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POLYTECHNIC, LATUR
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Maharashtra State Board of Technical Education,
CERTIFICATE
Place: Latur
Date: 27/03/202
Chapter-1
A cost sheet is a statement that shows the various components of total cost for a product and shows previous
data for comparison. You can deduce the ideal selling price of a product based on the cost sheet.
A cost sheet document can be prepared either by using historical cost or by referring to estimated costs. A
historical cost sheet is prepared based on the actual cost incurred for a product. An estimated cost sheet, on
the other hand, is prepared based on estimated cost just before the production begins. A cost sheet is a report
on which is accumulated all of the costs associated with a product or production job. A cost sheet is
used to compile the margin earned on a product or job, and can form the basis for the setting of prices
on similar products in the future. It can also be used as the basis for a variety of cost control measures.
Despite the name, a cost sheet can be compiled and viewed on a computer screen, as well as being
manually developed on paper. The costs listed on the report are usually aggregated into three categories,
which are direct materials, direct labor, and allocated factory overhead. In some situations, a cost sheet
may also include a line item for allocated administrative overhead. In addition, the costs of shipping and
handling, supplies, and outsourced costs may also appear on a cost sheet in varying degrees of detail.
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Production of a Cost Sheet: -
The development of a cost sheet can be a major production, especially if it is compiled by hand. Even if
it is drawn from a database of compiled costs, a cost accountant must still review it for duplicate,
missing, or incorrect entries before issuing it. A cost sheet is normally issued along with an explanatory
page that points out any unusual costs incurred or variances that management should be aware of.
The format of a cost sheet is usually a standard one that is either manually rolled forward from earlier
reports, or else set up within the accounting system for automatic display when a report is printed.
The production of a cost sheet typically involves several steps, which may vary depending on the specific
needs of a business. Here is a general outline of the production process:
1. Gather data:
The first step in producing a cost sheet is to gather data on the costs involved in producing a product or
service. This may include direct costs such as materials and labour, as well as indirect costs such as
rent and utilities.
2. Classify costs:
Once the data has been gathered, costs need to be classified into categories such as direct materials,
direct labour, and factory overhead. This enables businesses to accurately allocate costs to specific
products or services.
3. Assign costs:
Once costs have been classified, they need to be assigned to the appropriate products or services. This
may involve using cost drivers such as machine hours or labour hours to allocate costs based on usage.
4. Calculate total costs:
Once costs have been assigned to products or services, total costs can be calculated. This includes both
variable costs (which vary with production volume) and fixed costs (which remain constant regardless
of production volume).
5. Prepare the cost sheet:
The final step in producing a cost sheet is to prepare the actual document. This typically involves
creating a spreadsheet or other tool that shows the breakdown of costs for each product or service. The
cost sheet may also include other information such as pricing, profit margins, and production volumes.
6. Review and update:
Once the cost sheet has been prepared, it should be reviewed and updated regularly to ensure that it
remains accurate and relevant.
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Standard Costs on a Cost Sheet: -
1. Standard cost is a type of cost that is used to estimate the cost of producing a product or service based on
predetermined standards. These standards typically include the expected cost of direct materials, direct
labour, and overhead for each unit of output.
2. On a cost sheet, standard cost is often used as a benchmark against which actual costs can be compared. By
comparing actual costs to standard costs, businesses can identify areas where costs are higher or lower than
expected, and take corrective action if necessary.
3. To incorporate standard cost on a cost sheet, businesses typically include a column or section that shows
the standard cost for each component of the product or service being produced. For example, the cost sheet
may include a section for direct materials, which shows the standard cost per unit of each material used in
the production process. Similarly, there may be a section for direct labour, which shows the standard
labour rate and hours required for each unit of output.
4. In addition to showing the standard cost, the cost sheet may also include a variance analysis that compares
actual costs to standard costs. This enables businesses to identify any deviations from the expected costs,
and take corrective action if necessary.
5. In summary, standard cost is an important component of a cost sheet, as it enables businesses to estimate
the cost of producing a product or service based on predetermined standards. By comparing actual costs to
standard costs, businesses can identify areas where costs are higher or lower than expected, and take
corrective action if necessary.
6. Standard costs are typically set by analysing historical data on direct materials, direct labour, and overhead.
This data is used to develop a "standard" or "expected" cost for each component of the product or service
being produced. These standards are often reviewed and updated periodically to ensure that they reflect
current conditions.
7. Using standard cost on a cost sheet provides several benefits for businesses. It helps to establish a
benchmark for costs, enables more accurate budgeting and forecasting, and provides a basis for
performance evaluation and improvement.
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Cost Sheets Used for Quotes: -
A cost sheet can be used to create accurate and detailed quotes for products or services that a business offers.
By analysing the costs involved in producing the product or service, the business can determine the
appropriate price to charge customers.
Here are some ways in which a cost sheet can be used for quotes:
3. Overhead Costs:
Overhead costs are indirect costs that are not directly related to the production of a product but are
necessary for the operation of the business. These costs can include rent, utilities, and insurance. The cost
sheet can be used to determine the overhead costs associated with the production of the product and
factor them into the quote.
4. Profit Margin:
Once the costs associated with the production of the product have been determined, the business can
factor in a profit margin to determine the final quote. The profit margin is typically a percentage of the
total cost of production and represents the amount of profit that the business wants to make on the
product.
By using a cost sheet to determine the costs associated with producing a product, a business can create accurate
and detailed quotes for customers. This ensures that the business is charging a fair price for the product while
also making a profit. Additionally, by having a clear understanding of the costs associated with production, the
business can identify areas where it can reduce costs and improve efficiency, ultimately leading to increased
profitability.
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Importance and Objectives of Cost Sheet: -
A cost sheet shows the break-up of the total cost into different elements, i.e., material, labor, overheads, etc. It
also depicts the total cost and cost per unit of the units produced. Which helps the organization to
investigate the reasons for increasing costs and also control on them
A cost sheet helps in determining the selling price of a product or of a service. The cost sheet ascertains cost
at each stage of the product and also the total cost of the product, where a margin of profit is added and thus
the selling price is ascertained.
3. It facilitates comparison:
It helps in comparing the costs of the product over a period of time. This helps the organization to investigate
the reasons for increasing costs and also control them on the basis of them.
Preparation of cost sheet helps managers at various levels in their decision-making process such as
5. identify and make decisions whether they need to continue with the product or not.
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5. Preparation of budgets:
Preparing a budget for a cost sheet involves estimating the costs involved in producing a product or service
over a period of time, typically a year. Here are some steps that a business can follow to prepare a budget for a
cost sheet:
1. Determine the Sales Forecast: The first step in preparing a budget for a cost sheet is to determine the
sales forecast for the upcoming year. This involves estimating the number of units that the business expects
to sell and the price at which they will be sold.
2. Estimate Direct Material Costs: Once the sales forecast has been determined, the business can estimate
the direct material costs associated with producing the product. This includes the cost of the raw materials
as well as any transportation or handling costs associated with them.
3. Estimate Direct Labour Costs: The business can then estimate the direct labour costs associated with
producing the product. This includes the wages or salaries paid to employees who work on the product, as
well as any benefits or overhead costs associated with the labour.
4. Estimate Overhead Costs: The next step is to estimate the overhead costs associated with the production
of the product. This includes rent, utilities, insurance, and other indirect costs that are necessary for the
operation of the business.
5. Create a Budgeted Cost Sheet: Once the estimated costs have been determined, the business can create a
budgeted cost sheet. This sheet will outline the estimated costs associated with producing the product,
including direct material costs, direct labour costs, and overhead costs.
6. Compare Actual Costs to Budgeted Costs: Throughout the year, the business can compare the actual
costs of production to the budgeted costs on the cost sheet. This will help the business identify any
variances and adjust its operations accordingly.
By preparing a budget for a cost sheet, a business can ensure that it is operating within its financial means
while also ensuring that it is producing products that are profitable. Additionally, by comparing actual costs to
budgeted costs, the business can identify areas where it can reduce costs and improve efficiency, ultimately
leading to increased profitability.
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Chapter-2
Research & Development cost: It includes only those research and development related cost which with is
incurred to improvement of process, system, product or services
Factory Cost: Factory cost or works cost or manufacturing cost or production cost includes in addition to the
prime cost the cost of indirect material, indirect labor, and indirect expenses. It also includes the amount or units
of WIP or incomplete units at the end of the period.
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.
Total Cost: Total cost or alternatively cost of sales is the cost of production plus selling and distribution
overheads.
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Chapter-3
The following items of expenses, losses or incomes are excluded from the cost sheet:
appropriation of profits
interest on capital
cash discounts
bad debts
damages payable
dividend paid
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excess provision for depreciation on fixed assets
underwriting commission
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 Labor +
Step II
Indirect Expenses) +opening Work in progress-Closing Work in progress
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Cost of Production = Works Cost + Office and Administration overheads + Opening
Step III
finished goods-Closing finished goods
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Chapter-4
The various components of cost explained in the previous section can be represented in the form of a
statement. A cost sheet statement consists of prime cost, factory cost, cost involved in the production of
goods sold, and total cost. Let us look at an example, in which you have to prepare a cost sheet for a furniture
company for the financial year ending March 31, 2019. Now take a look at the following information which
is available to you to prepare a cost sheet statement.
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4.1 Cost sheet for Dabur India Pvt.Ltd. Company: -
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5.0 Advantages of Cost Sheet: -
In summary, cost sheets provide businesses with a range of advantages that are critical to their success. They
help businesses to understand the true cost of production, facilitate cost control, aid in decision-making, enable
accurate budgeting, and support financial reporting.
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6.0 Limitations of Cost Sheet: -
While cost sheets can be very useful for businesses, there are also some limitations to keep in mind. Here are
some of the main limitations of cost sheets:
1. Limited accuracy:
Cost sheets are based on estimates and assumptions, which can be subject to error. This means that the
cost figures provided may not always be completely accurate, which could lead to incorrect decision-
making.
2. May not capture all costs:
Cost sheets may not capture all the costs associated with a product or service. For example, some
indirect costs such as advertising or research and development may be difficult to allocate accurately to
specific products or services.
3. May not reflect changes in costs:
Cost sheets are typically prepared based on historical data, which may not reflect changes in costs over
time. For example, the cost of raw materials or labour may have increased since the cost sheet was
prepared, which could impact the accuracy of the information provided.
4. May not consider non-financial factors:
Cost sheets do not consider non-financial factors, such as environmental or social impact, that may be
important to stakeholders.
5. May be time-consuming:
Preparing and maintaining cost sheets can be time-consuming, particularly for businesses with a large
number of products or services.
In summary, while cost sheets are an important tool for businesses, they have limitations that should be taken
into account. It is important to use cost sheets in conjunction with other information sources and to regularly
review and update them to ensure accuracy and relevance.
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7.0 Items excluded from Cost Sheet: -
While cost sheets include a comprehensive breakdown of the costs involved in producing a product or
service, there are some items that are typically excluded. Here are some of the common items that may be
excluded from a cost sheet:
1. Non-manufacturing costs:
Cost sheets typically only include manufacturing costs, such as direct materials, direct labour, and
factory overhead. Non-manufacturing costs, such as selling and administrative expenses, are typically
excluded.
2. Period costs:
Costs that are not directly related to the production of a specific product, such as marketing or research
and development costs, are generally excluded from cost sheets.
3. Sunk costs:
Costs that have already been incurred and cannot be recovered, such as the cost of equipment that has
already been purchased, are generally not included in cost sheets.
4. Future costs:
Cost sheets only include costs that have already been incurred. Future costs, such as the cost of materials
that have not yet been purchased, are typically excluded.
5. Opportunity costs:
Opportunity costs, or the cost of the next best alternative that is forgone when a decision is made, are not
typically included in cost sheets.
In summary, cost sheets typically exclude non-manufacturing costs, period costs, sunk costs, future costs, and
opportunity costs. By excluding these items, cost sheets focus specifically on the costs that are directly related
to the production of a specific product or service.
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Chapter-5
8.0 Suggestions/Conclusion: -
A cost sheet analyses the components of cost in order to show the per-unit 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 way to track and control different kinds of costs.
In conclusion, a cost sheet is an essential tool for any business that wants to remain competitive and
profitable. It helps management understand the true cost of their products or services and make informed
decisions about pricing and resource allocation. By regularly updating and analyzing their cost sheets,
businesses can identify opportunities to improve their operations and increase their bottom line.
Certainly! A cost sheet is a comprehensive document that provides a detailed breakdown of the costs involved
in the production of goods or services. It includes direct costs, such as materials and labour, as well as indirect
costs, such as overhead expenses like rent, utilities, and insurance.
The primary purpose of a cost sheet is to provide management with a clear understanding of the costs
associated with a particular product or service. By understanding the cost structure, managers can make
informed decisions regarding pricing, production volume, and resource allocation.
A well-prepared cost sheet can also provide valuable information to other stakeholders, such as investors and
creditors. By showing a detailed breakdown of costs and expenses, it can help them evaluate the financial
health and sustainability of a business.
Additionally, a cost sheet can be used to identify areas where costs can be reduced and efficiencies can be
gained. For example, by analysing the cost of different raw materials, a business may be able to identify a less
expensive alternative that still meets the required quality standards.
In conclusion, a cost sheet is a crucial tool for any business that wants to remain competitive and profitable.
By providing a comprehensive overview of costs and expenses, it enables management to make informed
decisions, identify opportunities for improvement, and optimize their operations.
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9.0 Bibliography/ Reference: -
https://www.zoho.com/books/guides/cost-sheet.html#:~:text
toppr.com/guides/fundamentals-of-accounting
www.google.com
www.GeeksforGeeks.com
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10.0 Action Plan:
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Teacher Evaluation Sheet
Name of Student: Ansh Rampat Gupta Enrollment No: 2005630045
(A) Process and Product Assessment (Covert above total marks out of 6 Marks)
5 Quality of Prototype/Model
6 Report Preparation
(B) Individual Presentation / Viva (Convert above total marks out of 4 Marks)
7 Presentation
8 Viva
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Teacher Evaluation Sheet
Name of Student: Himanshu Atmaram Machhi Enrollment No: 2005630046
(A) Process and Product Assessment (Covert above total marks out of 6 Marks)
5 Quality of Prototype/Model
6 Report Preparation
(B) Individual Presentation / Viva (Convert above total marks out of 4 Marks)
7 Presentation
8 Viva
Micro-Project Evaluation Sheet
(A) Process and Product (B) Individual Presentation / Viva Total Marks
Assessment (6 Marks) (4 marks) (10 Marks)
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Teacher Evaluation Sheet
Name of Student: Khan Zaid Abdul Mannan Enrollment No: 2005630047
(A) Process and Product Assessment (Covert above total marks out of 6 Marks)
5 Quality of Prototype/Model
6 Report Preparation
(B) Individual Presentation / Viva (Convert above total marks out of 4 Marks)
7 Presentation
8 Viva
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