Learning Outcome

• Apply the cost categorization concepts in

preparation of cost sheet of the
companies.
 Meaning

• Cost sheet is a statement of cost. In other words, when costing

information are set out in the form of a statement, it is called
cost sheet. For determination of total cost of production a
statement showing the various elements of cost is prepared.

• This statement is called as a ‘statement of cost’ or ‘cost

sheet’.
• Calculation of Materials Consumed:
Materials Consumed = (Opening stock of raw materials + Purchase of raw material + carriage inward) - (closing stock of raw material).

• Calculation of Prime Cost:

Prime Cost = Materials consumed + direct wages + direct expenses.

• Calculation of Factory cost:

Factory Cost = Prime cost + sum of all factory overheads.

• Calculation of Cost of Production

Cost of Production = Factory cost + office and administration overheads.

• Calculation of Cost of Sales or Total Cost

Total Cost = Cost of production + selling and distribution overheads.

• Calculation of Total Sales

Total Sales = Total cost + net profit.
• A) Sale of Material Scrap = Adjustment
under material consumed

• B) Sale of Factory Scrap = Adjustment under

Factory cost
 Particulars Amount Amount
Opening Stock of Raw Material ***  
Add: Purchase of Raw materials ***  
Add: Purchase Expenses ***  
Less: Closing stock of Raw Materials ***  
Less;- Sale of Material Scrap (if any) ***  
_________  
Raw Materials Consumed ***  
Direct Wages (Labour) ***
Direct Expenses (Chargeable expenses) ***

Prime cost (1)   ***

Add :- Factory Over Heads:    

Factory Rent ***
Factory Power ***
Indirect Material ***
Indirect Wages ***
Supervisor Salary ***
Drawing Office Salary ***
Factory Insurance ***
Factory Asset Depreciation ***
Less:- Sale of Factory Scrap ( If any)
Add: Opening Stock of WIP ***  
Less: Closing Stock of WIP ***
Works cost (2)   ***
Add:- Office and Administration Overheads:-    
Office Rent ***
Asset Depreciation ***
General Charges ***
Audit Fees ***
Bank Charges ***
Counting house Salary ***
Other Office Expenses ***
Cost of Production (3)   ***
Add: Opening stock of Finished Goods ***  
Less: Closing stock of Finished Goods ***
Cost of Goods Sold (4)   ***
Add:- Selling and Distribution OH:-    
Sales man Commission ***
Sales man salary ***
Traveling Expenses ***
Advertisement ***
Delivery man expenses ***
Bad Debts ***
Cost of Sales /Total Cost (5)   ***

Add: Profit   ***

Sales   ***
 Ques.
Calculate Prime cost from the following
information:-
• Opening stock of raw material = Rs. 12,500
• Purchased raw material = Rs. 75,000
• Expenses incurred on raw material = Rs. 5,000
• Closing stock of raw material = Rs. 22,500
• Wages Rs. 47,600
• Direct expenses Rs. 23,400
 Ques.
Calculate works cost or factory cost from the following
details:-
Raw material consumed = Rs 50,000
Direct wages = Rs20, 000
Direct expenses = Rs 10,000
Factory expenses 80% of direct wages
Opening stock of work in progress = Rs 15,000
Closing stock of work in progress = Rs 21,000
Calculate the prime cost, factory cost, cost of production, cost of
sales and profit form the following particulars:
Direct Material 2,08,000
Direct wages 1,45,000
Direct expense 50,000
Lighting: Factory 3,000
Office 1,000
Repair of Plant, Machinery and tools 8,600
Rent, rates, taxes (Factory) 3,000
Rent, rates, taxes (office) 1,000
Advertisement expense 10,000
Salesman salary 3,700
Depreciation written off on machinery, plant and tools 9,100
Depreciation written off on office furniture 600
Director's fees 6,000
Gas and water charges (factory) 1,000
Gas and water charges (office) 300
Office stationery 1,000
Office salaries 9,600
Sundry office expense 3,000
Total sales 6,00,000
 From the following particulars, prepare cost sheet for the year
ended 31.12.2018
Rs
• Stock of finished goods (1.1.2018) 6000
• Stock of raw materials (1.1.2018) 60,000
• Work in progress (1.1.2018) 15,000
• Purchase of raw material 4,55,000
• Factory rent, taxes 7,250
• Other production expenses 43,000
• Stock of finished goods (31.12.2018) 15,000
• Wages 1,75,000
• Work manager salary 20,000
• Factory employees salary 70,000
• Power expenses (factory) 9,500
• General expenses 32,500
• Sales for the year 9,60,000
• Stock of raw material (31.12.2018) 50,000
• Work in progress (31.12.2018) 10,000
 Ques.
Mr. Zia furnishes the following data related to the manufacture of a standard
product during the month of August 2018
• Raw material consumed - Rs 15,000
• Direct labour - Rs 5,000
• Direct expenses - Rs. 4000
• Machine hours worked - 900 hrs.
• Machine hour rate - Rs 5
• Administration overheads - 20% of works cost
• Selling overheads - Rs 0.50 per unit
• Unit produced - 17,100
• Unit sold - 16,000 @ Rs 4 per unit

You are required to prepare a cost sheet from the above showing:-
• The cost per unit, Cost per unit sold and profit for the period
Estimated cost sheet
 Case study
Mr. Raj got an order to manufacture 100
pieces of shirts. Determine selling price
per piece from the following particulars :
Cost of Material Rs. 128 per piece
Total Wages paid to labour (12 workers)
Rs. 6,000
Rent paid for factory Rs. 1,200
Salary paid to staff Rs. 2,000
• If Mr. Raj got another order to manufacture
500 pieces of shirts, You are required to
make an estimation regarding revised
cost of production of shirts.
 Case study
• Consider the same case….

• Mr. Raj got an information that supplier of material

is ready to give discount of Rs. 5 per piece in case
of bulk purchase.
• The order can be completed by hiring 10 workers
only instead of 12. Mr. Raj wants to keep Rs. 2,000
as profit margin.

• Now Estimate cost of production of shirts.

 Ques
From the following particulars prepare the cost and profit statement of Popular Stoves
Manufacturing Co. for the year 2018:
Rs. Rs.
Stock of material as on 1-1-2018 35,000 Establishment expenses 10,000
Stock of material as on 31-12-2018 4,900 Completed stock as on 1-1-2018 nil
Purchases of material 52,500 Completed stock as on 31-12-2018 35,000
Direct wages 95,000 Sales 1,89,000
Factory expenses 17,500

The number of stoves manufactured during the year 2018 was 4,000 . The company wants to
quote for a contract for the supply of 1,000 electric stoves during the year 2019. The stoves to
be quoted are of uniform quality and make and similar to those manufactured in the previous
year; but cost of material has been increased by 15% and cost of factory labour by 10%.

Prepare the statement showing the price to be quoted to give the same % of net profit on
turnover as was realized during the previous year 2018, assuming the cost per unit of
overheads will remain the same as in the previous year.
 Solution
Cost and Profit Statement of Stoves
For the year 2018 (output 4,000 stoves)
Particulars Total Amount (Rs.) Amount per unit (Rs.)
 
Opening stock of material Rs. 35,000
Purchases of material Rs. 52,500 82,600 20.65
Less: closing stock Rs. 4,900
__________
95,000 23.75
 
Value of material consumed
Direct wages
Prime cost 1,77,600 44.40
Add: Factory expenses 17,500 4.37  
Works cost 1,95,100 48.77
Add: Establishment expenses 10,000 2.50  
Cost of production 2,05,100 51.27
 
Opening completed stock Nil
Add: Cost of production during the period 2,05,100
Less: closing completed stock 35,000
Cost of sales 1,70,100
Add: profit (10% on sales) 18,900
Sales 1,89,000
 Solution Cont…
Statement showing Quotation Price for 1,000 Stoves

Particulars Amount (Rs.) Amount

(Rs.)
Material consumed @ Rs. 20.65 per stove 20,650
Add: 15% increase 3,098 23,748
Factory wages 23,750 26,125
Add: 10% increase 2,375
Prime cost 49,873
Add: factory expenses @ Rs. 4.375 per stove 4,375
Works cost 54,248
Add: establishment expenses @ Rs. 2.50 per stove 2,500
Total cost 56,748
Profit ( 10% on selling price or 1/9 of cost) 6,305
Sales 63,053
 Ques.
Following are the particulars for the production of 800 waterproofs of K
Waterproofs Manufactures Ltd. for the year ending 31st march, 2017:
Cost of Material Rs. 32,000, direct wages Rs. 48,000, manufacturing charges Rs.
20,000, office salaries Rs. 24,000, rent and taxes Rs. 4,000, selling expenses Rs.
8,000, general expenses Rs. 12,000 and sales Rs. 1,60,000.
Following estimates were made by the costing department of the company for
the year ending 31st march, 2018:
•The output and sales will be of 1,000 waterproofs.
•The price of material will rise by 25% on the previous year’s level.
•Wages during the year will rise be 12.5%.
•Manufacturing cost will rise in proportion to the combined cost of material and
wages.
•Selling cost per unit will remain unchanged.
•Other expenses will remain unaffected by the rise in output.
From the above information prepare the cost statement showing the price at
which the waterproofs would be marked so as to show a profit of 12.5% on the
selling price.
 Solution
Particulars Amount Per Unit (Rs.)
Material ( 32,000/800 *125/100) 50.00
Direct Wages ( 48,000/800* 225/200) 67.50
Prime cost 117.50
Manufacturing Charges (25% of Prime Cost) 29.375
Works Cost 146.875
Office Salaries 24.00
Rent and Rates 4.00
General Expenses 12.00
Cost of Production 186.875
Selling Expenses ( Rs. 8,000/800) 10.00
Cost of Sales 196.875
Profit 12.5% ( 196.875*12.5/87.5) 28.125
Selling Price 225
 E Ltd. Furnishes the following particulars for 10,000 units of a product manufactured
for the year 2018, prepare estimated cost sheet for the year 2019 assuming that
15,000 units will be produced and sold.
Rs
• Material 90000
• Wages 60,000
• Power and consumable stores 12,000
• Indirect wages 15,000
• Factory lighting 5,500
• Plant repairs 11,500
• Plant Depreciation 3,000
• Manager salary 33,500
• Selling expenses 5,500
• Sales for the year 3,16,000
It is estimated that the selling price will reduce to Rs. 31 per unit.
QuiZ !!
 MCQ
Direct expenses are also called as---

A.major expenses
B.chargeable expenses
C.overhead expenses
D.sundry expenses
 MCQ
Indirect material used in production is
classified as _____
• A.office overhead
• B.selling overhead
• C.distribution overhead
• D.factory overhead
 MCQ
Warehouse Rent is a part of ______
• A.prime cost
• B.factory cost
• C.distribution cost
• D.production cost
 MCQ
Total of all direct costs are termed as ____
• A.prime cost
• B.works cost
• C.cost of sales
• D.cost of production