![Cost Sheet (or) Statement o/Cost
Illustration: 6
319
The following particulars have been extracted from the books of Sharma & Co. Ltd., Chennai for the
year ended 3151
March 2003
Raw Materials Consumed
Direct Wages
Other Direct Expenses
Factory Overheads 80% of direct wages
Office Overheads 10% of Work Cost
Rs. 1,82,000
Rs. 58,000
Rs. 22,000
Selling and distribution expenses Rs. 2 per unit sold
Units produced and sold during the month 20,000. You are required to prepare a cost sheet for the year 2003 and
also find the selling price per unit on the basis that profit mark up is uniformly made to yield a profit of 20% of the
selling price.
Solution:
Cost Sheet (units produced: 2000 units)
Particulars Per unit Amount
Rs. Rs.
Raw Materials Consumed 9.10 1,82,000
Direct Wages 2.90 58,000
Other Direct Expenses 1.10 22,000
Prime Cost (1) 13.10 2,62,000
Add : Factory Overheads :
~8.()()("
80
]
80% of direct wages 2.32 46,400
100
Work Cost (2) 15.42 3,08,400
Add : Office Overheads :
[3.08.400, 10
]
10% of work cost 1.542 30,840
100
Cost of Production (3) 16.962 3,39,240
Add : Selling & Distribution Expenses 2.00 40,000
Cost of Goods Sold (4) 18.962 3,79,240
Add : Profit 20% of Selling Price (E) 4.740 94,810
Selling Price 23,702 4,74,050
Illustration: 7
From the following informations of Mani & Co. Ltd., for the year 2003 you are required to prepare:
(a) Prime Cost (b) Work Cost (c) Cost of Production (d) Cost of goods sold and (e) Net Profit
Stock of raw materials (1.1.2003)
Purchase of raw materials
Stock of raw materials (31.12.2003)
Carriage Inward
Direct Wages
Rs.
50,000
1,70,000
80,000
10,000
1,50,000](https://image.slidesharecdn.com/chapter-12-cost-sheet-or-statement-of-cost-250309140605-b4ca44c5/85/Chapter-12-Cost-Sheet-or-Statement-of-Cost-pdf-10-320.jpg)
![324 A Textbook ofFinancial Cost and Management Accounting
11. Gowda & Co. Ltd. is Manufacturing a Sewing Machine and the following details are furnished in respect of its factory
operations for the year ended 31" December 2003.
Work in progress in the beginning
Manufacturing Expenses
Work in Progress at the end:
At Prime Cost
Manufacturing Expenses
Rs.
1,02,000
30,000
90,000
18,000
Opening Stock of raw materials 4,50,000
Purchase of raw materials 9,54,000
Direct Labour 2,42,000
Manufacturing Expenses 1,68,000
Closing Stock of raw materials 4,08,000
On the basis of the above data, prepare a statement showing the cost of production
[Ans: Prime Cost Rs.13,50,OOO; works cost Rs.15,30,OOO]
12. From the following particulars of a manufacturing firm prepare a statement showing:
(a) Cost of production of goods manufactured
(b) Cost of goods sold and
(c) Profit
Stock of materials on I" January 2003
Purchase of raw materials
Wages paid
Works overhead
Work in progress (1-1-2003)
Work in progress (31-12-2003)
Stock of raw materials on 31" December 2003
Stock of finished goods (1-1-2003)
Stock of finished goods (31-12-2003)
Selling and distribution expenses
Office and administration expenses
Sales
[Aos : Cost of production Rs. 8,04,000
Cost of goods sold Rs. 8,09,000
Profit Rs. 70,000]
Rs.
30,000
4,50,000
2,30,000
92,000
12,000
15,000
25,000
60,000
35,000
20,000
30,000
9,00,000
Rs.
1,22,000
1,08,000
13. Prepare cost sheet for the year 2003 from the following showing the total cost and cost per unit number of unit produced
2000 units:
Rs.
Raw materials 1.1.2003 20,000
Purchases 3,60,000
Direct wages 1,12,000
Indirect wages 96,000
Raw materials 31.12.2003 24,000
Work in progress 1.1.2003 10,000
Work in progress 31.12.2003 12,000
Factory overheads 52,000
Office overheads 90,000
Selling overheads 32,000
Stock of finished goods 1.1.2003 (100 units) 40,000 stock of finished goods 31.12.2003 120 units. DIo.ing :he year
2003, it is decided to increase the production to 2400 units. It is anticipated that:
(a) Material prices will increase by 10% (b) Wages will reduce by 20%
(c) Other expenses will remain constant per unit (d) Expected profit 20% on sales
Ascertain selling price to be fixed per unit
[Aos : Productions 2000 units: Prime cost Rs.4,68,OOO; Cost of goods sold Rs. 7,33,760; Profit Rs.81,528; Production
2400 units: Prime Cost Rs. 5,77,440; Cost of goods sold Rs. 9,01,824; Profit Rs. 2,25,456]](https://image.slidesharecdn.com/chapter-12-cost-sheet-or-statement-of-cost-250309140605-b4ca44c5/85/Chapter-12-Cost-Sheet-or-Statement-of-Cost-pdf-15-320.jpg)
![Cost Sheet (or) Statement of Cost 325
14. From the following particulars relating to the manufacture of a standard product during the 2003, you ate required to
prepare a statement of cost and profit per unit.
Raw materials used Rs. 40,000
Direct wages Rs. 24,000
Man hours worked 9,500 hours
Man hour rate Rs. 4 per hour
Office overheads 20% on works cost
Selling overheads Rs. 1 per unit
Units produced 20,000 units
Units sold 18,000 @ Rs. 10 per unit
[Ans: Prime cost Rs. 64,000; Cost of production Rs. 1,22,400 at Rs. 6.12 per unit; Cost of goods sold Rs. 1,28,160 at
Rs. 7.12 per unit; Profit Rs. 51,840 at Rs. 2.88 per unit]
15. From the following particulars, prepare cost sheet
Opening stock of raw materials
Opening stock of finished goods
Closing stock of raw materials
Closing stock of finished goods
Purchase of raw materials
Opening stock of work in progress
Closing stock of work in progress
Sales during the year
Direct wages
Factory expenses
Office expenses
Selling expenses
Distribution expenses
[Ans : Prime cost Rs. 54,800
Cost of goods sold Rs. 1,05,400
Net Profit Rs. 72,000]
61,000
40,800
97,000
20,000
50,000
16,000
18,000
1,90,000
40,800
21,000
11,000
7,600
5,000
000](https://image.slidesharecdn.com/chapter-12-cost-sheet-or-statement-of-cost-250309140605-b4ca44c5/85/Chapter-12-Cost-Sheet-or-Statement-of-Cost-pdf-16-320.jpg)
Chapter-12-Cost-Sheet-or-Statement-of-Cost.pdf
- 1. CHAPTER 12 Cost Sheet (or) Statement of Cost ELEMENTS OF COST Introduction Elements of cost are necessary to have a proper classification and analysis of total cost. Thus, elements of cost provide the management with necessary information for proper control and management decisions. For this purpose, the total cost is analysed by the elements or nature of cost, i.e., material, labour and overheads. The various elements of costs may be illustrated as below: Elements of Cost ~ t ~ Materials Labour Other Expenses ~ ~ ~ r l l l l l Direct Indirect Direct Indirect Direct Indirect l , Production or Factory Overhead 1 Administration Overhead 1 Overheads t Selling Overhead l Distribution Overhead By grouping of the above elements of cost, the following divisions of cost are obtained: (1) Prime Cost (2) Works Cost (Factory) = Direct Materials + Direct Labour + Direct Expenses = Prime Cost + Factory Overhead
- 2. Cost Sheet (or) Statement 01 Cost (3) Cost of Production (4) Cost of Sales (or) Total Cost (I) Materials Cost = Factory Cost + Office and Administrative Overhead = Cost of Production + Selling and Distribution Overhead 31/ Materials Costs refer to cost of materials which are the major substances used in production and are converted into finished goods and semi-finished goods. Materials are grouped as direct materials and indirect materials. Direct Materials: Direct materials are those that form part of a product. Raw materials, semi- finished products, and finished products which can be identified with production of a product are known as direct materials. Sugar cane, cotton, oilseeds, woods etc. are examples of direct materials. The cost of materials involves conversion of raw materials into finished products. Indirect Materials: Material costs, other than direct material cost are known as indirect material cost. Indirect materials cannot be identified with a particular unit of cost or product. Indirect materials are indirectly used for producing the products. Lubricating oil, consumable stores, fuel, design, layout etc. are examples of indirect material cost. (II) Labour Cost In actual production of the product, labour is the prime factor which is physically and mentally involved. The payment of remuneration of wages is made for their effort. The labour costs are grouped into (a) Direct Labour and (b) Indirect Labour. (a) Direct Labour: Direct labour cost or direct wages refer to those specifically incurred for or can be readily charged to or identified with a specific job, contract, work order or any other unit of cost are termed as direct labour cost. Wages for supervision, wages for foremen, wages for labours who are actually engaged in operation or process are examples of direct labour cost. (b) Indirect Labour: Indirect labour is for work in general. The importance of the distinction lies in the fact that whereas direct labour can be identified with and charged to the job, indirect labour cannot be so charged and has therefore to be treated as part of the factory overheads to be included in the cost of production. Examples are salaries and wages of supervisors, store keepers, maintenance labour etc. (III) Expenses All expenses are other than material and labour that are incurred for a particular product or process. They are defined by ICMA as "The cost of service provided to an undertaking and the notional cost of the use of owned assets." Expenses are further grouped into (a) Direct Expenses and (b) Indirect Expenses. ,(a) Direct Expenses: Direct expenses which are incurred directly and identified with a unit of output or process are treated as direct expenses. Hire charges of special plant or tool, royalty on product, cost of special pattern etc. are the examples of direct expenses. (b) Indirect Expenses: Indirect expenses are expenses other than indirect materials and indirect labour, which cannot be directly identified with a unit of output. Rent, power, lighting, repairs, telephone etc. are examples of indirect expenses. Overheads All indirect material cost, indirect labour cost, and indirect expenses are termed as Overheads. Overheads may also be classified into (a) Production or Factory Overhead (b) Office and Administrative Overheads (c) Selling Overhead and (d) Distribution Overhead.
- 3. 312 A Textbook ofFinancial Cost and Management Accounting (a) Production Overhead: Production Overhead is also termed as Factory Overhead. Factory overhead includes indirect material, indirect labour and indirect wages which are incurred in the factory. For example, rent of factory building, repairs, depreciation, wages of indirect workers, etc. (b) Office and Administrative Overhead: Office and Administrative Overhead is the indirect expenditure incurred in formulating the policies, establishment of objectives, planning, organizing and controlling the operations of an undertaking. All office and administrative expenses like rent, staff salaries, postage, telegram, general expenses etc. are examples. (c) Selling Overhead: Selling Overhead is the indirect expenses which are incurred for promoting sales, stimulating demand, securing orders and retaining customers. For example, advertisement, salesmen's commission, salaries of salesmen etc. (d) Distribution Overhead: These costs are incurred from the time the product is packed until it reaches its destination. Cost of warehousing, cost of packing, transportation cost etc. are some of the examples of distribution overhead. COST SHEET Meaning: Cost Sheet or a Cost Statement is "a document which provides for the assembly of the estimated detailed elements of cost in respect of cost centre or a cost unit." The analysis for the different elements of cost of the product is shown in the form of a statement called "Cost Sheet." The statement summarises the cost of manufacturing a particular list of product and discloses for a particular period: (I) Prime Cost; (II) Works Cost (or) Factory Cost; (III) Cost of Production; (IV) Total Cost (or) Cost of Sales. Importance of Cost Sheet (1) It provides for the presentation of the total cost on the basis of the logical classification. (2) Cost sheet helps in determination of cost per unit and total cost at different stages of production. (3) Assists in fixing of selling price. (4) It facilitates effective cost control and cost comparison. (5) It discloses operational efficiency and inefficiency to the management for taking corrective actions. (6) Enables the management in. the preparation of cost estimates to tenders and quotations. SPECIMEN OF COST SHEET Cost Sheet for the Period Particulars Total Cost Cost per Unit Rs. Rs. Direct Materials : Opening Stock of Raw Materials xxx Purchases xxx Carriage Inwards xxx Less: Closing Stock of Raw Materials xxx Direct Materials Consumed xxx Add : Direct Wages xxx Direct Expenses xxx
- 4. Cost Sheet (or) Statement a/Cost 313 Particulars Total Cost Cost per Unit Rs. Rs. Prime Cost (1) xxx xxx Add : Works or Factory Overheads: xxx xxx Indirect Materials Indirect Labour Factory Rent and Rates Factory Lighting and Heating Power and Fuel Repairs and Maintenance Cleaning Drawing Office Expenses Cost of Research and Equipments Depreciation of Factory Plant Factory Stationery Insurance of Factory Factory or Work Manager's Salary Other Factory Expenses xxx xxx Total Factory Cost xxx xxx Add: Opening Stock of Work in Progress Less: Closing Stock of Work in Progress Works Cost (or) Factory Cost (2) Add: Office & Administrative Overheads: Office Rent and Rates Office Salaries Lighting and Heating Office Stationery Office Insurance Postage and Telegrams Office Cleaning Legal Charges Depreciation of Furniture and Office Equipments and Buildings Audit Fees Bank Charges and Commission , xxx xxx Total Cost of Production (3) xxx xxx Add: Opening Stock of Finished Goods xxx xxx Less: Closing Stock of Finished Goods xxx xxx Cost of Production (4) xxx xxx Add: Selling and Distribution Overheads : Showroom Rent and Rates Salesmen's Salaries Salesmen's Commission Sales Office Rent and Rates Travelling Expenses of Salesmen Warehouse Rent and Rates Advertisement Expenses Warehouse Staff Salaries Carriage Outwards Sales Manager's Salaries Repairs and Depreciation of Delivery Van
- 5. 314 A Textbook ofFinancial Cost and Management Accounting Particulars Total Cost Cost per Unit Rs. Rs. Sample and Free Gifts Bad debts, Debt Collection Expenses xxx xxx Cost of sales (5) xxx Profit I Loss (6) xxx Sales xxx Illustration: 1 From the following particulars, prepare a Cost Sheet showing (1) Cost of Materials Consumed (2) Prime Cost (3) Factory Cost (4) Cost of Production and (5) Profit Opening stock of raw materials Opening stock of work in progress Opening stock of finished goods Raw materials purchased Direct wages Sales for the year Closing stock of raw materials Closing stock of work in progress Factory overhead Direct expenses Office and Administrative overhead Selling and Distribution expenses Solution: Rs. 20,000 10,000 50,000 5,00,000 3,80,000 12,00,000 75,000 15,000 80,000 50,000 60,000 30,000 Cost Sheet for the year ...... Particulars Opening Stock of Raw Materials Purchases Less : Closing Stock of Raw Materials Cost of Raw Materials Consumed (I) Add : Direct Wages Direct Expenses Prime Cost (2) Add : Factory overheads Add: Opening stock of work in progress Less: Closing stock of Work in Progress Works Cost (or) Factory Cost (3) Add: Office & Administrative Overhead Cost of Production (4) Add: Opening Stock of Finished Goods Less: Closing Stock of Finished Goods Amount Rs. Amount Rs. 20,000 5,00,000 5,20,000 75,000 4,45,000 3,80,000 50,000 4,30,000 8,75,000 80,000 10,000 90,000 15,000 75,000 9,50,000 60,000 10,10,000 50,000 10,60,000 50,000
- 6. Cost Sheet (or) Statement 01 Cost 315 Particulars Amount Rs. Amount Rs. Cost of Goods Sold (5) 10,10,000 Add : Selling and Distribution Overhead 30,000 Cost of Sales (6) 10,40,000 Profit (7) 1,60,000 Sales for the year 12,00,000 Illustration: 2 The following information relates to the manufacture of a product during the month of Jan. 2003: Raw materials consumed Rs. 20,000 Direct wages Rs. 12,000 Machine hours worked 1,000 hours Machine hour rate Rs. 2 per hour Office overhead 20% on works cost Selling overhead Re. 0.40 per unit Units produced 20,000 units Units sold at Rs. 3 each; 18,000 units Prepare a Cost Sheet and show (a) Prime Cost (b) Work Cost (c) Cost of Production (d) Cost of Goods Sold (e) Cost of Sales (f) Profit Solution: Cost Sheet for Jan. 2003 Particulars Amount Rs. Amount Rs. Raw Materials Consumed 20,000 Direct Wages 12,000 Prime Cost (l) 32,000 Add: Factory Overhead 1000 x Rs. 2 2,000 Work Cost (2) 34,000 Add : Office Overhead 20% on Works Cost 6,800 Cost of Production (3) 40,800 Less: Closing Stock of Finished Goods (20000 - 18000 =2000 Units) = 40,800 x 2,000 } 20,000 4,080 Cost of Goods Sold (4) 36,720 Add : Selling Overhead 18000 @ Re. 0.40 7,200 Cost of Sales (5) 43,920 Profit (6) 10,080 Sales 18000 Units @ Rs. 3 54,000 Illustration: 3 The following information relates to the manufacture of a product during the month of Jan. 2003: Direct raw materials Rs. 1,60,000 Direct wages Rs. 90,000 Machine hours worked 6000 Machine hour rate Rs. 6
- 7. 3/6 A Textbook ofFinancial Cost and Management Accounting Office overhead 15% of work cost SeIling overhead Rs. 2 per unit Units produced 5000 units Units Sold 5,000 units @ Rs. 80 each Prepare a cost sheet and show (a) Cost per unit and (b) Profit for the period. Solution: Cost Sheet for January 2003 Paniculars Total Cost Rs. Direct Raw Materials 1,60,000 Direct wages 90,000 Prime cost 2,50,000 Add: Factory Overhead (6000 x Rs. 6) 36,000 Works Cost { } 2,86,000 Add : Office Overhead 2,86,000 x II~ 42,900 Cost of Production 3,28,900 Add: Selling Overhead (5000 x Rs. 2) 10,000 Cost of Good Sold 3,38,900 Profit 61,100 Sales 5,000 x Rs. 80 4,00,000 Illustration: 4 Total per Unit Rs. 32.00 18.00 50.00 7.20 57.20 8.58 65.78 2.00 67.78 12.22 80.00 From the following particulars calculate (1) Prime Cost (2) Factory Cost (3) Cost of Production and (4) Cost of Sales: Paniculars Rs. Paniculars Rs. Direct Raw Materials 33,000 Depreciation of office building 1,000 Direct Wages 35,000 Depreciation of delivery Van 200 Direct Expenses 3,000 Bad debts 100 Factory Rent and rates 7,500 Advertising 300 Indirect Wages (Factory) 10,500 Salaries of salesmen 1.500 Factory Lighting 2,050 Up keeping of delivery Van 700 Factory Heating 1,500 Bank charges 100 Power (Factory) 4,400 Commission on sales 1.500 Office Stationery 900 Rent and rates (Office) 500 Director's Remuneration (Factory) 2,000 Loose tools written off 600 Director's Remuneration (Office) 4,000 Output (tonnes) Factory Cleaning 1,000 (sales @ Rs.40 per unit) 5,000 Sundry Office Expenses 200 Factory Stationery 750 Water supply (Factory) 1,300 Factory Insurance 1,100 Office Insurance 500 Legal Expenses (Office) 400 Rent of Warehouse 300 Depreciation Plant & Machinery 2,000 ..
- 8. Cost Sheet (or) Statement ofCost Solution: Particullus Direct materials Direct wages Direct expenses Prime Cost (l) Add : Factory overheads Factory rent and rates Indirect wages Factory lighting Factory heating Power (Factory) Cost Sheet for the year 0 0 0 0 0 0 0 Director's remuneration (Factory) Factory cleaning Factory stationery Water supply (Factory) Factory Insurance Depreciation of Plant & Machinery Loose Tools written off Works Cost (or) Factory Cost (2) Add: Office and Administrative Overhead: Office stationery Director's remuneration (Office) Sundry office expenses Office insurance Legal expenses (Office) Depreciation of office building Bank charges Rent and rates (Office) Cost of production (3) Add : Selling and Distribution Overhead: Rent of warehouse Depreciation of delivery van Bad debts Advertising Salesmen salaries Up keep of delivery van Commission on sales Total Cost of Sales (4) Profit Sales 5000 tones @ Rs. 40 per unit Illustration: 5 317 Rso Rso 33,000 35,000 3,000 71,000 7,500 10,500 2,050 1,500 4,400 2,000 1,000 750 1,300 1,100 2,000 600 34,700 1,05,700 900 4,000 200 500 400 1,000 100 500 7,600 1,13,300 300 200 100 300 1,500 700 1,500 4,600 1,17,900 82,100 2,00,000 From the fpllowing particulars calculate: (a) Prime Cost; (b) Works Cost; (c) Cost of Production; (d) Cost of Sales; (e) Profit; and (f) Cost per unit. Pandey Industries manufacture a product A. On 1st January 2003 finished goods in Stock Rs. 50,000. Other stocks such as :
- 9. 318 Work in progress (1.1.2002) Raw materials (1.1.2002) Rs. Rs. A Textbook ofFinancial Cost and Management Accounting 40,000 1,00,000 The information available from cOst records for the year ended 3151 December, 2002 was as follows: Direct materials Direct wages Carriage inward Indirect wages Factory cost Stock on raw materials (31.12.2002) Work in progress (31.12.2002) Sales (1,20,000 units) Indirect materials Office and Administrative overhead Selling and Distribution overhead Stock on finished goods (31.12.2002) Rs. 8,00,000 3,00,000 40,000 90,000 2,75,000 80,000 70,000 25,00,000 1,75,000 80,000 1,00,000 60,000 Solution: Cost Sheet for the year ending 31S Dec. 2002 Paniculars Amount Total cost Rs. Rs. Stock of raw materials (1.1.02) 1,00,000 Add: Direct materials 8,00,000 Carriage inwards 40,000 9,40,000 Less: Stock of raw materials (31.12.02) 80,000 Raw Materials Consumed 8,60,000 Add: Direct Wages 3,00,000 Prime Cost (1) 11,60,000 Add: Factory overhead 2,75,000 Add: Work in Progress (1.1.02) 40,000 3,15,000 Less: Work in Progress (31.12.02) 70,000 2,45,000 Work cost (or) Factory cost (2) 14,05,000 Add: Office & Administrative overhead 80,000 Cost of production (3) 14,85,000 Add: Stock of finished goods (1.1.02) 50,000 15,35,000 Less: Stock of finished goods (31.12.02) 60,000 Cost of goods sold (4) 14,75,000 Add: Selling and distribution expenses 1,00,000 Cost "of sales (5) 15,75,000 Profit (6) 9,205,000 Sales for the year 25,00.000
- 10. Cost Sheet (or) Statement o/Cost Illustration: 6 319 The following particulars have been extracted from the books of Sharma & Co. Ltd., Chennai for the year ended 3151 March 2003 Raw Materials Consumed Direct Wages Other Direct Expenses Factory Overheads 80% of direct wages Office Overheads 10% of Work Cost Rs. 1,82,000 Rs. 58,000 Rs. 22,000 Selling and distribution expenses Rs. 2 per unit sold Units produced and sold during the month 20,000. You are required to prepare a cost sheet for the year 2003 and also find the selling price per unit on the basis that profit mark up is uniformly made to yield a profit of 20% of the selling price. Solution: Cost Sheet (units produced: 2000 units) Particulars Per unit Amount Rs. Rs. Raw Materials Consumed 9.10 1,82,000 Direct Wages 2.90 58,000 Other Direct Expenses 1.10 22,000 Prime Cost (1) 13.10 2,62,000 Add : Factory Overheads : ~8.()()(" 80 ] 80% of direct wages 2.32 46,400 100 Work Cost (2) 15.42 3,08,400 Add : Office Overheads : [3.08.400, 10 ] 10% of work cost 1.542 30,840 100 Cost of Production (3) 16.962 3,39,240 Add : Selling & Distribution Expenses 2.00 40,000 Cost of Goods Sold (4) 18.962 3,79,240 Add : Profit 20% of Selling Price (E) 4.740 94,810 Selling Price 23,702 4,74,050 Illustration: 7 From the following informations of Mani & Co. Ltd., for the year 2003 you are required to prepare: (a) Prime Cost (b) Work Cost (c) Cost of Production (d) Cost of goods sold and (e) Net Profit Stock of raw materials (1.1.2003) Purchase of raw materials Stock of raw materials (31.12.2003) Carriage Inward Direct Wages Rs. 50,000 1,70,000 80,000 10,000 1,50,000
- 11. 320 Indirect Wages Other Direct Charges Office rent and rates Factory rent and rates Indirect consumption of materials Depreciation on plant Depreciation on office furniture Salesmen salary Salary to office supervisor Other factory expenses Other office expenses General Manager's remunerations: Office Rs. Factory Rs. SeIling Dept. Other seIling expenses Traveling expenses of salesmen Carriage & Freight outward Sales Advertisement Solution: Particulars Stock of raw materials (1.1.2003) Add: Purchases Carriage Inw~ds Less: Stock of raw materials (31.12.2003) Raw Materials Consumed (1) Wages Other Direct Charges Prime Cost (2) Add: Factory Overhead: (3) Indirect Charges Factory rent and rates Indirect Materials Depreciation of Plant Other factory Expenses General Manager's remuneration Factory Cost (2+3) =4 A Textbook ofFinancial Cost and Management Accounting Statement of Cost 20,000 30,000 1,000 10,000 1,000 3,000 200 4,000 5,000 11,400 1,800 4,000 8,000 12,000 2,000 2,200 2,000 5,00,000 4,000 Amount Rs. 50,000 1,70,000 10,000 2,30,000 80,000 20,000 10,000 1,000 3,000 11,400 8,000 Amount Rs. 1,50,000 1,50,000 30,000 3,30,000 53,400 3,83,400 Add: Office & Administrative Overheads: (5) Office rent and rates 1,000 Depreciation on office furniture 200 Salary to Office Supervisor 5,000 Other Office Expenses 1,800 General Managers remuneration 4,000 12,000 Cost of Production: (4+5) =6 3,95,400
- 12. Cost Sheet (or) Statement of Cost Add: SeIling & Distribution Overheads: (7) Salary to Salesmen General Manager's Salary Other Selling Expenses Advertisement Traveling expenses Carriage and freight overhead Cost of Goods Sold (8) Profit (9) Sales (10) Illustration: 8 4,000 12,000 2,000 4,000 2,200 2,000 26,200 4,21,600 78,400 5,00,000 321 A fire occurred in the factory premises on October 31, 2003. The accounting records have been destroyed. Certain accounting records were kept in another building. They reveal the following for the period September 1, 2003 to October 31, 2003: (i) Direct materials purchased (ii) Work in process inventory, 1.9.2003 (iii) Direct materials inventory, 1.9.2003 (iv) Finished goods inventory, 1.9.2003 (v) Indirect manufacturing costs (vi) Sales revenues (vii) Direct manufacturing labour (viii) Prime costs . (ix) Gross margin percentage based on revenues (x) Cost of Goods available for sale Rs. Rs. Rs. Rs. 2,50,000 40,000 20,000 37,750 40% of conversion cost Rs. 7,50,000 Rs. 2,22,250 Rs. 3,97,750 30% Rs. 5,55,775 The loss is fully covered by insurance. The insurance Company wants to know the historical cost of the inventories as a basis for negotiating a settieent, although the settlement is actually to be based on replacement cost, not historical cost. Required: (i) Finished goods inventory, 31.10.2003 (ii) Work-in-process inventory, 31.10.2003 (iii) Direct materials inventory, 31.10.2003 Solution: (eA Inter, Nov. 2003) Prime Cost (given) Rs.3,97,750 Direct material used = Prime cost - Direct manufacturing labour cost = 3,97,750 - 2,22,250 Conversion cost = = Indirect manufacturing cost Direct manufacturing labour cost 0.6 2,22,250 0.6 = Rs. 3,70,416.67 - Rs. 2,22,250 =Rs. 1,75,500 = Rs. 3,70,416.67 =Rs. 1,48,166.67
- 13. 322 A Textbook of Financial Cost and Management Accounting Schedule of Computations Direct materials 1.9.2003 Direct materials purchased Direct materials available for use Less: Direct material 31.10.2003 (Balancing figure) Direct materials used Add: Direct manufacturing labour cost Prime costs (1) Add: Indirect manufacturing cost Manufacturing cost incurred during current period Add: WIP 1.9.2003 Manufacturing cost to account for Less: WIP 31.10.2003 Cost of goods manufactured (2) Add: Finished goods 1.9.2003 Cost of goods available for sale 31.10.2003 Less: Finished gods 31.10.2003 Cost of goods sold (70% of 7,50,000) (3) Alternatively: Finished goods inventory 31.10.2003 WIP inventory 31.10.2003 Raw material inventory 31.10.2003 QUESTIONS Rs. Rs. Rs. 1. What do you understand by 'cost sheet'? Briefly explain with specimen of cost sheet. 2. Explain the different elements of total costs. 3. Explain the importance of cost sheet. 4. Explain the different functional classification of overheads. 5. What items constitute (a) Prime Cost (b) Cost of Production and (c) Cost of Goods Sold. 6. Distinguish between : (a) Direct material and Indirect material. (b) Direct labour and Indirect labour. (c) Direct expenses and Indirect expenses. 7. From the following particulars of a manufacturing firm prepare a statement showing: (1) Cost of Materials Consumed (2) Factory or Work Cost Cost ofProduction Rs. Stock of materials on I" January 2003 80,000 Purchases during the period 22,00,000 Stock of finished goods on I" January 2003 1,00,000 Direct wages 10,00,000 Sales 48,00,000 Factory on cost 30,00,000 Office and Administrative Expenses 2,00,000 Stock of raw materials on 31st December 2003 2,80,000 Stock of finished goods on 31" December 2003 1,20,000 Ans : (1) Rs. 20,00,000 (2) Rs. 33,00,000 (3) Rs. 35,00,000 Rs. 20,000 2,50,000 2,70,000 94,500 1,75,500 2,22,250 3,97,750 1,48,166.67 5,45,916.67 40,000 5,85,916.67 67,891.67 5,18,025 37,750 5,55,775 30,775 5,25,000 30,775 67,891.67 94,500
- 14. Cost Sheet (or) Statement ofCost 323 8. Mr. Ramesh furnishes the following data relating to the manufacture of a standard product during the month of April 2003. Raw materials consumed Direct labour charges Machine hour worked Machine hour rate Administrative overheads 20% on works cost Selling and distribution expenses Re.0.50 per unit Units Produced 17,100 Units Sold 16,000 at Rs.4 per unit Rs.15,OOO Rs. 9,000 900 Rs. 5 You are required to prepare a cost sheet from the above, showing: (a) the cost of production per unit. (b) Profit per unit sold and profit for the period. [Ans : (a) Rs. 2; (b) Rs. 1.50; and Rs. 24,000) 9. From the following particulars of a manufacturing firm, prepare a statement showing: (a) Prime Cost (b) Works Cost (c) Cost of Production (d) Cost of Sales and (e) Profit. Rs. Materials used in manufacturing 60,000 Materials used in primary packing 10,000 Materials used in selling the product 1,500 Materials used in the factory 750 Administrative expenses 1,250 Depreciation on office building 750 Depreciation on factory building 1,750 Materials used in the office 1,250 Wages - production 10,000 Wages - factory supervision 2,000 Indirect expenses - factory 1,000 Selling expenses 3,500 Freight on materials purchased 5,000 Advertising 1,250 Assuming that all the products manufactured are sold, what should be the selling price to obtain a profit of 20% on selling price? Ans: (1) Prime Cost Rs. 85,000; (2) Works Cost Rs. 90,500; (3) Cost of Production Rs. 93,750; (4) Cost of Sales Rs. 1,00,000; (5) Profit Rs. 25,000; (6) Selling Price Rs. 1,25,000 10. From the following particulars prepare a Cost Sheet showing production 4,000 units in 2002 and 6,000 units in 2003: Rs. Cost of materials 3,20,000 Wages 4,80,000 Manufacturing Expenses 2,00,000 Depreciation 2,40,000 Rent, Rates and Insurance 40,000 Selling Expenses 1,20,000 General Expenses 80,000 Sales 16,00,000 Actual Production in Units 4,000 The company plans to manufacture 6,000 units during 2003 Additional Information (1) Price of materials is expected to rise by 20% (2) Wage rates are expected to show an increase of 5% (3) Manufacturing expenses will rise in proportion to the combined cost of materials and wages (4) Selling expenses per unit will remain the same (5) Materials sold to earn a profit of 10% on seIling price [Ans: Production of 2,000 units: Prime cost Rs. 8,00,000; Total cost Rs. 14,80,000; . Profit Rs. 1,20,000; Production of 3,000 units: Prime Cost Rs. 13,32,000; Total Cost 22,04,000; Profit Rs. 2,63,000)
- 15. 324 A Textbook ofFinancial Cost and Management Accounting 11. Gowda & Co. Ltd. is Manufacturing a Sewing Machine and the following details are furnished in respect of its factory operations for the year ended 31" December 2003. Work in progress in the beginning Manufacturing Expenses Work in Progress at the end: At Prime Cost Manufacturing Expenses Rs. 1,02,000 30,000 90,000 18,000 Opening Stock of raw materials 4,50,000 Purchase of raw materials 9,54,000 Direct Labour 2,42,000 Manufacturing Expenses 1,68,000 Closing Stock of raw materials 4,08,000 On the basis of the above data, prepare a statement showing the cost of production [Ans: Prime Cost Rs.13,50,OOO; works cost Rs.15,30,OOO] 12. From the following particulars of a manufacturing firm prepare a statement showing: (a) Cost of production of goods manufactured (b) Cost of goods sold and (c) Profit Stock of materials on I" January 2003 Purchase of raw materials Wages paid Works overhead Work in progress (1-1-2003) Work in progress (31-12-2003) Stock of raw materials on 31" December 2003 Stock of finished goods (1-1-2003) Stock of finished goods (31-12-2003) Selling and distribution expenses Office and administration expenses Sales [Aos : Cost of production Rs. 8,04,000 Cost of goods sold Rs. 8,09,000 Profit Rs. 70,000] Rs. 30,000 4,50,000 2,30,000 92,000 12,000 15,000 25,000 60,000 35,000 20,000 30,000 9,00,000 Rs. 1,22,000 1,08,000 13. Prepare cost sheet for the year 2003 from the following showing the total cost and cost per unit number of unit produced 2000 units: Rs. Raw materials 1.1.2003 20,000 Purchases 3,60,000 Direct wages 1,12,000 Indirect wages 96,000 Raw materials 31.12.2003 24,000 Work in progress 1.1.2003 10,000 Work in progress 31.12.2003 12,000 Factory overheads 52,000 Office overheads 90,000 Selling overheads 32,000 Stock of finished goods 1.1.2003 (100 units) 40,000 stock of finished goods 31.12.2003 120 units. DIo.ing :he year 2003, it is decided to increase the production to 2400 units. It is anticipated that: (a) Material prices will increase by 10% (b) Wages will reduce by 20% (c) Other expenses will remain constant per unit (d) Expected profit 20% on sales Ascertain selling price to be fixed per unit [Aos : Productions 2000 units: Prime cost Rs.4,68,OOO; Cost of goods sold Rs. 7,33,760; Profit Rs.81,528; Production 2400 units: Prime Cost Rs. 5,77,440; Cost of goods sold Rs. 9,01,824; Profit Rs. 2,25,456]
- 16. Cost Sheet (or) Statement of Cost 325 14. From the following particulars relating to the manufacture of a standard product during the 2003, you ate required to prepare a statement of cost and profit per unit. Raw materials used Rs. 40,000 Direct wages Rs. 24,000 Man hours worked 9,500 hours Man hour rate Rs. 4 per hour Office overheads 20% on works cost Selling overheads Rs. 1 per unit Units produced 20,000 units Units sold 18,000 @ Rs. 10 per unit [Ans: Prime cost Rs. 64,000; Cost of production Rs. 1,22,400 at Rs. 6.12 per unit; Cost of goods sold Rs. 1,28,160 at Rs. 7.12 per unit; Profit Rs. 51,840 at Rs. 2.88 per unit] 15. From the following particulars, prepare cost sheet Opening stock of raw materials Opening stock of finished goods Closing stock of raw materials Closing stock of finished goods Purchase of raw materials Opening stock of work in progress Closing stock of work in progress Sales during the year Direct wages Factory expenses Office expenses Selling expenses Distribution expenses [Ans : Prime cost Rs. 54,800 Cost of goods sold Rs. 1,05,400 Net Profit Rs. 72,000] 61,000 40,800 97,000 20,000 50,000 16,000 18,000 1,90,000 40,800 21,000 11,000 7,600 5,000 000