Unit or Output Costing

¼ bdkbZ vFkok mRiknu ykxr

fof/k ½

PROF. M. M. JINNAH
FACULTY OF COMMERCE
KUMAUN UNIVERSITY
S.S.J. CAMPUS, ALMORA

PROF. M. M. JINNAH 1
Unit or Output Costing
¼ bdkbZ vFkok mRiknu ykxr fof/k ½

1. Introduction ¼ çLrkouk ½

2. Meaning of Unit or Single or Output Costing

Alan Pizzey defines “ Unit or Single Costing as the
system of Cost Accounting in which costs are
determined per unit of a single product in a
manufacturing activity.”

3. Element of Costs and Costing Procedure

¼ ykxr ds RkRo ,oa ykxr ys[ks dh çfØ;k ½
PROF. M. M. JINNAH 2
Name and Unit of Suitable Industries
¼ bdkbZ vFkok mRiknu ykxr fof/k ½

S. No. Name of Industries Unit Cost ¼ çfr bdkbZ

ykxr ½

1. Cotton Industries Per Meter

2. Milk Industries Per Litre
3. Paper Industries Per Rim or per Kg.
4. Sugar Industries Per Quintal
5. Cement Industries Per Ton
6. Coal Industries Per Ton
7. Mining Industries Per Ton
8 Steel Industries Per Ton
9. Bricks Industries Per 1,000 Bricks
10. Wine Industries Per Barrel
11. Petrol Per Galan
12. Goods Per Unit
PROF. M. M. JINNAH 3
Methods of Unit Costing
¼ bdkbZ ykxr ys[kkadu dh fof/k;k¡ ½

1. Cost Sheet ¼ ykxr & i= ½

2. Statement of Cost and Profit

¼ ykxr ,oa ykHk fooj.k ½

3. Production Account ¼ mRiknu [kkrk ½

PROF. M. M. JINNAH 4
Specimen of Cost Sheet ¼ ykxr & i= dk uewuk ½
for the month ending ....................2014
(Output= Units)
Particulars Total Cost Cost per Unit
( Rs.) ( Rs.)

Direct Materials xxxxxxx xxxxxxx

Direct Labour xxxxxxx xxxxxxx

Direct Expenses xxxxxxx xxxxxxx

Prime Cost xxxxxxx xxxxxxx

Factory Overhead /Expenses, Works xxxxxxx xxxxxxx

Overhead/Expenses
Factory Cost or Works Cost xxxxxxx xxxxxxx

Office & Administrative Overhead xxxxxxx xxxxxxx

Office Cost xxxxxxx xxxxxxx

Selling and Distribution Overhead xxxxxxx xxxxxxx

Total Cost xxxxxxx xxxxxxx

Profit ( Certain % on Cost or Sales) xxxxxxx xxxxxxx

Sales xxxxxxx xxxxxxx

PROF. M. M. JINNAH 5
Specimen of Comparative Cost Sheet ¼ ykxr & i= dk uewuk ½

Period Period
(1-9-15 to 30-9-15 ) (1-10-15 to 31-10-15 )
(Output = Units) (Output = Units)
Particulars
Total Cost Cost per Unit Total Cost Cost per Unit
( Rs.) ( Rs.) ( Rs.) ( Rs.)

xxxxxxx xxxxxxx Direct Materials xxxxxxx Xxxxxxx

xxxxxxx xxxxxxx Direct Labour xxxxxxx Xxxxxxx
xxxxxxx xxxxxxx Direct Expenses xxxxxxx Xxxxxxx
xxxxxxx xxxxxxx Prime Cost xxxxxxx Xxxxxxx
xxxxxxx xxxxxxx Factory Overhead /Expenses, Works Xxxxxxx Xxxxxxx
Overhead/Expenses
xxxxxxx xxxxxxx Factory Cost or Works Cost Xxxxxxx Xxxxxxx
xxxxxxx xxxxxxx Office & Administrative Overhead Xxxxxxx Xxxxxxx

xxxxxxx xxxxxxx Office Cost Xxxxxxx Xxxxxxx

xxxxxxx xxxxxxx Selling and Distribution Overhead Xxxxxxx Xxxxxxx

xxxxxxx xxxxxxx Total Cost Xxxxxxx Xxxxxxx

xxxxxxx xxxxxxx Profit ( Certain %M.on Cost or Sales) Xxxxxxx Xxxxxxx
PROF. M. JINNAH 6
xxxxxxx xxxxxxx Xxxxxxx Xxxxxxx
Method of Finding out Material Consumed
Particulars Total Cost Amount
( Rs.) ( Rs.)

Opening Stock of Raw Materials xxxxxxx

Add Purchase of Raw Materials xxxxxxx

Add Carriage Inward xxxxxxx

Add Customs Duty and Octroi xxxxxxx

Add Direct Expenses on Material xxxxxxx xxxxxxx

xxxxxxx

Less Return of Defective Materials xxxxxxx

Less Scrap Value of Materials xxxxxxx

Less Abnormal Waste of Materials xxxxxxx

Less By-Products xxxxxxx

Less Sales of Waste of Materials xxxxxxx

Less Closing Stock of Raw Materials xxxxxxx xxxxxxx

Cost of Materials Consumed or Value of Materials Consumed xxxxxxx

PROF. M. M. JINNAH 7
Specimen of Statement of Cost ¼ ykxr fooj.k dk uewuk ½
for the month ending ....................2014

Particulars Amount Amount

( Rs.) ( Rs.)

Cost of Materials Consumed or Value of Materials xxxxxxx

Consumed

Direct Labour xxxxxxx

Direct Expenses xxxxxxx

Prime Cost xxxxxxx

Factory Overhead / Works Overhead xxxxxxx

Add Opening Stock of Work- in- Progress xxxxxxx

xxxxxxx
Less Closing Stock of Work -in -Progress xxxxxxx

Factory Cost or Works Cost xxxxxxx

Office & Administrative Overhead xxxxxxx

Cost of Production xxxxxxx

PROF. M. M. JINNAH 8
Statement of Profit ¼ ykHk fooj.k ½
for the month ending ....................2014

Particulars Amount Amount

( Rs.) ( Rs.)

Cost of Production xxxxxxx

Add Opening Stock of Finished Goods xxxxxxx

xxxxxxx

Less Closing Stock of Finished Goods xxxxxxx

Cost of Goods Sold xxxxxxx

Selling and Distribution Expenses xxxxxxx

Cost of Sales xxxxxxx

Profit ( Certain % on Total Cost or Sales) xxxxxxx

Sales xxxxxxx

PROF. M. M. JINNAH 9
SOME IMPORTANT FORMULAE
Section – I ( RELATIONSHIP OF DIFFERENT COMPONENTS OF COST)

1. The percentage of Works Overhead to Direct Wages =

= Works Overhead x 100

Direct Wages
2. The percentage of Works Overhead to Direct Materials =

= Works Overhead x 100

Direct Materials
3. The percentage of Works Overhead to Prime Cost =

= Works Overhead x 100

Prime Cost
4. The percentage of Office Overhead to Works Cost =

= Office Overhead x 100

Works Cost
5. The percentage of Selling & Distribution Overhead to Works Cost =

= Selling & Distribution Overhead x 100

Works Cost
PROF. M. M. JINNAH 10
SOME IMPORTANT FORMULAE

Section – II ( CALCULATION OF FACTORY OVERHEAD AND OFFICE OVERHEAD)

A. CALCULATION OF FACTORY OVERHEAD:

1. = Direct Materials x % Of Works Overhead to Direct Materials
100

2. = Direct Wages x % Of Works Overhead to Direct Wages

100

3. = Prime Cost x % Of Works Overhead to Prime Cost

100

B. CALCULATION OF OFFICE OVERHEAD:

1. = Works Cost x % Of Office Overhead to Works Cost
100
B. CALCULATION OF SELLING AND DISTRIBUTION OVERHEAD:
1. = Works Cost x % of Selling and Distribuion Overhead to Works Cost
100
PROF. M. M. JINNAH 11
SOME IMPORTANT FORMULAE
Section – II ( CALCULATION OF PROFITS)

A. WHEN PROFIT PERCENTAGE ON TOTAL COSTS IS GIVEN ( TOTAL COST AVAILABLE) :

SALES = TOTAL COST + PROFIT

1. = Total Cost x % of Profit on Total Cost

100

B. WHEN PROFIT PERCENTAGE ON SALES IS GIVEN ( TOTAL SALES DATA AVAILABLE) :

SALE S = TOTAL COST + PROFIT

1. = Total Sales x% of Profit on Sales

100
C. WHEN PROFIT PERCENTAGE ON SALES IS GIVEN ( TOTAL SALES DATA NOT AVAILABLE) :
SALES = TOTAL COST + PROFIT

1. = Total Cost x % of Profit on Sales

( 100 - Percentage ofM.Profit
PROF. on Sales)
M. JINNAH 12
SOME IMPORTANT FORMULAE

Section – III ( PERCENTAGE OF EVERY EXPENDITURE WITH

TOTAL COST)
1. The percentage of Material Consumed with Total Cost =

= Material s Consumed x 100

Total Cost
2. The percentage of Direct Wages with Total Cost =

= Direct Wages x 100

Total Cost

3. The percentage of Direct Expenses with Total Cost =

= Direct Expenses x 100

Total Cost PROF. M. M. JINNAH 13
SOME IMPORTANT FORMULAE

4. The percentage of Works Overhead with Total Cost =

= Works Overhead x 100

Total Cost

5. The percentage of Office Overhead with Total Cost =

= Office Overhead x 100

Total Cost
6. The percentage of Selling and Distribution Overhead with Total Cost =

= Selling and Distribution Overhead x 100

Total Cost

PROF. M. M. JINNAH 14
SOME IMPORTANT FORMULAE

Section – IV PERCENTAGE OF VARIOUS COST, EXPENSES AND

PROFITS WITH SALES

1. The percentage of Prime Cost with Sales =

= Prime Cost x 100
Sales

2. The percentage of Works Cost with Sales =

= Works Cost x 100
Sales

3. The percentage of Office Cost with Sales =

= Office Cost x 100
Sales

PROF. M. M. JINNAH 15
SOME IMPORTANT FORMULAE

4. The percentage of Total Cost with Sales =

= Total Cost x 100
Sales

5. The percentage of Works Overhead with Sales =

= Works Overhead x 100
Sales

6 . The percentage of Other Expenses with Sales =

= Other Expenses x 100
Sales

PROF. M. M. JINNAH 16
SOME IMPORTANT FORMULAE

7. The percentage of Profits with Sales =

= Profit x 100
Sales

8. The percentage of Gross Profits with Sales =

= Gross Profit x 100
Sales

9. The percentage of Net Profits with Sales =

= Net Profit x 100
Sales

PROF. M. M. JINNAH 17
SOME IMPORTANT FORMULAE
Section – V DISTRIBUTION OF FACTORY OVERHEADS AND
OFFICE OVERHEAD

1. Factory Overheads =

a. A ‘s Share in Combined Works Overhead

= Combined Works Overhead x Wages of A Article
Wages of A Article + Wages of B Article

b. B ‘s Share in Combined Works Overhead

= Combined Works Overhead x Wages of B Article
Wages of A Article + Wages of B Article

PROF. M. M. JINNAH 18
SOME IMPORTANT FORMULAE

Section – V DISTRIBUTION OF FACTORY OVERHEADS AND

OFFICE OVERHEAD

2. Office Overheads =

a. A ‘s Share in Combined Office Overhead

= Combined Office Overhead x A’s Works Cost
A’s Works Cost + B’s Works Cost

b. B ‘s Share in Combined Works Overhead

= Combined Works Overhead x Wages of B Article
A’s Works Cost + B’s Works Cost

PROF. M. M. JINNAH 19
Specimen of Statement of Cost ( Abnormal Wastage) ¼ ykxr fooj.k dk uewuk ½
for the month ending ....................2014
Particulars Amount Amount
( Rs.) ( Rs.)

Cost of Materials Consumed or Value of Materials Consumed xxxxxxx

Direct Labour xxxxxxx

Less Abnormal Wastage of Time xxxxxxx

Less Abnormal Idle Time xxxxxxx xxxxxxx

Direct Expenses or Chargeable Exps. xxxxxxx

Prime Cost xxxxxxx

Factory Overhead xxxxxxx

Add Opening Stock of Work- in- Progress xxxxxxx

xxxxxxx

Less Closing Stock of Work -in -Progress xxxxxxx

Factory Cost or Works Cost xxxxxxx

Office & Administrative Overhead xxxxxxx

Cost of Production xxxxxxx

PROF. M. M. JINNAH 20
1

1. The accounts of Lakshman Pvt. Ltd, which are engaged in

the manufacture of water Pumps show the following
expenditures for 1913:

Material Used Rs. 1,00,000

Direct Wages 2,00,000
Works Overhead Expenses 1,00,000
Office Overhead Expenses 50,000
Selling and Distribution Expenses 50,000

Show the Prime Cost, the Works Cost, Office Cost, Total
Cost of manufacture and Selling Price. It is assumed that the
company will earn a profit of 25 percent on Cost Price or 20
percent on Sales Price.

PROF. M. M. JINNAH 21
Statement of Cost ¼ ykxr & i= ½
for the month ending ....................2013
Particulars Amount
( Rs.)

Direct Materials 1,00,000

Direct Labour 2,00,000

Prime Cost 3,00,000

Works Overhead Expenses 1,00,000
Factory Cost or Works Cost 4,00,000
Office Overhead 50,000
Office Cost 4,50,000
Selling and Distribution Overhead 50,000
Total Cost 5,00,000
Profit ( 25% on Cost or 20% on Sales) 1,25,000
Sales 6,25,000

PROF. M. M. JINNAH 22
*

( CALCULATION OF PROFITS)

A. WHEN PROFIT PERCENTAGE ON TOTAL COSTS IS GIVEN

(TOTAL COST AVAILABLE) :

= Total Cost x % of Profit on Total Cost

100

= 5,00,000 x 25 = Rs. 1,25,000 ( Profit)

100

PROF. M. M. JINNAH 23
*

B. WHEN PROFIT PERCENTAGE ON SALES IS GIVEN

( WHEN TOTAL SALES DATA IS NOT AVAILABLE) :

= Total Cost x % of Profit on Sales

( 100 - Percentage of Profit on Sales)

= 5,00,000 x 20 = 1,25,000 ( Profit)

( 100 - 20 )

PROF. M. M. JINNAH 24
2. You are required to find out the Prime Cost, Works Cost, Office Cost, total
Cost and Selling Price of Total units produced:
Particulars Amount Particulars Amount
Units Produced 200 Office Lighting Charges 2,000
Direct Labour 20,000 Legal Charges 5,000
Direct Expenses 30,000 Dep. On Motor Van ( Distribution) 2,000
Rent of Factory Building 1,000 Advertisement 5,000
Depreciation of Plant 2,000 Stationary 1,000
Dep. On Office Furniture 5,000 Telephone ( Factory) 2,000
Direct Materials 50,000 Plant Insurance 3,000
Factory Manager Salary 10,000 Salesman Salary 2,000
Office Worker Salary 5,000 Greece, Oils, nut bolts 5,000
Directors Remuneration 25,000 Office Furniture 2,000
Distribution Expenses 10,000 Profit 6,000
Factory Building Rent 2,000
Office Building Rent 5,000
PROF. M. M. JINNAH 25
Statement of Cost
for the period ending ( Output = 200 Units)
Particulars Amount Amount
( Rs.) ( Rs.)

Direct Materials 50,000

Direct Labour 20,000
Direct Expenses 30,000
Prime Cost 1,00,000
Works Overhead:
Rent of Factory Building 1,000
Depreciation of Plant 2,000
Factory Manager Salary 10,000
Factory Building Repair 2,000
Telephone ( Factory) 2,000
Plant Insurance 3,000
Greece, Oils, nut bolts, etc. 5,000 25,000
Works Cost 1,25,000

PROF. M. M. JINNAH 26
Cost Sheet ¼ ykxr & i= ½
for the period ending ( Output = 200 Units)
Particulars Amount Amount
( Rs.) ( Rs.)

Works Cost 1,25,000

Office & Administrative Overhead:

Depreciation on Office Furniture 5,000
Office Worker Salary 5,000
Director’s Remuneration 25,000
Office Building Rent 5,000
Office Lighting Charges 2,000
Legal Charges 5,000
Stationary 1,000
Office Furniture 2,000 50,000

Office Cost 1,75,000

Selling and Distribution Overhead :

Distribution Expenses 10,000
Depreciation on Motor Van Distribution 2,000
Advertisement 5,000
Salesman Salary 2,000 19,000

Total Cost 1,94,000

Profit 6,000

Sales 2,00,000

PROF. M. M. JINNAH 27
8

The accounts of the Prize Products Ltd., which are engaged in the
manufacture of electric pumps show the following expenditures for
2013:
Particulars Amount
Materials Used Rs. 1,00,000
Direct Wages 2,00,000
Works Overhead Expenses 50,000
Office Overhead Expenses 35,000

Show the Prime Cost, the Works Cost and the Total Cost of manufacture,
the percentage that the works overhead expenses bear to the direct
wages and percentage that the office overhead expenses bear to the
works cost.

What price should the company quote to manufacture an electric pump,

which, it is estimated, will require material worth Rs. 800 and Rs. 1,000
for wages , so that it will yield a profit of 10 percent on the selling price?
PROF. M. M. JINNAH 28
Statement of Cost ¼ ykxr &fooj.k i= ½
for the year ....................2013

Particulars Amount
( Rs.)

Materials Used 1,00,000

Direct Wages 2,00,000

Prime Cost 3,00,000

Works Overhead Expenses 50,000
Works Cost 3,50,000
Office Overhead Expenses 35,000
Total Cost 3,85,000

PROF. M. M. JINNAH 29
QUOTATION FOR ELECTRIC PUMPS
for the period ending

Particulars Amount
( Rs.)

Direct Materials 800

Direct Wages 1,000

Prime Cost 1,800

Works Overhead Expenses ( 25 % on Direct Wages) 250

Works Cost 2,050
Office Overhead ( 10 % on Works Cost) 205
Total Cost 2,255
Profit ( 10 % on Sales) Rs. 250.55 251
Quotation Price 2506
PROF. M. M. JINNAH 30
WORKING NOTES

1. Calculation of Percentage of Works Overhead to Direct Wages =

= Works Overhead x 100

Direct Wages

= 50,000 x 100 = 25%

2,00,000

4. Calculation of Percentage of Office Overhead to Works Cost =

= Office Overhead x 100
Works Cost
= 35,000 x 100 = 10%
3,50,000

PROF. M. M. JINNAH 31
*

A. CALCULATION OF FACTORY OVERHEAD:

1. = Direct Wages x % Of Works Overhead to Direct Wages

100

= 1,000 X 25 = Rs. 250 ( Factory Overhead)

100
B. CALCULATION OF OFFICE OVERHEAD:
1. = Works Cost x % Of Office Overhead to Works Cost
100

= 2,050 X 10 = Rs. 205 ( Office Overhead)

100

PROF. M. M. JINNAH 32
*

WHEN PROFIT PERCENTAGE ON SALES IS GIVEN

( TOTAL SALES DATA NOT AVAILABLE) :

= Total Cost x % of Profit on Sales

( 100 - Percentage of Profit on Sales)

= 2,255 x 10 = 250.555 or 251 ( Profit)

( 100 – 10)

PROF. M. M. JINNAH 33
10. A factory produces 100 units of each of the commodities A & B.
The cost of production are :

Particulars Product A Product B

Direct Materials 12,000 10,000

Direct Wages 8,000 5,000
Chargeable Expenses 1,000 1,000

The overhead expenses are ( i) Factory Rs. 6,500 and (ii) Office Rs.
3,480.

If a profit of 25% on sales is to be realised, what would be the

selling price of each article.

PROF. M. M. JINNAH 34
Cost Sheet
for the period ending

Commodities A Commodities B
Particulars ( Output = 100 Units) ( Output = 100 Units)
Total Cost Cost per Unit Total Cost Cost per Unit
( Rs.) ( Rs.) ( Rs.) ( Rs.)

Direct Materials 12,000 120.00 10,000 100.00

Direct Labour 8,000 80.00 5,000 50.00

Chargeable Expenses 1,000 10.00 1,000 10.00

Prime Cost 21,000 210.00 16,000 160.00

Works Overhead 4,000 40.00 2,500 25.00

Works Cost 25,000 250.00 18,500 185.00

Office Overhead 2,000 20.00 1,480 14.80

TOTAL COST 27,000 270.00 19,980 199.80

Profit 9,000 90.00 6,660 66.60

Sales/ Selling Price 36,000 360.00 26,640 266.40

PROF. M. M. JINNAH 35
WORKING NOTES
DISTRIBUTION OF FACTORY OVERHEADS

1. Factory Overheads =

a. A ‘s Share in Combined Works Overhead

= Combined Works Overhead x Wages of A Article
Wages of A Article + Wages of B Article
= 6,500 x 8,000 = RS. 4,000 ( Factory Overhead)
13,000

b. B ‘s Share in Combined Works Overhead

= Combined Works Overhead x Wages of B Article
Wages of A Article + Wages of B Article
= 6,500 x 5,000 = RS. 2,500 ( Factory Overhead)
13,000
PROF. M. M. JINNAH 36
WORKING NOTES

DISTRIBUTION OF OFFICE OVERHEAD

2. Office Overheads =

a. A ‘s Share in Combined Office Overhead

= Combined Office Overhead x A’s Works Cost
A’s Works Cost + B’s Works Cost
= 3,480 x 25,000 = Rs. 2,000 ( Office Overhead)
25,000 + 18500

b. B ‘s Share in Combined Works Overhead

= Combined Works Overhead x B’s Work Cost
A’s Works Cost + B’s Works Cost
= 3,480 x 18,500 = Rs. 1,480 ( Office Overhead)
25,000 + 18,500

PROF. M. M. JINNAH 37
*

WHEN PROFIT PERCENTAGE ON SALES IS GIVEN

( TOTAL SALES DATA NOT AVAILABLE) :

= Total Cost x % of Profit on Sales

( 100 - Percentage of Profit on Sales)

A = 27,000 x 25 = Rs. 9,000 ( Profit)

( 100 – 25 )

B = 19,980 x 25 = Rs. 6,660 ( Profit)

( 100 – 25 )

PROF. M. M. JINNAH 38
9. Prepare a statement showing cost per cabinet and profit per cabinet from the following particulars :

The cabinets manufactured are classed No. 1 and No. 2. There is no opening or closing stock of the cabinets.

Particulars CABINET 1 CABINET 2

Direct Materials 12,400 13,232

Labour 22,540 25,358
Number Sold 520 780
Selling Price ( Rs) 150 110

Works overhead comes to 100% on labour and office overhead to 25%

on works cost.

What is the total profit for the year as per the above particulars?
PROF. M. M. JINNAH 39
Statement of Cost
for the period ending

Cabinet No 1 Cabinet No. 2

Particulars
( Units Sold = 520) ( Units Sold = 780 )

Total Cost Total Cost

( Rs.) ( Rs.)

Materials 12,400 13,232

Labour 22,540 25,358

Prime Cost 34,940 38,590

Works Overhead ( 100% on Labour) 22,540 25,358

Works Cost 57,480 63,948

Office Overhead ( 25% of Works Cost) 14,370 15,987

TOTAL COST 71,850 79,935

Profit 6,150 5,865

Sales/ Selling Price 78,000 85,800

PROF. M. M. JINNAH 40
*

A. CALCULATION OF FACTORY OVERHEAD:

1. = Labour x % Of Works Overhead to Labour

100

Cabinet No. 1 = 22,540 X 100 = Rs. 22,540 ( Factory Overhead)

100

Cabinet No. 2 = 25,358 X 100 = Rs. 25,358 ( Factory Overhead)

100
B. CALCULATION OF OFFICE OVERHEAD:
1. = Works Cost x % Of Office Overhead to Works Cost
100

Cabinet No. 1 = 57,480 X 25 = Rs. 14,370 ( Office Overhead)

100

Cabinet No. 2 = 63,948 X 25 = Rs. 15,987 ( Office Overhead)

100

PROF. M. M. JINNAH 41
Total Profit

Profit in Cabinet No. 1 = 6,150

Profit in Cabinet No. 2 = 5,865
Total Profit = 12,015

PROF. M. M. JINNAH 42
11. A manufacturer of scooters finds that in 2014, it cost him Rs. 6,16,000 to
manufacture 200 scooters which he sold at Rs. 4,000 each. Cost was made up
of:
Materials Rs. 2,00,000
Direct Wages 3,00,000
Factory Overhead 60,000
Office Overhead 56,000
Rs. 6,16,000

For 2015 season, he estimates:

( a ) The each scooter will require materials to the value of Rs. 1,000 and wages of Rs. 1,500.

( b ) That the factory overhead will bear the same relation to direct wages as in the previous
year.

( c ) The percentage of office overhead on factory cost will be the same as in the previous year.

Prepare a statement showing the profit he should make per unit if he enhances the price of
the scooter by Rs. 80.
PROF. M. M. JINNAH 43
Statement of Cost
for the year ....................2014

Particulars Amount ( Rs.)

Materials Used 2,00,000

Direct Wages 3,00,000

Prime Cost 5,00,000

Factory Overhead Expenses 60,000

Works Cost 5,60,000

Office Overhead Expenses 56,000

Total Cost 6,16,000

Profit 1,84,000

Sales 8,00,000

PROF. M. M. JINNAH 44
QUOTATION FOR SCOOTER
for 2015
Particulars Amount
( Rs.)

Direct Materials 1000

Direct Wages 1,500

Prime Cost 2,500

Works Overhead Expenses ( 20 % on Direct Wages) 300
Works Cost 2,800
Office Overhead ( 10 % on Works Cost) 280
Total Cost 3,080
Profit (23% on Sales) 920 + 80 ( Enhance the Price) 1,000
Sales 4,080

Enhance the Profit of Scooter Rs. = 920 (Profit) + 80 = 1,000 ( Profit)

Selling Price = 4,000 + 80 ( Enhance the price) = 4,080
PROF. M. M. JINNAH 45
WORKING NOTES
( RELATIONSHIP OF DIFFERENT COMPONENTS OF COST)

1. The percentage of Works Overhead to Direct Wages =

= Works Overhead x 100

Direct Wages

= 60,000 x 100 = 20%

3,00,000
2. The percentage of Office Overhead to Works Cost =

= Office Overhead x 100

Works Cost

= 56,000 x 100 = 10 %
5,60,000

PROF. M. M. JINNAH 46
*

A. CALCULATION OF FACTORY OVERHEAD:

1. = Direct Wages x % Of Works Overhead to Direct Wages

100

= 1,500 X 20 = Rs. 300 ( Factory Overhead)

100
B. CALCULATION OF OFFICE OVERHEAD:
1. = Works Cost x % Of Office Overhead to Works Cost
100

= 2,,800 X 10 = Rs. 280 ( Office Overhead)

100

PROF. M. M. JINNAH 47
*

The percentage of Profits with Sales =

= Profit x 100
Sales
= 1,84,000 x 100 = 23%
8,00,000

PROF. M. M. JINNAH 48
*

WHEN PROFIT PERCENTAGE ON SALES IS GIVEN

( TOTAL SALES DATA NOT AVAILABLE) :

= Total Cost x % of Profit on Sales

( 100 - Percentage of Profit on Sales)

= 3,080 x 23 = Rs. 920 ( Profit)

( 100 – 23 )

PROF. M. M. JINNAH 49
12. In a factory 15,000 units of an article were manufactured during the
month of December 2014, 13,500 units were sold at Rs. 7 per unit. The
following figures are obtained from the costing records:
Raw Materials Consumed Rs. 52,000

Direct Wages 15,600

Works indirect expenses are allocated to production by means of a machine hour

rate. This rate for December 2014 was Rs. 4 per hour and 1,100 hours were worked
during the month.

Office overhead is charged on the basis of 15 percent on works cost and selling
overhead at 25 paise per unit.

Compile a cost sheet showing ( a) Cost per unit and (b) profit for the month.

PROF. M. M. JINNAH 50
Cost Sheet
for the year ending December, 2014

Total Cost Cost Per Unit

Particulars ( Rs.)
( Output = 15,000 Units)
( Rs.)

Raw Materials Consumed 52,000 3.47

Direct Wages 15,600 1.04

Prime Cost 67,600 4.51

Works Indirect Expenses 4,400 0.29

( 1100 Hours x Rs. 4)
Works Cost 72,000 4.80

Office Overhead ( 15 % of Works Cost) 10,800 0.72

COST OF PRODUCTION 82,800 5.52

PROF. M. M. JINNAH 51
Statement of Profit for 13,500 Units
for the year ending December, 2014

Total Cost Cost Per Unit

Particulars ( Rs.)
( Sales = 13,500 Units)
( Rs.)

COST OF PRODUCTION 74,520 5.52

( 13,500 Units x Rs. 5.52 per unit)

Add Selling Overhead 3,375 0.25

( 13,500 Units x Rs. 0.25 per unit)

Cost of Sales 77,895 5.77

Profit 16,605 1.23

SALES / SELLING PRICE 94,500 7.00

( 13,500 X Rs. 7.00 per Unit)

PROF. M. M. JINNAH 52
13. The following figures relate to the costing of quality of a
manufacturer of electric fans of one uniform size and quality
for a period of three months:
Rs
Completed stock on 1 October, 2014 Nil
Completed stock on 31 December, 2014 20,250
Stock of Raw Materials 1 October, 2014 5,000
Stock of Raw Materials 31 December 2014 3,500
Factory Wages 75,000
Indirect Charges 12,500
Materials Purchases 32,500
Sales 1,12,500

The number of fans manufactured during the three months was 3,000.
Prepare a statement showing the cost per fan and the price to be quoted for 750 fans
to realized the same percentage of profit as was realized during three months
referred to above assuming identical cost.

PROF. M. M. JINNAH 53
Statement of Cost
for the period of three months ending 31st December, 2014

Total Cost Cost Per Fan

Particulars ( Rs.)
( Output = 3,000 Fans)
( Rs.)

Stock of Raw Materials ( 1st Oct., 2014) 5,000

Add Materials Purchased 32,500

37,500

Less Stock of Raw Materials (31st Dec.,2014) 3,500

Cost of Materials Consumed 34,000 11.33

Factory Wages 75,000 25.00

Prime Cost 1,09,000 36.33

Indirect Charges 12,500 4.17

Cost of Production 1,21,500 40.50

PROF. M. M. JINNAH 54
Statement of Profit
for the year ending December, 2013
Amount
Particulars

COST OF PRODUCTION 1,21,500

Add Completed Stock (on 1st Oct., 2014) NIL

1,21,500

Less Completed Stock ( on 31st December, 2014) 20,250

Cost of Goods Sold or Cost of Sales 1,01,250

Profit 11,250

Sales 1,12,500

PROF. M. M. JINNAH 55
Quotation for 750 Fans
for the year ending December, 2014
Particulars Total Cost Cost Per Fan
( Rs.) ( Rs.)

COST OF PRODUCTION 30,375 40.50

( 750 Fans x @ Rs. 40.50 per Fan)
Profit 3,375 4.50
QUOTATION PRICE 33,750 45.00

The percentage of Profits with Sales =

= Profit x 100
Sales
= 11,250 x 100 = 10%
1,12,500

Profit = Total Cost x % of Profit on Sales

( 100 - Percentage of Profit on Sales)

= 30,375 x 10 = Rs. 3,375 ( Profit)

( 100 – 10 )

PROF. M. M. JINNAH 56
15. Khaitan Ltd. Manufactures three type of fans:
Table Fans, Ceiling Fans and Man Cooler. The materials and wages cost are
separated as follows:

Materials Wages
Table Fan 48 64

Ceiling Fan 80 80

Man Cooler 720 200

His total factory overhead in the month of December, 2014 was Rs. 80,000. You are
asked to determine the factory cost of each type of fan after assuming that one
ceiling fan is equal lent to two table fans, and man cooler is equal lent to five table
fans for the purposes of overhead allocation. The production in the month of
December was :
Table Fan 200
Ceiling Fan 100
Man Cooler 20

PROF. M. M. JINNAH 57
Calculation

One Table Fan = 1 Table Fan

200 Table Fan = 200 x 1 = 200 Table Fan

One Ceiling Fan = 2 Table Fans

100 Ceiling Fan = 100 x 2 = 200 Table Fans

One Man Cooler = 5 Table Fans

20 Man Cooler = 20 x 5 = 100 Table Fans

Hence the Ratio is = Table Fan : Ceiling Fan : Man Cooler

= 200 : 200 : 100
= 2 : 2 : 1

PROF. M. M. JINNAH 58
Calculation of Factory Overhead

Table Fan = 80,000 x 2 = 32,000 ( Factory Overhead)

5

Ceiling Fan = 80,000 x 2 = 32,000 ( Factory Overhead)

5

Man Cooler = 80,000 x 1 = 16,000 ( Factory Overhead)

5

PROF. M. M. JINNAH 59
Calculation of Total Materials and Wages

MATERIALS WAGES
FAN
RS. QUANTITY TOTAL RS. QUANTITY TOTAL
AMOUNT AMOUNT

TABLE FAN 48 200 9,600 64 200 12,800

CEILING FAN 80 100 8,000 80 100 8,000

MAN 720 20 14,400 200 20 4,000

COOLER

PROF. M. M. JINNAH 60
Statement of Cost of Khaitan Ltd.,
for the year ending 31st December, 2014

TABLE FAN CEILING FAN MAN COOLER

Particulars
( Output = 200) ( Output = 100 ) ( Output = 20)

( Rs.) ( Rs.) ( Rs.)

Materials 9,600 8,000 14,400

Labour 12,800 8,000 4,000

Prime Cost 22,400 16,000 18,400

Factory Overhead 32,000 32,000 16,000

Factory Cost 54,400 48,000 34,400

PROF. M. M. JINNAH 61
16. From the following particulars prepare a cost sheet showing the comparative
cost per ton for both the periods:
30-09-2014 31-12-2014
Rs Rs.
Raw Materials 10,000 5,000
Direct Wages 20,000 10,000
Fuel 5,000 3,000
Electric Power 4,000 2,000
Repairs 5,000 2,000
Depreciation 8,000 5,000
Rent ( Factory) 3,000 5,000
Office Stationary 5,000 2,000
Office Lighting 2,000 1,000
Advertising 5,000 2,000
Salesman Salary 6,000 5,000
The tonnage produced in the two quarters was 1,000 and 500 tons respectively.

PROF. M. M. JINNAH 62
Comparative Cost Sheet

Three Months Ending Three Months Ending

30-09-2014 31-12-2014
(Output = 1,000 Tonnes) (Output = 500 Tonnes)
Particulars
Total Cost Cost per Tonne Total Cost Cost per
( Rs.) ( Rs.) ( Rs.) Tonne
( Rs.)

10,000 10.00 Raw Materials 5,000 10.00

20,000 20.00 Direct Wages 10,000 20.00
30,000 30.00 Prime Cost 15,000 30.00
Works Expenses:
5,000 5.00 Fuel 3,000 6.00
4,000 4.00 Electric Power 2,000 4.00
5,000 5.00 Repairs 2,000 4.00
8,000 8.00 Depreciation 5,000 10.00
3,000 3.00 Rent 5,000 10.00
55,000 55.00 Works Cost 32,000.00 64.00

PROF. M. M. JINNAH 63
Comparative Cost Sheet

Three Months Ending Three Months Ending

30-09-2014 31-12-2014
(Output = 1,000 Tonnes) (Output = 500 tonnes)
Particulars
Total Cost Cost per Tonne Total Cost Cost per
( Rs.) ( Rs.) ( Rs.) Tonne
( Rs.)

55,000 55.00 Works Cost 32,000.00 64.00

Office & Administrative Overhead:
5,000 5.00 Office Salary 2,000 4.00
2,000 2.00 Office Lighting 1,000 2.00
62,000 62.00 Office Cost 35,000 70.00
Selling and Distribution Overhead :
5,000 5.00 Advertising 2,000 4.00

6,000 6.00 Salesman Salary 5,000 10.00

73,000 73.00 Total Cost 42,000 84.00

PROF. M. M. JINNAH
18. The following information has been obtained from the records of Left Centre
Corporation for the period from June 1 to June 30, 2015:
01-06-2015 30-06-2015
Rs Rs.
Cost of Raw Materials 30,000 25,000
Cost of Work-in-Progress 12,000 15,000
Cost of Stock of Finished Goods 60,000 55,000
Purchases of Raw Materials during the month 4,50,000
Wages Paid 2,30,000
Factory Overhead 92,000
Administration Overhead 30,000
Selling and Distribution Overheads 20,000
Sales 9,00,000

Prepare a statement giving the following information: ( a ) Material Consumed;

(b) Prime Cost; ( c ) Factory Cost; ( d) Cost of Goods Sold and ( e ) Net Profit

PROF. M. M. JINNAH 65
Statement of Cost
for the period of three months ending 30st June, 2014

Total Cost ( Rs.)

Particulars

Opening Stock of Raw Materials 30,000

Add Purchased of Raw Materials 4,50,000
4,80,000
Less Closing Stock of Raw Materials 25,000
(a) Value of Materials Consumed/Cost of Materials Consumed 4,55,000
Direct Wages 2,30,000
(b) Prime Cost 6,85,000
Add Factory Overheads 92,000
Add Opening Stock of Work-in-Progress 12,000
7,89,000
Less Closing Stock of Work-in-Progress 15,000
(c) Factory Cost 7,74,000
Add Administrative Overheads 30,000
Cost of Production 8,04,000
PROF. M. M. JINNAH 66
Statement of Profit ¼ ykHk fooj.k ½
for the month ending 30th June, 2014

Particulars Amount
( Rs.)
Cost of Production 8,04,000

Add Opening Stock of Finished Goods 60,000

8,64,000

Less Closing Stock of Finished Goods 55,000

( d) Cost of Goods Sold 8,09,000

Selling and Distribution Expenses 20,000

Cost of Sales 8,29,000

(e ) Net Profit 71,000

Sales 9,00,000

PROF. M. M. JINNAH 67
19. In respect of a factory the following figures have been obtained for the year 2014.
Cost of Materials Rs. 6,00,000; Direct Wages Rs. 5,00,000; Factory Overhead Rs.
3,00,000; Administrative Overhead Rs. 3,36,000; Selling Overhead Rs. 2,24,000;
Distribution Overhead Rs. 1,40,000; and profit Rs. 4,20,000.

A work order has been executed in 2015 and the following expenses have been
incurred : Materials Rs. 8,000 and Wages Rs. 5,000.

Assuring that in 2015 the rate of factory overheads has increased by 20%,
distribution overheads have gone down by 10% and selling and Administration
overheads have each gone up by 12½% at what price should the product be sold so
as to earn the same rate of profit on the selling price as in 2014.

Factory overheads is based on direct wages while all other overheads are based on
factory cost.

PROF. M. M. JINNAH 68
Statement of Cost
for the year ....................2014

Particulars Amount ( Rs.)

Cost of Materials 6,00,000
Direct Wages 5,00,000
Prime Cost 11,00,000
Factory Overhead 3,00,000
Factory Cost 14,00,000
Administrative Overheads 3,36,000
Cost of Production 17,36,000
Selling Overheads 2,24,000
Distribution Overheads 1,40,000
Cost of Sales 21,00,000
Profit 4,20,000
Sales 25,20,000

PROF. M. M. JINNAH 69
Calculation of Percentage
1. Percentage of Factory Overhead with Direct Wages =
= Factory Overhead x 100 =
Direct Wages

= 3,00,000 x 100 = 60%

5,00,000
2. The percentage of Administrative Overhead to Works Cost =

= Administrative Overhead x 100 =

Works Cost

= 3,36,000 x 100 = 24 %
14,00,000

PROF. M. M. JINNAH 70
*

3. The percentage of Selling Overhead with Works Cost =

= Selling Overhead x 100 =

Works Cost
= 2,24,000 x 100 = 16%
14,00,000

4. The percentage of Distribution Overhead with Works Cost =

= Distribution Overhead x 100 =

Works Cost
= 1,40,000 x 100 = 10%
14,00,000

PROF. M. M. JINNAH 71
*

5. The percentage of Profit on Total Cost =

= Profit x 100
Total Cost or Cost of Sales

= 4,20,000 x 100 = 20%

21,00,000

PROF. M. M. JINNAH 72
Estimate for the Work Order
for the year ....................2015

Particulars Amount ( Rs.)

Materials 8,000
Wages 5,000
Prime Cost 13,000
Factory Overhead ( 3,000 + 600) = 3,600 3,600
Works Cost 16,600
Administrative Overheads ( 3,984 + 498 ) = 4,482 4,482
Cost of Production 21,082
Selling Overheads ( 2,656 + 332 ) = 2,988 2,988
Distribution Overheads ( 1,660 - 166 ) = 1,494 1,494
Cost of Sales 25,564
Profit ( 20 % on Cost or Cost of Sales) 5,113
Sales 30,677

PROF. M. M. JINNAH 73
*

A. CALCULATION OF FACTORY OVERHEAD:

1. = Direct Wages x % Of Factory Overhead to Direct Wages

100

= 5,000 X 60 = Rs. 3,000 ( Factory Overhead)

100
= 3,000 + 20% Increase = 3,000 + 600 = 3,600

B. CALCULATION OF ADMINISTRATIVE OVERHEADS:

1. = Factory Cost x % Of Administrative Overhead to Factory Cost
100

= 16,600 X 24 = Rs. 3,984 ( Office Overhead)

100
= 3,984 + 12½% Increase = 3,984 + 498 = 4,482
PROF. M. M. JINNAH 74
*

C. CALCULATION OF SELLING OVERHEAD:

= Factory Cost x % Of Selling Overhead to Factory Cost

100

= 16,600 X 16 = Rs. 2,656 ( Selling Overhead)

100
= 2,656 + 12½% Increase = 2,656 + 332 = 2,988

D. CALCULATION OF DISTRIBUTION OVERHEADS:

= Factory Cost x % Of Distribution Overhead to Factory Cost
100

= 16,600 X 10 = Rs. 1,660 ( Distribution Overhead)

100
= 1,660 - 10% Decrease = 1,660 - 166 = 1,494
PROF. M. M. JINNAH 75
Calculation of Overheads

1. Factory Overhead = 60 x 20 = 12% = 60% + 12% = 72%

100

2. Adm. Overhead = 24 x 12.5 = 3 % = 24% + 3% = 27%

100

3. Selling Overhead = 16 x 12.5 = 2 % = 16% + 2% = 18%

100

4. Distribution Overhead = 10 x 10 = 1% = 10% - 1% = 09%

100

PROF. M. M. JINNAH 76
From the following information relating to the production of a commodity X, you
are required to ascertain:
i. Value of Material consumed; ii. Factory or Cost of Production; iii. Total Cost of Goods Sold; iv. Net Profit; v.
Profit per ton of the Goods.
Purchases of Raw Materials Rs. 1,20,000
Direct Wages 1,08,000
Indirect Wages 20,000
Abnormal Idle Time in Connection with Direct Wages 8,000
Carriage Inward 1,000
Factory Rent, Tax and Insurance 5,000
Opening Stock of Raw Materials 40,000
Closing Stock of Raw Materials 20,000
Opening Stock of Finished Goods, 500 Tons 15,000
Closing Stock of Finished Goods , 1,500 Tons 12,000
Opening stock of Work-in-progress 5,000
Closing Stock of Work –in-Progress 1,000
Sales of Finished Goods 3,50,000
Cost of Factory Supervision 10,000
Selling expenses is 60 paise per ton sold. 11,000 tons of commodity were
produced during the period

PROF. M. M. JINNAH 77
Statement of Cost
for the month ending ....................

Particulars Amount Amount

( Rs.) ( Rs.)
Opening Stock of Raw Materials 40,000
Add Purchase of Raw Materials 1,20,000

Carriage Inward 1,000

1,61,000
Less Closing Stock of Raw Materials 20,000
Cost of Materials Consumed or Value of Materials Consumed 1,41,000 1,41,000

Direct Labour 1,08,000

Less Abnormal Idle Time 8,000 1,00,000
Prime Cost 2,41,000

PROF. M. M. JINNAH
Specimen of Statement of Cost
for the month ending ....................2014

Prime Cost 2,41,000

Factory Overhead:

Indirect Wages 20,000

Factory Rent, Tax and Insurance 5,000

Cost of Factory Supervision 10,000

35,000

Add Opening Stock of Work- in- Progress 5,000

40,000

Less Closing Stock of Work -in -Progress 1,000 39,000

Cost of Production (Factory Cost) 2,80,000

PROF. M. M. JINNAH
Specimen of Statement of Cost
for the month ending ....................2014

Particulars Amount Amount

( Rs.) ( Rs.)
Cost of Production (Factory Cost) 2,80,000

Add Opening Stock of Finished Goods 15,000

295,000
Less Closing Stock of Finished Goods 12,000
Cost of Goods Sold 2,83,000
Selling Expenses ( 10,000 x 0.60) 6,000
Cost of Sales 2,89,000
Net Profit 61,000
Sale of Finished Goods 3,50,000

PROF. M. M. JINNAH
80
Working Notes:
Calculation of Units Sold: Tons
Opening Stock of Finished Goods 500
+ Units Produced 11,000
11,500
- Closing Stock of Finished Goods 1,500
Units Sold 10,000

Selling Expenses = Units Sold 10,000 Units x @ Rs 0.60 per unit = Rs. 6,000

And Profit per ton = ( 61,000 /10,000) = Rs. 6.10

PROF. M. M. JINNAH 81
20

PROF. M. M. JINNAH 82
Production Account
for the month ending 31st December, 1984

Particulars Amount Particulars Amount

To Opening Stock 75,000 By Prime Cost C/d 1,03,500

To Purchase of Raw Materials 66,000
1,41,000
Less Closing Stock of R. M. 91,500
49,500
To Direct Wages 52,500
To Expenses on Purchase 1,500
1,03,500 1,03,500
To Prime Cost B/d 1,03,500 By Works Cost C/d 1,17,750
To Indirect Wages 2,750
To Factory Rent 15,000
To Depreciation on Plant 3,500
124,750

PROF. M. M. JINNAH 83
Production Account
for the month ending 31st December, 1984

Particulars Amount Particulars Amount

1,24,750
Add Opening Stock of W.I.P 28,000
1,52,750
Less Closing Stock W.I.P. 35,000
1,17,750 1,17,750
To Work Cost B/d 1,17,750 By Total Cost of 1,20,250
Production C/d
To Office Rent and taxes 2,500
1,20,250 1,20,250
To Total Cost of Production B/d 1,20,250 By Closing Stock of 31,000
Finished Goods
To Opening Stock of Finished Goods 54,000 By Cost of Goods Sold 1,43,250
c/d
1,74,250 1,74,250

PROF. M. M. JINNAH 84
Production Account
for the month ending 31st December, 1984

Particulars Amount Particulars Amount

To Cost of Goods Sold B/d 1,43,250 By Cost of Sales C/d 1,55,750

To Carriage Outwards 2,500

To Advertising 3,500

To Travelers' Wages 6,500

1,55,750 1,55,750

To Cost of Sales B/d 1,55,750 By Sales 2,11,000

To Profit 55,250

2,11,000 2,11,000

PROF. M. M. JINNAH 85
The following figures are collected from the books of Tata Iron & Steel Foundry after
the close of the year 31st March, 2016:
Raw Materials:

Opening Stock on ( 1st April, 2015) Rs. 7,00,000

Purchases during the year 50,00,000

Closing stock on ( 31st March, 2016) 5,00,000

Direct Wages 10,00,000

Works overhead 60% direct wages

Stores overhead on material – 10% of the cost of material.

10% of the casting were rejected being not upto specification and a sum of Rs. 50,000 was realized on sale as
scrap.
10% of the finished casting were found to be defective in manufacture and were rectified by expenditure of
additional work overhead charges to the extent of 20% on the proportionate direct wages
The total gross output of casting during the year – 1,000 ton.

Find out the manufacturing cost of the saleable casting per ton.

PROF. M. M. JINNAH 86
Statement of Cost
for the month ending 2015

Particulars Amount Rs Quantity Amount

in ton ( Rs.)
Opening Stock of Raw Materials 7,00,000
Add Purchase of Raw Materials 50,00,000

57,00,000
Less Closing Stock of Raw Materials 5,00,000

Cost of Raw Materials Consumed or Value of 52,00,000 52,00,000

Raw Materials Consumed
Direct Wages 10,00,000
Prime Cost 62,00,000
Works Overhead ( 60% of Direct Wages) 6,00,000
Stores overhead ( 10% on the cost of 5,20,000
materials)
Total Cost of Gross Output 1,000 73,20,000

PROF. M. M. JINNAH
Specimen of Statement of Cost
for the month ending ....................

Total Cost of Gross Output 1,000 73,20,00

0

Less : Sale of rejected castings 100 50,000

Cost of Finished Castings 900 72,70,000

Additional Works Overhead:

Cost of rectifying 10% of the finished casting
found defective to the extent of 20% of the
proportionate direct wages 18,000*

Manufacturing Cost of Saleable Castings:

( per ton Rs. 8,097.78 Rs. 8,098 per ton approx.) 900 72,88,00
0

PROF. M. M. JINNAH
Working Notes

• 10% of finished castings is 90 ton. These 90 ton have been

rectified by increasing works overhead to the tune of 20% of
the proportionate direct wages i.e.

Rs. 10,00,000 x 90 x 20% = Rs. 18,000

1,000
or
Rs. 10,00,000 x 20 = Rs. 2,00,000 for 1,000 ton
100
Rs. 2,00,000 = Rs. 200 per ton x 90 ton = Rs. 18,000
1,000
PROF. M. M. JINNAH 89
The following particulars are derived from the records of a factory of Mohan Ltd:
Materials issued Rs. 64,000

Wages Paid 56,000

Factory overhead 60% wages

Materials returned to stores 8,000

Materials transferred to other jobs 4,000

10% of the production has been scrapped as bad and a further 30% has been brought

upto the specification by increasing the factory overheads to 80% of wages. If the

scrapped production fetches only Rs. 1,000 find the production cost per unit of the

finished product if the total product ( including the quantity scrapped ) be 100 units.

PROF. M. M. JINNAH 90
Statement of Cost
for the month ending ....................

Particulars Amount Unit Amount

Rs ( Rs.)
Materials Issued 64,000
Less Returned to Stores 8,000

Transferred to other jobs 4,000 12,000

Materials consumed 52,000
Wages 56,000
Prime Cost 100 1,08,000
Factory Overhead ( 60% of Wages) 33,600
Add ; Additional Factory Overhead 20% of wages 3,360*
on 30% of output
1,44,960
Less : Sale of Scrapped Materials 10 1,000
Cost of production 90 1,43,960
Cost Per Unit of production 1,599.56

PROF. M. M. JINNAH
Working Notes

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PROF. M. M. JINNAH 92