direct wages will increase by 10%.
You are required to prepare :
(a) Cost sheet for the year 2017 showing various elements of cost
per unit, and
(b) Estimated cost and profit for 2018.
Assuming that 15,000 units will be produced and sold during the year and
factory overheads will
Je recovered as a percentage of direct wages and office and selling expens
es as a percentage of works
cost. · (B. Com., Bangalore)
Solution :
(a) Cost Sheet for the year 2017
Output : 10,000 unit
Total Per unit
Materials
t t
90,000 . 9.00
Wages
60,000 6.00
Prime Cost 1,50,000 15.00
Factory Overheads:
Power and consumable stores 12,000 1.20
Factory indirect wages _ 15,000
Lighting of factory 1.50
5,500 0.55
Defective work (cost of rectification) 3,000 0.30
Plant repairs, maintenance and depreciation 11,500 1.15
47,000 4.70
Less : Sales of scrap
Works Cost
2,000 45,000
1,95,0 00
0.20
--4.50
19jO

(Contd.. ,)
 tp
ut costing (Cost Sheet)
·ror 0 ''·~ - - - - - - - - - - - - - - -- - - - - -- - - - - 5.19
~
and Selling Overheads :
(#Cf Clerical salaries and management expenses 33,500 3.35
Selling expenses 5,500 39,000 0.55
Cost of Goods Sold 2,34,000 23.40
fit (balancing figure) 82,000 8.20
PIO Sales
3,16,000 31.60
Note. It is assumed that defective work is normal.

(b) Statement of Estimated Cost and Profit

for the year 2018
Output 15,000 units
Total Per unit
r r
Materials (15,000 x 9) + 10% = 1,48,500 1,48,500 9.90
Wages (15,000 x 6) + 10% = 99,000 99,000 6.60
Prime Cost 2,47,500 16.50
*Factory overheads (75% of wages) 74,250 4.95
Works Cost 3,21,750 21.45
*Office and selling overheads (20% of works cost) 64,350 4.29
Cost of Sales 3,86,100 25.74
Profit 78,900 5.26
Sales 4,65,000 31.00
*Working Notes. Overheads are absorbed on a percentage basis on 2017 figures as follows :
45,000
Factory overhead= - - x 100 = 75% of wages
60,000

Office overhead= 39 ,000 x 100 = 20% of works cost.

1,95~