6.1-6.

29
GUnit or Output Costing (Cost Sheet) 6.1
Introduction
6.1
Cost Sheet
Method of Preparing Cost Sheet 6.2
Treatment of Scrap 6.7
Price QuotationsTenders and
or
Estimated Cost Sheet
Problems and Solutions 6.8
Examination Questions 6.9
6.25
C H A R T E R

Unit or Output Costing

(Cost Sheet)
3 napteromine
Iction, Cost Sheet, Production Statement, Treatment of Stocks, Items not included
in Cost Sheet, lus
in Cost Sheet,
lustrative Cost Sheet, Treatment of Scrap, Price Quotations and Estimated
C Sheets, Problems and Solutions, Examination Questions.

Introduction

Outputcosting, Single costing or unit costing is a method of cost ascertainment which is used in
thoseindustr+es which have the folowing features
Production consists of a single product or a few varieties of the
same product with vanations in size, shape, quality, etc., and Output Costing is used
() Production is uniform and on continuous basis. in:
Examples of industries in which this method is commonly used are Steel mills
cement, steel, sugar, paper, brick works, quarmies, breweries, dairies, etc. Brick works
Cost units in these industries are a tonne of cement or steel or sugar, 1,000 Paper mills
bricks, a barrel of beer, a gallon of milk, etc. Breweries
Cement mills, etc.
Costing Procedure
In order to ascertain cost of products, a statement known as 'Cost Sheet' is prepared periodically.
As the production is uniform and cost units are identical, the cost per unit is the average cost. It is
ascertained by dividing the total cost by the number of units produced. The cost sheet is designed to
show the total cost as well as cost per unit of output for the given period.

COST SHEET
Cost sheet is "a document which provides for the assembly of the detailed cost of a cost centre or
COSt unit." Thus cost sheet is a periodical statement of cost designed to show in detail the vanous
elements of cost of goods produced like prime cost, factory cost of production and
As the
Loral cost. It is prepared at regular intervals, eg., weekly, monthly, quarterly,
shown in the production is
Comparative
yearly, etc. figures of the previous period may also be uniform and all
SE Sheet so that assessment can be made about the progress of the business.
cost units are
Production Statement. Though the term Production Statement is ustuidentical, the

the former is
an form of the latter. In
expanded
angeably with cost sheet, stocks and
cost per unit is
ition to costelements, a production statement includes items of sales, the average cost.
are shown in a
nen the details of cost sheet or production statement
6.1
6.2 Cost and Management Accou
ounting
cost and Profit.
tatement
T-shape account, it is known as Production Account. Other names used are Cost Statement and
and State
statement of
Purposes. Cost sheet serves the following purposes:
1. It reveals the total cost and cost per unit of goods produced.
2. It discloses the break-up of total cost into different elements of cost.
3. It
provides a comparative study of the cost of current period with that of the corresnond
previous period. onding
4. It acts as a guide to management in fixation of seling
pices and quotation of tenders
Method of Preparing Cost Sheet
A cost sheet is prepared by
clarifying costs according to elements materials, labour and
overhead.
1. Materials Cost of materials includes cost of
materials purchased plus all In cost
cost sheet,
In sheet.
expenses relating to purchases, e.g., carmiage inward, octroi, custom duty on im-
costs are
ported materials, etc.
2. Labour-A distinction is to be made accumulated
between direct labour and indirect element-wise
labour. Direct labour cost which is also known as
productive wages, is taken in the
prime cost. Indirect labour cost or unproductive wages are added in the
3. Overheads- Overheads are classified
factory overhead.
into three broad categories:
(i) Factory Overhead.
(ii) Office Overhead.
(iü) Selling and Distribution Overhead.

Treatment of Stocks
Stocks may be of three types
: (a) Stocks of raw materials, (b) Stocks of
Stocks of finished goods. work-in-progress, and (¢)
(a) Stock of Raw Materials. In cost sheet, materials
calculating the value of raw materials consumed during the consumed in production are shown. In
added in purchases and the value of period, opening stock of raw matenal is
closing stock is subtracted from
purchases. In the following
example with assumed figures, the treatment of stock of raw
material has been shown:
Opening stock of raw materials
Add: Purchases 30,000
80,000
Less: Closing stock of 1,10,000
raw materials
17,000
Cost of materials consumed
93,000
(b) Stock of Work-in-progress. This is the stock of semi-finished
process. The cost of work-in-progress consists of cost goods,
in manufacturing i.e., the goods whicn
consumed, direct wages and a proportionate of materials Opening stocks
part of the factory overhead. Onening stocks
fore, in the preparation of cost sheet, There- are added while
opening and closing stocks of
progress are adjusted at the stage of
is
factory cost. Opening stock of work-in-
work-in- closing stocks
progress added works cost and closing stock is
subtracted from this figure. In are deducted
to deducted in
in
the following example,
figures have been assumed to show the treatment of the sheet.
Costing (Cost Sheet) 6.3
luit or Ontyut

stock of work-in-progress.

Direct materials consumed 93,000

Direct wages 22,000
Direct expenses 5.000
Prime Cost 1,20,000
Factory overhead 24,000
Add:
1,44,000
stock of work-in-progress 14,000
Add Opening
1,58,000
Less Closing stock of work-in-progress 8,000
Works Cost or Factory Cost 1,50,000
t Stock of Finished Goods. This stock is adjusted after the calculation of cost of production.
of The resulting
The opening stock is added to and closing stock is subtracted from the cost production.
fqurewillbe the Cost of Goods Sold. This is shown below, continuing the same assumed igures

Factory cost 1,50,000

Add: Administration overhead 10,000
Cost of Production 1,60,000
Add Opening stock of finished goods 30,000
1,90,000
Less: Closing stock of finished goods 22,000
Cost of Goods Sold 1,68,000
Note. In case the value of closing stock of finished goods is not given in the question, it will be
valued at the current cost of production.
The treatment of the above three types of stocks is illustrated in the following specimen cost
sheet.
Cost Sheet for the period..
Production .. units.

Total cost Cost per unit

Particulars

Opening stock of raw materials XXX

Add: Purchases XXX
Add: Expenses on XXX
purchases
Less: Closing stock of raw materials XXX
Cost of material consumed
Direct wages
Direct expenses
Prime Cost
Add. Factory overhead
Add: Opening stock of work-in-progress
Less: Closing stock of work-in-progress
Factory or Works Cost
(Contd..)
6.4
Cost and Manage1ent
Accons
unting
Add Administrative overhead
Cost of Production
Add Opening stock of finished goods
Less: Closing stock of finished goods
Cost of Goods Sold
Add : Selling and distribution overhead
Cost of Sales
Profit (or Loss)
Sales

EXHIBIT 6.1. Performa of cost sheet

Items not included in cost sheet

The following items are of financial nature and thus not included while preparina
sheet:
1. Cash discount 7. Transfer to reserves
2. Interest paid 8. Donations
3. Preliminary expenses written off 9. Income-tax paid
4. Goodwill written off 10. Dividend paid
5. Provision for taxation 11. Profit/loss on sale of fixed assets
6. Provision for bad debts 12. Damages payable at law, etc.

Exhaustive Cost Sheet (Detailed)

Units produced .
Particulars Total cost Cost per unit

Opening Stock of Direct Raw Mateials

Add: Purchases
Add: Carriage Inward and other
expenses on purchases
Add: Octroi and Customs Duty
Less: Closing Stock of Direct Raw Materials
Cost of Direct Materials Consumed
Direct or Productive Wages
Direct (or Chargeable) Expenses

Prime Cost
Add Works or Factory Overheads
Indirect Materials
Indirect Wages
Leave Wages
Overtime Premium
Fuel and Power
Coal
Factory Rent and Taxes
Insurance

(Contd.
Costing (Cost Sheet)
hil or Output 6.5

Particulars
Total cost Cost per unit

Factory Lighting
Supervision
Works Stationery
Canteen and Welfare Expenses
Repairs
Works Salaries
Depreciation of Plant & Machinery
Works Expenses
Gas and Water
Drawing 0ffice Salaries
Technical Director's Fees
Laboratory Expenses
Works Telephone Expenses
Internal Transport Expenses
Less: Sale of Scrap
Add: Opening Stock of Work-in-progress
Less: Closing Stock of Work-in-progress

Works Cost
Add: Office and Administrative 0verheads
Office Salaries
Director's Fees
Office Rent and Rates
Office Stationery and Printing
Sundry Office Expenses
Depreciation and Repairs of Office Equipment
Depreciation of Office Furniture
Subscription to Trade Journals
Office Lighting
Establishment Charges
Director's Travelling Expenses
Postage
Legal Charges
Audit Fees
Cost of Production
Add: Opening Stock of Finished Goods
Less: Closing Stock of Finished Goods
Cost of Goods Sold
Add: Selling and Distribution Overheads
Advertising
Showroom Expenses
Bad Debts

(Contd...)
Cost and Management
Acco.
6.6 nting,
Total cost Cost per unit
Particulars

Salesmen's Salaries and Expenses

Packing Expenses
Carriage Outward
Commission of Sales Agents
Counting House Salanies
Cost of Catalogues
Expenses of Delivery Vans
Collection Charges
Travelling Expenses
Cost of Tenders
Warehouse Expenses
Cost of Mailing Literature
Sales Manager's Salaries
Sales Director's Fees
Showroom Expenses
Sales Office Expenses
Depreciation and Repairs of Delivery Vans
Expenses of Sales Branches
Cost of Sales (or Total Cost)
PROFIT
Sales

EXHIBIT 6.2. Performa of detailed cost sheet

Illustration 6.1
The Bangalore Ltd. supplies you the following information and requires you to prepare a cost
sheet.

Stock of raw materials on 1st April, 2012 75,000

Stock of raw materials on 30th April, 2012 91,500
Direct wages 52,500
Indirect wages 2,750
Sales 2,00,00
Work-in-progress on 1st April, 2012 28,000
Work-in-progress on 30th April, 2012 35,000

Purchases of raw materials 66,000

Factory rent, rates and power 15,000

Depreciation of plant and machinery 3,500

Expenses on purchases 1,500

Carriage outward 2,500

Advertising 3,500

Office rent and taxes 2,500

6.7
Output
Costing (Cost Shcet)
nit
or
wages
and commission 6,500
Travellers 54,000
of finisB goods on 1st April, 2012
Stock
on 30th 31,000
of finished goods April, 2012
Stock of.
Stock

Solution
Cost Sheet
for the Month ending 30th April, 2012

Stock of raw material (1st April) 75,000

Opening
66,000
Purchases
Add
Expenses on purchase 1,500
1,42,500

Closing Stock of raw material (30th April) 91,500

Less: 51,000
Materials consumed
52.500
Direct wages
1,03,500
Prime Cost
28,000

Add: Opening Work-in-progress (1st April)

Factory Overheads:
2,750
Indirect wages
15,000
rates and power
Factory rent, 21,250
of plant and machinery
3,500
Depreciation 1,52,750
35,000
Less: Closing Work-in-progress (30th April) 1,17,750
Works Cost

Office and Administration Overheads 2,500

Office rent and taxes
1,20,250
Cost of Production
54,000
Add: Opening Stock of finished goods (1st April) 1,74,250
31,000
Less: Closing Stock of finished goods (30th April) 1,43,250
Cost of Goods Sold

Selling and Distribution Overheads: 2,500

Carriage outward 3,500
Advertising 6,500 12,500
Travellers' wages and commission
1,55,750
Cost of Sales
Profit
44,250
2,00,000
Sales

Treatment of Scrap
in the form of cuttings, trimmings,
ncertain manufacturinq industries, scrap of materials arises of scrap
generally can be sold at a price. The realisable value
boring
ngs from metals or timber, etc. Scrap while preparing the cost sheet. This is shown in the
is d overheads factory cost
eaucted from factory or

following illustration.
6.8 Cost and Manageiment
Accounting
Ilustration 6.2
From the following information prepare a cost sheet to show:
(a) Prime cost; () Works cost; (c) Cost of production (d) Cost of sales; and (e) Profit.

Raw materials purchased 32,250

Carriage on purchases 850
Direct wages 18,450
Factory overhead 2,750
Selling overhead 5O
2,450 Sale value of
Office overhead 1,850 scrap is
Sales 75,000 deducted from
Sale of factory scrap 250 factory
Opening stock of finished goods 9,750 overhead or
Closing stock of finished goods 11,100 factory cost
Solution
Cost Sheet for the period.

Raw materials
35,250
Add: Carriage on purchases
Direct wages
850 36,100
18,450
(a) Prime Cost 54,550
Factory overhead
2,750
57,300
Less Sale of factory scrap 250
(b) Works Cost 57,050
Office overhead
1,850
(c) Cost of Production 58,900
Add Opening stock of finished goods 9,750

Less 68,650
Closing stock of finished goods 11,100
Cost of Goods Sold 57,550
Selling overhead
2,450
(d) Cost of Sales 60,000
(e) Profit 15,000
Sales
75,000
Price Quotations Tenders and Estimated Cost Sheet
or

Quite often the management has to

tenders for goods to be supplied. For this
quote prices of its products in advance or has to bmit
an estimated cost
su
estimated cost sheet is prepared to show purpose
the estimated cost of
sheet has to be prepared. Suc an
this
cost sheet, cost of direct
materials, direct wages and various products to be manufactured. n
the basis of past costs after types of overheads are pre-determne on
taking into account the present conditions and
changes in the future price level. Overheads are absorbed also the antiap of
on the basis of a
suitable metno
(Cost Sheet) 6.9
Output Costing
or
lnit

age
absorption like percentage of direct materials, or wages or machine hour rate, etc. When profit is
metho were discussed:in the overhead chapter.
These
1/5 of cost, it
Calculation of Profit. After the total cost has been estimated, 1s equal to 1/6
a desired
ntage of profit is added to arive at the price to be quoted. Such profit may of sales
yen as a percentage of cost or percentage of selling price. In order to calculate the amountot
D 4 i t is easy to assume that figure as 100 on which profit percentage is given and then calculate
profit,
amount of profit.
the

Example 1

Given:
Total cost 50,000
Profit 20% of cost
Suppose cost = 100
Profit 100 x 20% = 20
. When cost is 50,000
Profit 50,000 20% = 10,000
x

Example 2

Given: Total cost -50,000

Profit =
20% of selling price
= 7 100
Suppose selling price
Profit 100x 20% 20
Cost Selling Price Profit
-

100 20= 80
it is 20/80 1/4 or 25% of cost. When total cost
So when profit is 20% or 1/5 of selling price,
will be calculated as follows:
given as 50,000, the profit
Profit =Cost 50,000 x 25% =
12,500

Example 3
= 750,000
Given: Seling price
Profit 20% of cost
= 100
Suppose cost
= 20
Profit 100 x 20%
-Cost+Profit
Selling price 100 20 = 7 120

cost is equal to 20/120 or 1/6 of selling price. Thus, the profit will be
0 profit of 20% of
calculated as follows
1/6 8333.33.
Proit =Cost 7 50,000x =

PROBLEMS AND SOLUTIONS

Problem 6.1
MI. Gopal fumishes the following data relating
to the manufacture of a standard product during
the month of
April 2012:
Raw materials consumed T15,000
6.10 Cost andManagement Accou
Accountino
Direct labour charges 79,000
Machine hours worked 900
Machine hour rate 5
Administration overheads 20% on works cost
Selling overhead Re. 0.50 per unit
Units produced 17,100
Units sold 16,000 at 4 per unit
You are required to prepare a cost sheet from the above, showing:
(a) the cost per unit,
(6) cost per unit sold and profit for the period.
Cost Sheet
for the month of April 2012
Output: 17,100 unts
Total Per unit

Direct materials
15,000 0.87
Direct labour
9,000 0.526
Prime Cost 24,000
Production overheads (900 machine hrs. @ 75 1.403
per hour) 4,500 0.263
Works Cost 28,500 1.666
Administration overhead (@ 20% on works cost) 5,700 0.334
Cost of Production 34,200 2.000
Less: Closing stock on 30th April, 2012 (1,100 units @ 72 per unit) 2,200
Cost of Goods Sold 32,000 2.000
Selling overhead (@Re. 0.50 per unit for 16,000) 8,000 0.500
Cost of Sales 40,000 2,500
Profit
Sales (16,000 units) 24,000 1.500
64,000 400
Problem 6.2

A factory produces a standard product. The following information is qiven to you from which you a
required toprepare "Cost Sheet" for the period ended 31st March, 2012
Consumable materials:
Opening stock
10,000
Purchases 85,000
Closing Stock 4,000
Direct wages 20,000
Other direct expenses 10,000
Factory overheads 100% of direct labour
Office overheads 10% of works cost
2 per unit sold
Selling and distribution expenses
(Cost Sheet) 6.11
or
Output Costing
nit

product:
Units of finished
In hand at the beginning of the period Units 1,000 (value 7 16,000)
10,000 units
Produced during the period
2,000 units
In hand at the end of the period
made to yield
Alea find out the selling price per unit on the basis that profit mark-up is uniformly
There was no work-in-progress either at the beginning or at the end
t of 20% of the selling price.
ofthe period

Solution:

Cost Sheet for the year ended on 31-3-2012

Raw material-opening stock 10,000

Purchases 85,000
95,000
4,000
Less: Clossing stock
91,000
Raw material consumption
20,000
Direct wages
10,000
Other direct expenses
1,21,000
Prime cost
20,000
Factory overheads
1,41,000
Works Cost
14,100
Office overheads (10°% of 7 1,41,000)
Cost of Production
1,55,100
16,000
Add Opening finished goods (1000 units)
1,71,100
31,020
Less: Closing stock (2000 units@7 15.51)* 1,40,080
Cost of Goods Sold (9000 units)
18,000
Selling expenses (for 9000 units@ 2)
1,58,080
Cost of Sales
39,520
Profit (20% on Sales)

Sales 1,58,080
007 1,97,600

80
21.95
1,97,600 9,000 units
per unit
=

Selling price = 4.39

Profit per unit
= 7 39,520 9,000 units
10,000 units 15.51.
7 1,55,100
"Working Note: Cost of production per unit =
Problem 6.3 2011
particulars have been extracted for the year
n respect of a factory the following
6,00,000
Cost of materials
6.12 Cost and Management Accounti
ng
Wages 5,00,000
Factory overheads 3,00,000
Administration charges 3,36,000
Selling charges 2,24,000
Distribution charges 1,40,000
Profit 4,20,000
Awork order has to be executed in 2012 and the estimated expenses are MaterialsR
wages 5,000. ,000,
Assuming that in 2012, the rate of factory ovetheads has gone up by 20%, distribution chat.
have gone down by 10% and seling and administration charges have gone each up by 15%, at
price should the product be sold so as to earm the same rate of profit on the selling price as in 2011nat
Factory overheads are based on wages and administration, selling and distribution overheade
factory cost.

Solution
Statement of cost
for the year 2011

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:

3,00,000 100
1. Factory overhead as a percentage of wages x 100 60%
5,00,000
2. Administration charges as a percentage of factory cost 3,36,000
x
100 24%
14,00,000
3. Selling charges as a percentage of factory cost 2,24,000 x 100 = 16%
14,00,000
4. Distribution charges as a percentage of factory cost 1,40,000
x 100 10%
14,00,000

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

21,00,000
Output
Cost (Cost Sheet) 6.13
itor

Statement of Estimated Cost and Profit on Work Order in 2012

Materials 8,000
5,000
Wages
Prime Cost 13,000

Factory. Overheads (b0% of wages, increased by 20%, i.e., 72%) 3,600

Factory Cost 16,600

Administration Charges (24% of factory cost, increased by 15%, i.e., 27.6%) , ,581
Cost of Production 21,181

Selling Charges (16% of factory cost, increased by 15%, i.e., 18.4%) 3,054
1,494
Distribution Charges (10% of factory cost, decreased by 10%, ie., 96)
Cost of Sales 25,729

Profit (20°% on cost of sales) 5,146

30,875
Price to be quoted

Problem 6.4
six
disclose the following information for the
The accounts of a machine manufacturing company
2012.
months ending 31st Dec.,

1,50,000
Materials used
1,20,000
Direct wages
24,000
Factory overhead expenses
17,640
Office expenses
for
the price which the company should quote
Prepare aCost Sheet of the machines and calculate on productive
materials valued at F 1,250 and expenditure
the manufacture of a machine requiring
wages of 750, so that the price may
yield a profit of 20% on the selling price.
and
factory overhead as a percentage of direct wages
For the purpose of pice quotation, charge
cost.
charge office overhead as a percentage of works

Solution
Cost Sheet
months ending 31st Dec. 2012
for the period of six

1,50,000
Materials used 1,20,000
Direct wages 2,70,000
Prime Cost
24,000
Factory overhead expenses 2,94,000
Works or Factory Cost
17,640
Office and general expenses Cost of Production 3,11,640
6.14 Cost and Managenient Accounti.
Factory overheads 24,000
o of factory overhead to direct wages x 100 1,20,000 * 100
Direct wages

Office overheads
x 100
17,640
o of office overhead to factory cost X
100 6
Factory cost 2,94,000
Statement showing the Quotation of Price of a Machine

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

Problem 6.5

From the understated particulars, you are required to prepare a monthly cost sheet of
Soap
Manufacturers Lt showing therein:
i) Prime cost; (i) Works cost; (ii) Cost of production;
iv) Cost of sales; and (v) Profit per unit.
Opening Inventory (1-1-2012):
Raw materials 6,000
Work-in-progress 9,620
Finished goods (1,000 units) 13,680
Closing Inventory (31-1-2012):
Raw materials 7,000
Work-in-progress 8,020
Finished goods
Donations to home for destitutes 2,100
Raw materials purchased 72,000
Import duty on raw materials purchased 14,400
Productive wages 18,000
Machine hours worked 21,600 hours
Machine hour rate 1.50
Chargeable expenses 2,000
Office and Administration expenses Re. 1 per unit
Selling expenses Re. 0.90 per unit
Units soldd 8,000 units
Units produced 8,200 units
Profit on sale 10%
Costing (Cost Sheet) 6.15
thnil orOulput

Solution
Cost Sheet for January, 2012

Units 8,200

Particulars

materials 6,000
Opening stock of
raw

Add: Purchases 72,000

duty on purchases 14,400
Add: Import 92,400
stock of raw materials 7,000
Less: Closing 85,400
Raw materials consumed
18,000
Productive wages
2,000
Chargeable expenses
(i) Prime Cost 1,05,400

hrs. @7 1.50) 32,400

Add: Factory overheads (21,600 9,620
Add: Opening Work-in-progress
1,47,420
8,020
Less: Closing Work-in-progress
(ii) Works Cost 1,39,400
8,200
Administrative expenses 8,200 units @ Re. 1
Add: Office and 1,47,600
(ii) Cost of Production
13,680
Add: Opening stock of finished goods (1,000 units) 1,61,280
21,600
Less: Closing stock of finished goods* (1,200 units) 1,39,680
Cost of goods sold
Add: Selling expenses (8,000 units Re. 0.90) 7,200
Cost of Sales
1,46,880
(iv)
Profit (1/9 of cost of sales i.e., 1/9 x 1,46,880) 16,320
1,63,200
Sales
7 16,320 8000 units =
{ 2.04
(V) Profit per unit =

*Working notes:
1,000 + 8,200 8,000 1,200 units.
Units in closing stock of finished goods
=

1.

Rs. 1,47,600 x 1,200 units = 7 21,600.

2. Value of closing stock =
8,200 units

Problem 6.6
units of a product manufactured during the
E Ltd. furmish the following information for 10,000
year 2011:

90,000
Material 60,000
Direct wages 12,000
Power and consumable stores
15,000
Indirect wages
6.16 Cost andManagenent nling

Factory lighting 5,500

Cost of rectification of defective work 3,000
Clerical salaries and management expenses 33,500
5,500
Selling expenses
Sale proceeds of scrap 2,000
Repairs, maintenance and depreciation of plant 11,500
The net selling price was 31.60 per unit sold and al units were sold.
As from 1-1-2012, the selling price was reduced to 3 1 per unit. It was estimated that

production could be increased in 2012 by 50% due to spare capacity.

Rates for materials and direct wages will increase by 10%.

You are required to prepare:

Cost sheet for the year 2011 showing various elements of cost per unit, and
(a)
(b)Estimated cost and profit for 2012.
Assuming that 15,000 units will be produced and sold dunng the year and factory overheads will
be recovered as a percentage of direct wages and offhice and seling expenses as a percentage of works

cost.

Solution:
(a) Cost Sheet for the year 2011
Output: 10,000 units
Total Per unit

90,000 9.00
Materials
60,000 6.00
Wages
Prime Cost 1,50,000 15.00

Factory Overheads:
Power and consumable stores 12,000 1.20
15,000 1.50
Factory indirect wages
0.55
Lighting of factory 5,500
Defective work (cost of rectification) 3,000 0.30

Plant repairs, maintenance and depreciation 11,500 1.15

47,000 4.70
4.50
Less: Sales of scrap 2,000 45,000 0.20
19.50
Works Cost 1,95,000
Office and Selling Overheads
3.35
Clenical salaries and management expenses 33,500
0.55
Selling expenses 5,500 39,000 23.410
2,34,000
Cost of Goods Sold 8.20
Profit (balancing figure) 82,000 31.60
Sales 3,16.000
Note. It is assumed that defective work is normal.
(Cost Sheet)
or
Output Costing 6.17
Unit

(b) Statement of Estimated Cost and Profit

for the year 2012
Output 15,000 units

Total Per unit

9) x + 10% =
1,48,500
Materials (15,000 1,48,500 9.90
6) +
x 10% =
99,000
Wages (15,000 99,000 6.60
Prime Cost 2,47,500 16.50
Factory
overheads (75% of wages) 74,250 .95
Works Cost 3,21,750 21.45
0ffice 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

basis 2009 figures follows

*Working Notes. Overheads are absorbed on a percentage on as

45,000
Factory overhead x 100 75% of wages
60,000

39,000 x 100 20% of works cost.

Office overhead =

1,95,000
Problem 6.7
2012. Following
manufactured and sold 1,000 sewing machines in
Bharat Engineering Company
are the particulars obtained from
the records of the company:
80,000
Cost of materials 1,20,000

Wages paid 50,000

Manufacturnng expenses 60,000
Salaries 10,000
Rent, rates and insurance 30,000
Selling expenses 20,000
General expenses 4,00,000

Sales are required to

submit a
machines in 2013. You
1,200 sewing on the
Ihe plans to manufacture
company would be sold so at to
show a profit of 10%
Statement showing the price
at which machines
information is supplied to you:
seling pice. The following additional level.
cent on the previous
year's
of maternals will rise by 20 per
The price
(a)
rates will rise5 per cent.
by cost of materials
and wages.
(6) Wage proportion to the combined
will rise in
(C) Manufacturing expenses unchanged.
unit will remain
(a) Selling expenses per rise in output.
remain unaffected by the
(e) Other will
expenses
6.18 Cost and Managei1ient
Accounti
Solution
Statement Showing the Quotation of Price
for the year 2013

Particulars Total (1,200 machines) Per machine

Materials ( 80 + 20% = 96 per machine) 1,15,200

Direct wages (7 120 + 5% = 7 126 per machine)
96.00
1,51,200 126.00
Prime Cost 2,66,400
222.00
Manufacturing expenses 66,600 55.50
Works Cost 3,33.000
277.50
Admn. overhead
Rent, rates and insurance 10,000 8.33
Management and staff salaries 60,000 50.00
General expenses 20,000 16.67
Cost of Production 4,23,000 352.50
Selling expenses 36,000 30.00
Cost of Sales 4,59,000 382...50
Profit (10%o on selling price)* 51,000 42.50
Selling Price 5,10,000 425.00

*Working Notes
Materials + Labour in 2013
1. Mfg. expenses in 2013 = x Mtg. exp. in 2012
Materials+ Labour in 2012

222
x
50 55.50 per unit.
200
2. Profit of 10% or 1/10 on selling price = 1/9 of total cost i.c. 382.50 x 1/9 = 42.50 per machine.

Problem 6.8
Delco Shoe Co. manufacture two types of shoes A and B. Costs for the year ended 31-3-2012
were:

Direct materials 15,00,000

Direct wages 8,40,000
Production overhead 3,60,000

27,00,000
There was no work-in-progress at the beginning or at the end of the year. It is ascertained tha
(a) Direct material in type A shoes consists twice as much as that in type B shoes,
(b) The direct wages for type B shoes were 60% of those of type A shoes,
(c) Production overhead was the same per pair of A and B type.
(d) Administrative overhead for each type was 150% of direct wages,
(e) Selling cost was 1.50 per pair.
(Cost Sheet)
Costing 6.19
nitor Output

() Droduction during the year were : Type A 40,000 pairs of which 36,000 were sold; Type B
1,20,000 pairs of which 1,00,000 were sold.
o)Selling price was 44 for type A and T 28 for type B per pai
a statement showing cost and profit.
Prepare

Solution
Statement of Cost and Profit
for the year ending 31st March. 2012

Particulars Type A Type B

Total Per pair Total Per pair

Direct maternals 6,00,000 15.00 9,00,000 7.50

Direct wages 3,00,000 7.50 5,40,000 4.50
Prime Cost 9,00,000 22.50 14,40,000 12.00
Production overhead 90,000 2.25 2,70,000 2.25
Works Cost 9,90,000 24.75 17,10,000 14.2
Administrative expenses 4,50,000 11.25 8,10,000 6.75

Cost of Production 14,40,000 36.00 25,20,000 21.00

Less: Closing stock 1,44,000 4,20,000
Cost of Goods Sold 12,96,000 36.00 21,00,000 21.00
Selling expenses 54,000 1.50 1,50,000 1.50
Cost of Sales 13,50,000 37.50 22,50,000 22.50
Profit 2,34,000 6.50 5,50,000 5.50
15,84,000 44.00 28,00,000 28.00
Sales

Working Notes
1. Materials cost has been allocated as follows
Suppose Type B's material cost is =
x

Then Type As materials 2x

1,20,000 x + 80,000 x =7 15,00,000
2,00,000x = 7 15,00,000

X = 7.50
B material cost 7.50 per pair
Type
=

A material cost = 7 15.00 per pair

2. Wages
Let labour charges for A be = x

60
Then labour charges for B x or 0.6x
100

40,000x + (l,20,000 x
0,6 x) =
78,40,000
1,12.000x = 8,40,000
X =7.550
A's labour charges = 7.50 per pair

B's labour charges 7.50 x 60% * 4.50 per

=
=
pair.
6.20 Cost and Managen1ent
Accountino
Problem 6.9
-

Steel Products Company produces a machine that sells for 300. An increase of 15% in co
cost
materials and of 10% in cost of labour is anticipated.
If the only figures available are those given below, what must be the selling price to give the e
percentage of gross profit as before ? same
(a) Material costs have been 45% of cost of sales, (b) Labour costs have been 40% of cost of
(c) Overhead costs have been 15% of cost of sales, (d) The anticipated increased costs in relation tosales.
present sale price would cause 35% decrease in the present gross profit. the

Solution
Statement of Cost
(Suppose cost of Sales = 100
Assumed present Increase
cost of sales
Anticipated
cost of sales

Materials 45 15% 51.75

Labour costs 40 10% 44.00
Overhead costs 15
Cost of sales
15.00
100 110.75
Selling price = 300 x 110.75 = 7 332.25
100
Increase in cost in relation to the assumed
present cost of sales =7 110.75 100 10.75 Increase
in cost 35% decrease in the amount of
=

gross profit
Rs. 10.75
Gross profit = - 30.72
35 %

Gross 30.72
profit as a
percentage of sales 300 x 100 - R 10.24%
300
Actual present cost of sales R 300 30.72 7 269.28
Taking the anticipated increase

Percentage Present cost Increase Anticipated cost

Rs Rs
Material
45% 121.18 18.18 139.36
Labour 40% 107.72 10.78 118.50
Overhead
15% 40.38 40.38
100% 269.28 298.24
Anticipated cost of sales with the increase
Same 298.24
percentage of gross profit (10.24% of sales)
Selling price 34.01
332.25
Costing (Cost Sheet) 6.21
or Output
LnitorO u
hit

Problem 6.10

books
cme Ltd. present the following data for the month of Jan., 2010.
of Acm
The

Direct labour cost 16,000 (160% of factory overhead)

sold 56,000
Cost of goods
accounts show the following opening and closing balances
Inventory
January I January 31

Raw materials 8,000 8,600

Work-in-progress 8,000 12,000

14,000 18,000
Finished goods
3,400
Selling expenses
administration expenses 2,600
General and
75,000
Sales for the month
to prepare a cost sheet showing cost of goods manufactured and sold and profit
You are required
earned.

Solution:
in the question. It is ascertained as shown below by
Note. Purchase of raw materials is not given of
a reverse cost sheet i.e., working
backward from cost of goods sold upto the amount
preparing
purchases.

56,000
Cost of goods sold
Add: Closing stock of finished goods 18,000
74,000
Less: Opening stock of finished goods. 14,000
Cost of Production 60,000
2,600
Less: General administrative expenses
Factory Cost 57,400
12,000
Add: Closing stock of work-in-progress
69,400
8,000
Less: Opening stock of work-in-progress 61,400

100 10,000
Less: Factory overhead 16,000 160
Prime Cost 51,400
16,000
Less: Labour cost Materials Consumed 35,400
Add: Closing stock of raw matenñals
8,600
44,000
8,000
Less: Opening stock of raw materials 36,000
Purchases
6.22
Cost and Managenuent Accounin.

Cost Sheet
for the month ending 31st January, 2010

Opening stock of raw materials 8,000

Add: Purchases 36,000
44,000
Less: Closing stock of raw materials 8,600
Materials consumed 35,400
Direct labour cost
Prime Cost
16,000
51,400
Factory overhead 10,000
61,400
Add: Opening work-in-progress
8,000
400
Less: Closing work-in-progress 12,000
Factory Cost
57,400
General administrative expenses 600
Cost of Production 60,000
Add: Opening stock of finished goods
14,000
74,000
Less: Closing stock of finished goods 18,000
Cost of Sales 56,000
Selling expenses 3,400
Cost of Sales 59,400
Profit 15,600
Sales 15,000
Problem 6.11 (Cost Sheet)
Philips India Ltd. has just completed operations for the year 2012. Company's assistant accountant
(who is very inexperienced) prepared the following Profit and Loss Acrnt for the year's activities:

Sales
32,00,000
Operating expenses
Insurance
40,000
Gas, electricity and water
1,00,000
Direct labour cost
Indirect labour cost 6,00,000
Depreciation of factory equipment 1,20,000
Raw materials 1,60,000
purchased during the year 12,00,000
Rent
Selling and admn. overheads 4,00,000
3,20,000 29,40,000
Net profit 2,60,000
You have been asked to assist the
company in preparing a correct Profit and Loss Statement for the
year 2012. The following additional information are
available.
io
1. The company is a
manufacturing concerm that produces a product for sale to outside mers.

2. 80% of the rent

paid applies to factory operations and the custnd and

adminisurative activities. remaining to seluny

Onlput
Costing Cost Sheet) 6.25
or
Unit
2w materials were on hand on Ist January. lHowever, raw materials of the value of
3.
1 50.000 purchased dunng 2012 were still on hand on 31st December. The remainig was used
during year. the
in production
,70 of the insurance and 90% of the gas, electricity and water applied to factory operations,
to selling and administration activities.
the remaining applied
and hinished inventories were
5. Work-in-Progress
Ist January 31st December
Work-in-progress 4,20,000 4,80,000
Finished goods 5,40,000 4,00,000
to prepare: (a) statement of cost of goods manufactured in 2012, and (b) a
You 2re required
and loss account for the ended on 31st December, 2012.
profit
corTect

Solution:

(a) Statement of Cost of Goods Manufactured in 2012

Particulars
in 2012 12,00,000
Direct materials purchased 10,50,000
Less: Closing stock
1,50,000
6,00,000
Direct labour cost
16,50,000
Prime Cost
Manufactuing overhead 1,20,000
Indirect labour cost
of 1,00,000] 90,000
Gas, electricity and water [90% 28,000
Insurance (70% of F 40,000]
1,60,000
Depreciation on equipment 7,18,000
3,20,000
Rent [80% of 4,00,000] 23,68,000
4,20,000
Add: Opening work-in-progress
27,88,000
4,80,000
Less: Closing work-in-progress
Cost of Goods Manufactured 23,08,000

the ended on 31.12.2012

(b) Correct Profit and Loss Statement for

Particulars
23,08,000
Cost of goods manufactured (as calculated above)
5,40,000
Add: Opening stock of finished goods
28,48,000
4,00,000
Less: Closing stock of finished goods
Cost of goods sold 24,48,000

Administration & Selling Overheads: 3,20,000

Selling & administration expenses
80,000
Rent [20% of 7 4,00,000] 12,000
Insurance [30% of 7 40,000] 10,000 4,22,000
water [10% of 7 1,00,000]
Gas, electicity and 28,70,000
Cost of Sales
Profit 3,30,000

Sales 32,00,000
Cost and Management
6.24 Account

Problem 6.12 (Cost Sheet)

M.K. Works can produce 60,000 units per annum at its optimum The
(100%) capacity. The estümated
ects.

costs of production are as under:

3 per unit
Direct material
2 per unit
Direct labour

Indirect expenses: 1,50,000 per annum

Fixed
Variable 75 per unit.
extra expenses of
Semi-variable: 50,000 p.a. upto 50% capacity and
thereof
10,000 for every 25% increase in capacity on part
The factory produced only against orders and not for own stock. If the production programm
of
the factory is as indicated below, and the management desires to ensure a proit of R 1,00,000 for tha

selling price at which each unit should be quoted.

year, work out the average
First 3 months of the year 50% of capacity
Remaining 9 months 80% of capacity
Ignore selling, distribution and administration overheads.
Solution:
Production Statement
(Output; 43,500* units

Direct materials (43,500 units* @ 3 per unit) 1,30,500

Direct labour (43,500 @ 2 per unit) 87,000

Prime Cost 2,17,500

Indirect expenses:
Fixed 1,50,000
Variable (43,500 units @ R 5 per unit) 2,17,500
Semi-variable:
For first 3 months at 50% capacity =50,000x 3/12 12,500
For 9 months at 80% capacity = 70,000 x 9/12 52,500 4,32,500

Cost of Production 6,50,00

Estimated profit 1,00,00

Estimated sales revenue for 43,500 units 7,50,000

Selling price per unit = 7,50,000+ 43,500 units = 7 17,24

*Working Note:
Output: First 3 months at 50% capacity 50 = 7,500 units
-60,000 * 100

80
For next 9 months 80% capacity 60,000x 100 =36,000
100

Total units produced = 7,500+ 36,000

43,500.
or
Outpu Costing (Cost Sheet)
Unit
6.25

EXAMINATION QUESTIONS
Theoretical Questions

1. hat is a cost sheet ?Explain the purposes served by it.

naceribe the objects of cost sheets. Give an example of a cost sheet
2.
headings and the important items supplying imaginary figures. indicating clearly the
o w Cost and price are determined in tenders.
Explain with a numerical example.
Practical Questions

1. From the following particulars,

(a) Prepare a Cost Sheet showing: () the cost of materials consumed, (ii) Prime Cost (ii)
Production Cost, (iv) 1otal Cost, () Profit; and
(b) Calculate ( ) Percentage of production overheads to direct wages, (ii) Percentage of
general overheads to production cost, and (i) Percentage of profit to sales.

Stock of raw materials- 1st Jan., 2012 30,850

Work-in-progress- Ist Jan 2012 60,850
Purchases of raw materials 1,43,250
Direct wages 1,78,500
Production overhead 1,42,800
General overhead 1,12,700
Stock of raw materials- 31st Dec., 2012 37,700
Work-in-progress 31st Dec. 2012 67,750
Sales for the year 8,60,625
There is no opening or closing stock of finished goods.
[Ans.(a) () r 1,36,400; (iü) 3,14,900; (i) 4,50,800; (iv) 5,63,500: () 2,97,125.
(6) (i) 80%; (i) 25%: (il) 34.50%.]
2. The following data relate to the manufacturing of a standard product during the four weeks ending
on 31st March, 2012.
Raw materials consumed 720,000
Direct wages 712,000
1,000 hours
Machine hours worked
Machine hour rate 72 per hour
20% on works cost
Office overhead
Re. 0.40 per unit
Selling overheads
20,000 units
Units produced
18,000 units
Units sold at 7 3 each
Prepare a cost sheet to show: (1) Prime cost. (2) Works cost, (3) Cost of production, (4) Cost of goods
sold, (5) Cost of sales, (6) Profit.
(2) 34,000; (3) 40,800: (4)
7
F 36,720; (5) 43,920; (6) 7 10,080.]
Ans. (1) 32,000;
to commodity for the half-year ended 30th June,
relates
3. Ihe following extract of costing information
2010
1,32,000
Purchase of raw materials 1,10,000
Direct wages 44,000
oncost
Rent, rates, insurance and works
6.26
Cost and
Management
Carriage Inward
Stock on 1st
Accounting
January,
Raw materials
2010:

Finished products (1,600 tonnes)

1584
Stock on 30th June,
Raw materials
2010 22,1 0600
Finished products (3,200 tonnes)
Work-in-progress 24,4614
1st Jan., 2010 35,200
30th June, 2010
Cost of factory
supervision 5,280
Sales of finished production 17,600
Advertisingand other selling expenses 8,300
25,600 tonnes of the finished
are 75 Paise per tonne sold. 3,30,0
products were produced during the year.
Prepare Cost Sheet and ascertain profit.
[Ans. Total Profit R 48,000]
4. Calculate (a) Cost of raw materials
consumed; (b) Cost of production; (c) Cost of goods
(d) Amount of profit from the following sold
particulars and

Opening stock:
Raw materials
Finished goods 5,000
Closing stock: 4,000
Raw materials
Finished goods 4,000
Raw materials purchased 5,000
Wages paid to labourers 50,000
20,000
Chargeable expenses 2,000
Rent, rates and taxes
Power 5,000
2,000
Factory heating and lighting
2,000
Factory insurance
1,000
Experimental expenses 500
Office management salaries
4,000
Office printing and stationery
200
Salaries of salesmen
2,000
Commission of travelling agents
1,000
Sales
1,00,000
[Ans. (a) 7 51,000 (b) 7 87,700 (c) 7 86,700 (d) 10,300)
5. The Modern Manufacturing Company submits the
following information on 31st March, 2008
Sales for the year R 2,75,000
Inventories at the beginning of the year were
Finished goods 7,000
Work-in-progress 4,000
Purchases of materials for the year were: 1,10,000
Materials inventory at the beginning of the year was

3,000 and at the end of the year 4,000

Direct labour
65,000
utyut Costing(Cost Sheet) 6.27
nitore
Inventories at the end ofthe year were:
Work-in-progress 6,000
Finished goods 8,000
for the year were
Qther expenses
Factory overhead was 60% of the direct labour cost.
10% of sales
Selling expenses
Administration expenses 5% of sales
Statement of Cost.
Prepare
Profit 7 23,750]
Ans.
manufacturing transistor sets and the following details are furnished in respect of its
6. Z companyis
the year ended 31st December, 2012
factoryoperations for
Rawmaterials
Purchases
40,000
Opening stock 8,000
Closing stock 6,000
Direct labour 28,000
Manufacturing expenses 8,500
Office and administration expenses 5,300
Work-in-progress: Opening Closing

1,000 1,500
Materials
Labour 1,200 1,400
600 700
Manufacturing expenses
2,800 3,600
Total
Statement of Cost of Production.
During the year, 600 sets are produced. Prepare a

[Ans. Cost of production per set 7 138.33]

be adjusted in factory
Hint. Total amounts of opening and closing stocks of work-in-progress may
cost.]
7. On 15th August, 2012, the Tiger Cycle Co. was required to quote
for a contract for the supply of 500
the price to be quoted to give the
bicycles. From the following details, prepare a statement showing
same percentage of net profit on turnover as was
reaised during the six months to 30th June, 2012.

Stock of materials on 1st January, 2012 50,000

Stock of materials on 30th June, 2012 7,000
75,000
Purchase of materials during 6 months to 30th June, 2012
1,50,000
Factory wages 25,000
Indirect charges
2,70,000
Sales
Nil
Completed stock-in-hand on January, 2012
1st
50,000
Completed stock-in-hand on 30th June, 2012
months was 2,000, including those sold and
Ihe number of bicycles manufactured duing the six
to be quoted for are to be of uniform size and
those in stock at the end of the period. The bicycles
the six months to 30th June, 2012. As from 1st
guality and similar to those manufactured during cent and that of materials by 15 per cent.
10
August, the cost of factory labour has increased by per
Ans. Price to be 7 90,472 180.94 per bicycle.]
quoted
6.28 Cost and
nagement
Accountin
8. The following particulars have been extracted from the books of J.K. Production
Kolkata, for the year ended 31st March, 2012.
duction Co. Ltd.
Stock of materials as on 1st April, 2011
47,000
Stock of materials as on 31st March, 2012
45,000
Materials purchased 2,08,000
Drawing office salaries
9,600
Counting house salaries
14,000
Carriage inwards
8,200
Carrmage outwards
5,100
Donations to relief fund
4,300
Sales
4,87,000
Bad debts written off
4,700
Repairs of plant, machinery and tools
8,600
Rent, rates, taxes and insurance (factory) 3,000
Rent, rates, taxes and insurance (office) 1,000
Travelling expenses 3,700
Travelling salaries and commission
7,800
Production wages 1,45,000
Depreciation written off on machinery, plant and tools
9,100
Depreciation written off on office furniture 600
Director's fees 6,000
Gas and water charges (factory)
1,000
Gas and water charges (office) 300
General charges 5,000
Manager's salary 18,000
Out of 48working hours in a week. the time devoted by the manager to the factory and office was On
an average 30 hours and 18 hours
respectively throughout the accounting year.
Prepare a Production Statement showing different elements of cost.
[Ans. Prime cost 7 3,63,200; Factory cost 7 4,05,750; Cost of production 7 4,25,400,
Cost of as sales 4,60,700; Profit 7 26,300]
Hint. Donation of relief fund is not included in cost but bad debts have been included. Drawing
office salaries are included in factory overhead and counting house salaries are included in selling
and distribution overhead.]
9. A company makes two distinct types of toys, A & B. The total expenses during a period as shown
the books for the assembly of 600 of the type A and 800 of the type B toys are as under

Materials 1,98,000
Direct wages 12,000
Stores overheads 19,800
Running expenses of machine 4,400
Depreciation 2,200
Labour amenities 1,500
Works general overhead 30,000
Administration and selling overhead 26,800
Costing
(Cost Sheet) 6.29
Output
n i to rO n t
or

available to you is :
The otherdata
A:B
cost ratio per
unit 1:2
Material
ratio per unit
labour
2:3
Direct 1 2
utilisation ratio per unit
Machine
Calculate the cost of each toy per unit giving the bases of apportionment adopted by you.
B2,11,4271
TAns. Total cost AR 83,273;
particulars have been extracted from the accounts of Exids Motors Ltd. for the year
10. Thefollowing
ending 31-12-2012.

stock of raw materials 2,00,000

Opening
stock of raw materials 3,00,000
Closing
Purchase of raw materials 48,00,000
on raw materials 2,40,000
Carriage
28,00,000
Direct wages
Works overhead 7,84,000
Establishment and general charges 5,96,680
cost to wages and
the works cost and total cost of motors, the percentage of works
Ascertain
estabishment and general charges to works cost.
percentage of will require an
should quote for a motor, which is estimated
Workout the price the company it would yield a profit of 25%
of 22,000 in raw materials and { 16,000 in wages, so that
expenditure
on total cost and 20% on selling price.
91,20,680; % of works cost to wages 28%; of establishment
%
Ans. Works cost 85,24,000; total
cost
Tender price of motor to be quoted 7 56,817)
and general charges to works cost 7%.