COST ACCOUNTING

CHAPTER NO 1

COST SHEET
Particular Total cost Cost per unit
Rs. Rs.
Opening stock of direct material
Add:- Purchase Xxx Xxx
Add:- Carriage inward Xxx Xxx
Add:- octroi, customs duty, and other expenses on purchase Xxx Xxx
Less:- closing stock of direct raw materials Xxx xxx
Cost of direct materials consumed Xxx xxx
Direct or productive wages Xxx xxx
Direct or chargeable expenses Xxx xxx
Prime cost Xxx xxx
Add:- Work or Factory overheads:-
Indirect materials Xxx
Indirect wages Xxx
Leave wages Xxx
Overtime Premium Xxx
Fuel and power Xxx
Coal Xxx
Factory rent and taxes Xxx
Supervision Xxx
Works stationery Xxx
Canteen and welfare expenses Xxx
Repairs Xxx
Haulage Xxx
Works salaries Xxx
Depreciation of plant and machinery Xxx
Works expenses Xxx
Gas and water Xxx
Drawings office salaries Xxx
Technical director’s fees Xxx
Laboratory expenses Xxx
Works telephone expenses Xxx
Internal transport expenses Xxx
Less:- sale of scrap Xxx
Add:- operating stock of work-in-progress Xxx
Less:- closing stock of work –in-progress Xxx
Works cost Xxx
Add:- office and administration overhead:
Office salaries Xxx

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Director’s fees Xxx
Office rent and rates xxx
Office stationery and printings xxx
Sundry office expenses xxx
Depreciation and repairs of office equipment xxx
Depreciation of office furniture xxx
Subscription to trade journals xxx
Office lighting xxx
Establishment charges xxx
Director’s travelling expenses xxx
Postage xxx
Legal charges xxx
Audit fees xxx
Cost of production xxx
Add:- opening stock of finished goods xxx
Less:- Closing stock of finished goods xxx
Cost of goods sold xxx
Add;- Selling and distribution overheads:
Advertising xxx
Showroom expenses xxx
Bad debts xxx
Salesmen’s salaries and expenses xxx
Packing expenses xxx
Carriage outward xxx
Commission of sales agent xxx
Counting house salaries xxx
Cost catalogues xxx
Expenses of delivery vans xxx
Collections charges xxx
Travelling expenses xxx
Cost of tenders xxx
Warehouse expenses xxx
Cost of mailing literature xxx
Sales manager’s salaries xxx
Sales director’s fees xxx
Showroom expenses xxx
Sales office expenses xxx
Depreciation and repairs of delivery vans xxx
Expenses of sales branches xxx
Cost of sales or total cost xxx
Profit xxx
Sales xxx

Items excluded from cost:-

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Cash discount, interest paid, preliminary expenses written off, goodwill written off,
provision for taxation , provision for bad debts, transfer to reserve, donations, income tax
paid, dividend tax paid, profit/loss on sale of fixed assets, damages payables at law, etc.

Problems on cost sheet;-

Problem no :- 1

The bangalore Ltd. Supplies you the following information and requires you to prepare a cost
sheet.

Rs.

Stock of raw materials on 1st sept 2015 75000

Stock of raw materials on 30th sept 2105 91500

Direct wages 52500

Indirect wages 2750

Sales 200000

Work – in- progress on 1st sept 2015 28000

Work-in-progress on 30th spet 2015 35000

Purchases of raw materials 66000

Factory rent, rates, and power 15000

Depreciation of plant and machinery 3500

Expenses on purchases 1500

Carriage outward 2500

Advertising 3500

Office rent and taxes 2500

Travellers wages and commission 6500

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Stock of finished goods on 1st sept 2015 54000

Stock of finished goods on 30th sept 2015 31000

Problem no:-2

From the following information prepare a cost sheet to show:

A) Prime cost b) works cost c) cost of production d) cost of sale and e) profit
Raw materials purchase 35250
Carriage on purchase 850
Direct wages 18450
Factory overhead 2750
Selling overhead 2450
Office overhead 1850
Sales 75000
Sale of factory scraps 250
Opening stock of finished goods 9750
Closing stock of finished goods 11100

Problem no:-3
Mr. Gopal furnishes the following the data relating to the manufacture of a standard
product during the month of April 2008.
Rs.
Raw materials consumed 15000
Direct labour charges 9000
Machine hours worked 900
Machine hours rate Rs. 5
Administration overheads 20% on works cost
selling overhead Rs. 0.50 per cost
United produced 17100
Units sold 16000 at Rs. 4 per unit
You are required to prepare a cost sheet from the above showing,
A) The cost per unit
B) Cost per unit sold and profit for the period

Problem no:-4

From the following information for the month of January prepare a cost sheet to show
the following components A) prime cost b) factory cost c) cost of production d) total
cost.

Direct material 57000

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Direct wages 28500

Factory rent and rates 2500

Office rent and rates 500

Plant repairs and maintenance 1000

Plant depreciation 1250

Factory heating and lighting 400

Factory manger’s salaries 2000

Office salaries 1600

Director’s remuneration 1500

Telephone and postage 200

Printing and stationery 100

Legal charges 150

Advertisement 1500

Salesmen’s salaries 2500

Showroom rent 500

Sales 116000

Problem no:5

From the following particulars prepare a cost statement.

Stock 1-1-2008 raw materials 30500

Finished goods 20400

Stock 31-1-2008 raw materials 48500

Finished goods 10000

Purchase of raw materials 25000

Work – in – progress 1-1-2008 8000

Work – in – progress 31-1-2008 9000

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Sales 95000

Direct wages 20400

Factory expenses 10500

Office expenses 5400

Selling expenses 3800

Distribution expenses 2500

Also calculate the percentage of works expenses to direct wages and the percentage of
office expenses to work cost.

Problem no:- 6

In respect of a factory the following particulars have been extracted for the year 2008.

Cost of materials 600000

Wages 500000

Factory overheads 300000

Administration charges 336000

Selling charges 224000

Distribution charges 140000

Profit 420000

A work order has to be executed in 2009 and the estimated are.

Materials Rs. 8000 wages Rs. 5000

Assuming that in 2009 the rate of factory overhead 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 2008?

Factory overhead are based on wages and administration, selling and distribution
overhead on factory cost.

Problem no:- 7

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The accounts of a machine manufacturing company disclose the following information
for the six months ending 31st dec 2008

Rs.

Materials used 150000

Direct wages 120000

Factory overhead expenses 24000

Office expenses 17640

Prepare a cost sheet of the machine and calculate the price which the company should
quote for the manufacture of a machine requiring materials valued at Rs. 1250 and
expenditure on productive wages of Rs.750, so that the price may yield a profit of 20%
on the selling price.

For the purpose of price quotation charge factory overhead as a percentage of direct
wages and charge office overhead as a percentage of work cost.

Problem no:-8

The following extracts of costing information relate to commodity X for the year ending
31-12-2008.

Rs.

Purchase of raw materials 6000

Direct wages 5000

Rent, rates and insurance 2000

Carriage inward 100

Stock (1-1-2008) Raw materials 1000

Finished products --- 200 tons 800

Stock (31-12-2008) raw materials 1100

Finished products ---- 400 tons ----

Cost of factory supervision 400

Sale of finished products 15000

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Advertising and selling cost is 40 paisa per ton sold. 3000 tons of the commodity were
sold during the year. Prepare a cost sheet.

Problem no:-9

The following details are available from a company’s books.

Rs.

Stock of raw material on 1-1-2008 10800

Stock of finished goods on 1-1-2008 28000

Purchases during the year 294000

Productive wages 198800

Sale of finished goods 592000

Stock of finished goods on 31-12-2008 30000

Stock of raw materials on 31-12-2008 13600

Works overhead 43736

Office expenses 35524

The company is about to send a tender for large plant. The costing department estimate
that the material required for its production would cost Rs.20000 and wages for making
the plant would cost Rs.12000. tender is to be made keeping a net profit of 20% on the
selling price. State what would be the amount of the tender, if based on the percentages.

Problem no:- 10

The account of flex manufacturing co. for the year ended 31st march 2008, show the
following information.

Production wages 250000

Direct materials used 318200

Chargeable expenses 30000

Sales 780000

Drawing office salaries 10000

Counting office salaries 18800

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Cash discount allowed 3000

Carriage outward 5400

Bad debts written off 8500

Rent, rates and taxes

(i) Office 4000

Travelling expenses 3600

Travelers salaries and commission 8500

Depreciation on plant and machinery 6500

Depreciation on office furniture 1000

Directors fee 12000

Gas and water (3/4 factory, ¼ 0ffice) 2800

Mangers salary (3/4 factory, ¼ office) 24000

General expenses 4000

Haulage hire 5000

Donation to charitable trust 2000

Prepare a statement showing i) prime cost ii) factory cost iii) total cost iv) net profit.

Problem no:- 11

The following particulars have been extracted from the books of calcutta manufacturing
co. Ltd. Calcutta, for the year ended 31st march 2008.

Rs.

Stock of raw materials as on 1 April 2008 47000

Stock of materials as on 31st march 2008 50000

Materials purchased 208000

Drawings office salaries 9600

Counting house salaries 14000

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Carriage inwards 8200

Carriage outward 5100

Cash discounts allowed 3400

Bad debts written off 4700

Repairs of plant, machinery and tools 10600

Rent, rates, taxes and insurance (factory) 3000

Rent, rates, taxes and insurance (office) 1000

Travelling expenses 3100

Travelling salaries and commission 8400

Production wages 140000

Depreciation on plant and tools 7100

Depreciation written off of on furniture 600

Director’s fee 6000

Gas and water charges (factory) 1500

Gas and water charges ( office) 300

General charges 5000

Mangers salary 12000

Out of 48 working hours in a week, the time devoted by the manger to the factory and
office was on an average 40 hours and 8 hours respectively throughout the accounting
year.

You are required to prepare cost sheet…..

Problem no:-12

From the books of M/s ZYX enterprise, the following details have been extracted for the
year ending March 31 2008.

Stock or materials ----------- opening 188000

Closing 200000

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Materials purchased during the year 832000

Direct wages paid 238400

Indirect wages 16000

Salaries to administration staff 40000

Freight ----- inward 32000

Outward 20000

Sales 1579800

Cash discount allowed 14000

Bad debts written off 18800

Repairs of plant and machinery 42400

Rent, rates and taxes ------ factory 12000

Office 6400

Travelling expenses 12400

Salesmen’s salaries and commissions 33600

Depreciation written off ----- plant and machinery 28900

Furniture 2400

Directors fees 24000

Electricity charges (factory) 48000

Sale of scrap 64000

General charges 24800

Sale of scrap 500

Managers salary 48000

The mangers time is shared between the factory and the office in the ratio of 20: 80.

From the above details you are required to prepare a cost sheet to show.

A) Prime cost b) factory cost c) cost of production d) total cost e) profit.

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Problem no:-13

E Ltd. Furnish the following information for 10000 units of a product manufactured
during the year 2008.

Materials 90000

Direct wages 60000

Power and consumable stores 12000

Indirect wages 15000

Factory lighting 5500

Cost of rectification of defective work 3000

Clerical salaries nd management expenses 33500

Selling expenses 5500

Sale proceeds of scrap 2000

Repairs, maintenance and depreciation of plant 11500

The net selling price was Rs. 31.60 per unit sold and all units were sold.

As from 1-1-2009, the selling price was reduced to Rs.31 per unit. It was estimated that
production could be increase in 2009 by 50% due to spare capacity.

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

You are required to prepare.

A) Cost sheet for the year 2008 showing various elements of cost per unit, and
B) Estimated cost and profit for 2009.

Assume that 15000 units will be produced and sold during the year and factory overheads
will be recovered as a percentage of direct wages and office and selling expenses as a
percentage of works cost.

Problem no:-14

Bharath Engineering company manufactured and sold 1000 sewing machines in 2008.
following are the particular obtained from the record of the company :

Cost of material 80000

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Wages paid 120000

Manufacturing expenses 50000

Salaries 60000

Rent, rates and insurance 10000

Selling expenses 30000

General expenses 20000

Sales 400000

The company plans to manufacture 1200 sewing machines in 2009. You are required to
submit a statement showing the price at which machines would be sold so at to show a
profile of 10% on the selling price. The following additional information is supplied to
you :

(a) The price of materials will rise by 20 per cent on the previous years level.
(b) Wage rates will rise by 5 per cent.
(c) Manufacturing expenses will rise in proportion to the combined cost of materials and
wages.
(d) Selling expenses per unit will remain unchanged.
(e) Other expenses will remains unaffected by the rise in output.

Problem no : 15

Flex shoe co` manufacture two types of shoes A and B costs for the year ended
31-3-2008 were:

Direct materials 1500000

There was no work-in-progress at the beginning or at the end of the year. It is ascertained that.

a) Direct materials 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) Administration overhead for each type was 150% of direct wages,

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e) Selling cost was Rs, 1.50 per pair,
f) Production during the year were. Type A 40000 pairs of which 36000 were sold type B
120000 pairs of which 100000 were sold,
g) Selling price was Rs. 44 for type A and Rs.28 for type B per pair.

Prepare a statement showing cost and profit.

Problem no:-16

From the following particular, prepare cost sheet showing the comparative cost per tons for
the periods.

Three months ended 2008

-------- ---------------------------------------

31st March 30th June

Productive wages 72000 98000

Administrative expenses 12000 12000

Raw materials 36000 49000

Taxes and insurance (factory) 750 750

Light and water 1000 1000

Direct expenses 9000 12500

Depreciation 2000 2000

Factory rent 1500 1500

Unproductive labour 30000 41000

Factory repairs 3000 4500

---------------------- -------------------------

167250 222250

The tonnage produced in the two quarter was 12000 and 16000 respectively.

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Problem no:-17

Steel Products Company produces a machine that sells for Rs. 300. An increase of 15% in
cost of 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
same percentage of gross profit as before?

a) Materials costs have been 45% of cost of sales, b) labour costs have been 40% of cost of
sales c) overhead costs have been 15% of cost of sales d) the anticipated increased costs
in relation to the present sale price would cause 35% decrease in the present gross
profit…

Problem no:-18

The books of ACME Ltd. Present the following data for the month of Jan 2008.

Direct labour cost 16000 (160% of factory overhead)

Cost of goods sold 56000

Inventory account showed the following opening and closing balance.

January 1 January 31

Raw materials 8000 8600

Work-in-progress 8000 12000

Finished goods 14000 18000

Selling expenses 3400

General and administration expenses 2600

Sales for the month 75000

You are required to prepare a cost sheet showing cost of goods manufactured and sold and profit
earned.

Problem no:-19

The following direct costs were incurred on job no. 239 of XYL CO. Ltd.

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Materials Rs. 6010

Wages: Dept. A---60 hours @ Rs. 30 per hr.

B---40 hours @ Rs. 20 per hr.

C---20 Hours @ Rs. 50 per hr.

Overhead for these three departments were estimated as follows.

Variable overhead: Dept. A--- Rs.15000 for 1500 labour hours

B--- Rs. 4000 for 200 labour hours

C--- Rs. 12000 for 300 labour hours

Fixed overhead: estimated at Rs.40000 for 2000 normal working hours.

You are required to calculate the cost of Job No. 239 and quote the price to give profit of 25% on
selling price.

Problem no:-20

A Factory uses job costing. The following data are obtained from its books for the year ended
31st December 2008.

Direct materials 90000

Direct wages 75000

Factory overheads 45000

Selling and dist. Overheads 52500

Administration overhead 42000

Profit 60900

a) Prepare a cost sheet indicating the prime cost. Work cost. Production Cost, cost of sales
and the sales value.
b) In 2009, the factory received an order for a number of jobs. It is estimated that direct
materials required will be 120000 and direct labour will cost Rs.175000. what should be
the price for these jobs if factory intend to earn the same rate of profit on sales assuming
that the selling and distribution overhead have up by 15%? The factory recovers factory
overhead as a percentage of direct wages and administration, selling and distribution

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overheads as a percentage of work cost, based on cost rates prevailing in the previous
year.

Problem no;-21

Job no. 718 was consumed on 10th October, 2005 and completed on 1st November, 2005.

Materials used were Rs. 600 and labour charged directly to the Job was Rs. 400 other
information was as follows.

Machine no. 215 used for 40 hours. The machine hour rate is Rs. 3.50

Machine no. 169 used for 30 hours. The machine hours rate Rs.4

Six welders worked on the job for 5 days of 8 hours each, the direct labour hour rate for welders
is 20 paisa.

Other expenditure of the concern not apportioned for calculating the machine hours or the direct
hours rates amounted to Rs. 20000, total direct wages for the period being Rs.20000.

Ascertain the work cost of job no. 718.

Problem no:- 22

From the following particulars relating to production and sales for the year ended on 31st July,
2008, prepare a statement of cost showing, inter alia, the prime cost, factory cost, cost of
production, cost of goods sold as well as per unit cost of sales and profit.

As on 1-8-2007(Rs.) As on 31-7-2008(Rs.)

Stock:

Raw materials 16000 19600

Work-in-progress 12600 4600

Finished goods (at cost) 16400(3000 units) ? (2500 units)

Other information for the year.

Purchase of raw materials 111600

Sales of finished goods (40500 units) 283500

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Direct wages 67200

Office and administration overhead 20800

Selling and distribution overhead 50 pasie per unit sold

Machine hour rate 2.50

Machine hours worked 8000 hours

Assume that sales are made on the basis of ‘first-in, first-out.

SHIVARAJ .M M.com, PGDBA

lecture of commerce and management dept.

Vani govt. first grade college-hiriyur

Contact no: 9164786273, 8971512459

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