Cost Sheet

Dr. Shubhendu Vimal

 Cost Sheet

 Cost Sheet is a statement designed to

show the output of a particular
accounting period along with the
breakup of costs.
 It provides information relating to cost
per unit at different stages of the total
cost of production.
 Importance of Cost Sheet

 Ascertainment of cost
 Controlling costs
 Fixation of selling price
 Submitting of tenders
Components of Total Cost
 Prime Cost: The sum total of direct material, direct labor & direct expenses.
 Treatment of Stock of Raw Material
 The ‘direct material’ refers to the cost of material consumed. The cost of direct
material is found by adjusting the opening and closing stock of materials.
 Factory Cost or Work Cost: The sum total of prime cost plus the total factory
overheads or works overheads. E.g., factory rent, factory insurance, depreciation
on plant & machinery, coal, gas etc.
 Treatment of stock of Work-In-Progress: Work-in-progress represents the units
on which some work is yet to be completed. The stock of such goods form part of
works cost and adjusted while calculating the factory cost or works cost.
 Administration Cost or Office Overheads: It is obtained by adding the office or
administration overheads to works cost. It is also known as office cost or cost of
production. E.g., salaries of office staff, depreciation on office building, rent &
rates, taxes & insurance, printing & stationery, postage etc.
 Components of Total Cost

 Treatment of finished stock: Finished goods are the

goods on which all the factory work has been completed.
The stock of finished goods is adjusted in the cost of
production.
 Selling & Distribution Cost: The selling cost or cost of
sales is obtained by adding the selling & distribution
overheads to cost of goods sold. The selling & distribution
overhead includes advertisement, selling expenses,
salesman’s salaries & commission, distribution expenses,
carriage outward, transporting charges etc.
 Particulars Rs (per unit) Rs
   

Opening stock of raw materials

   

Add purchase of raw materials

   

Less closing stock of raw materials

   

Add carriage on purchases

   

Less discount on purchases

   

Raw Materials consumed

   

Add Direct labour /  Production Wages / Factory wages

   

Add direct expenses

   

Prime cost
   

Add: Factory overheads

   

Indirect material
   

Indirect labour
   

Indirect expenses such as Factory Rent and Taxes Power

Electricity, Repairs, Maintenance etc.
   
Gross Factory Cost
Rs (per unit) Rs

Add work - in process opening stock

Less work – in process closing stock

Total work cost/ Total Factory cost

Add Office & Administration overhead
Cost of Production/ goods manufactured    

   
Add opening stock of finished goods
   
Less closing stock of finished goods
   
Cost of goods sold
Add Selling & Distribution Overhead    

Cost of Sales    

Add Profit    

Sales
From the following data you are required to prepare a cost sheet and calculate Prime
cost, Cost of Production, Total cost and Profit .

Material used              50000

Direct labour 20000
Direct expenses 10000
Factory overheads 15000
Administrative overheads 25000
Marketing overheads 5000
Sales 150000
Units sold 10000
 From the following data you are required to prepare a cost sheet and calculate Prime cost, Cost of Production, Total cost and Profit.

Carriage inwards 500

Indirect material 600
Repair of machinery 700
Wages direct 1900
Salaries 800
Rent - office building 900
Rent - factory building 1000
Insurance of machinery 1100
Insurance of office furniture 1200
Raw material purchased 9000
Stock of raw material as on 1st Jan 2009 1300
Stock of raw material as on 31st Jan 2009 400
Direct expenses 1400
Advertisement 1500
Sales 30000
Units produced 10000