SUMMARY AND KEY TERMS

Outputcosting, also known as single costing, is a method of cost

which is used in those industriesin which production
ascertainment,
consistsof a single product or a •fewvarieties of the same product, like
cementindustry, steel mills, paper mills and sugar mills.
Forascertainment of the cost of products, a cost sheet is prepared. Cost
sheetis a periodical statement of cost, designed to show in detail,the
variouselements of cost of goods produced like prime cost, factory cost,
costof production and total cost.
i Costsheet reveals the total cost and cost per unit of goods produced.
A Costsheet is also prepared to determine the price to be quoted. In such a
situation,an estimated cost sheet is prepared in which a fixed percentage
price to
Ofprofit is added in the estimated total cost to arrive at the selling
bequoted.

EXAMINATION QUESTIONS

theoretical
Questions
l. Whatis unit or output costing? In what industries is it used?
2. Whatis a cost sheet? Explain the purposes served by it.

Practical
Questions
during the four weeks
the manufacturing of a standard product
@The following data relate to
endingon 31 March 2012: oo,ooo
Rawmaterials consumed
{12,000
Directwages
6.34 0 Output or Unit Costing (Cost Sheet)
I
,OOOhours
Machine-hours worked
? 2 per hour
Machine-hour ratc
20% on
Oflicc overhead Works
(0.40 per cost
Selling overheads unit
20,000 units
Units produced
18,000 units
Units sold at {3 each
(B. Com.,
Prepare a Cost Sheet and show the profit. Bangalore) 5
The following information is given to you
2. A factory produces a standard product.
ended 31 July 2012:
you are required to prepare a 'Cost Sheet' for the period
Consumable materials:
Opening stock 10,000
Purchases 85,000
Closing stock 4,000
Direct wages 20,000
Other direct expenses 10,000
Factory overheads 100% of direct labour
Office overheads 10% of works cost
Selling and distribution expenses per unit sold
Units of finished product:
In hand at the beginning of the period Units 1,000 (value æ16,000)
Produced during the period 10,000 units
In hand at the end of the period 2,000 units
Also, find out 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. There was no work-in-progress either at the
beginning or at the end of the period. (B. com., Delhi)
3. Z company is manufacturing transistor sets and the following details are furnished with respect
to its factory operations for the year ended 31 December 2010.
Raw materials:
Purchases 40,000
Opening stock 8,000
Closing stock 6,000
Direct labour 28,000
Manufacturing expenses 8,500
Office and administration expenses 5,300
Work-in-progress: Opening Closing
Materials æl,ooo RI,500
Labour æ1,200 RI ,400
Manufacturing expenses
Total •2,800 0,600
During the year, 600 sets are produced. Prepare a Statement of Cost of Productions
4. Calculate the prime cost from the following:

Opening stock of raw materials 3,000

Purchases 60,000
 Output or Unit Costing (cos/ Sheet) C] 6.35

Closingstock of raw matertals 5,000

Wages 42.000
CAITiagc inwards 6,000
Camagc outwards 12,000
Directexpenses 4.000
Indirect expenses 6,000
Salanes 12.000
Co. manufactures two types of pens P and Q. The cost datc for thc ycar cndcd 30 Scptcmbcr
2010is as follows:

Directmaterials 4.00,ooo
Direct wages 224,000
Productionoverheads 96.000

It is liltlher ascertained that:

(a) Direct materials in type P cost twice as much direct materials in type Q.
(b) Direct wages for type Q were 60% of those for type P.
(c) Productionoverhead cost was same for both types.
(d) Administration overheads for each were 200% ofdirect labour.
(e) Selling costs were 50 paise per pen sold for both types.
(f) Production during the year:
Type P 40,000
Type Q
(g) Sales during the year:
Type P 36,000
Type Q
(h) Selling prices were per pen for the type P and per for the type Q.
Prepare a statement showing per unit Cost of Production, Tötal Cost, Profit and also the
Total Sales Value separately, for two types of pens P and Q. (ICWAliner)
6. ABC Ltd is manufacturing coolers and the following details are Kit-nishedfor the year ended 31
December2010:

Work-in-processI January2010:
At prime cost 51,000
Manufacturing expenses 25,000
Work-in-process 31 December 2010:
At prime cost 45,000
Manufacturing expenses 20.000
Stock of raw materials, I January 2010
Purchasesof raw materials
Direct labour 1,[Link]
Manufacturing expenses 84,000
Stock of raw materials on 31 December 2010
On the basis of the above data, prepare a statement showing the cost Of prodüction.
(CA, Adapted)
6.36 Output or Unit Costing (Cost Sheet)

Ltd disclosc the following information for the six

7. The accounts of J K Entctpriscs
ending 31 December 2010:

150,000
Materials used
Production wages
Factory overhead expenses 24,000
17,640
Establishment and general expenses
calculate the price which the company
Prepare a Cost Sheet of the machines and
materials valued at «l ,250 and
quote for the manufacture ofa machine requiring
yield a profit of 20% on the sellingpte
o productive wages of {750, so that the price may
product, the cost data for which
8. A firm has purchased a plant to manufacture a new
below:
Estimated annual sales 24,000
Estimated costs:
Materials per unit

Direct labour {0.60 per unit

Overheads 04,000per
Adm. expenses 08,-800 per year
Selling expenses 15% ofsales
Calculate the selling price if profit per unit is *1.02 (lcvr,untü'
9 The following information relates to a commodity for the half year ended 30 June2010:

Purchase of raw materials.

Direct wages
Rent, rates, insurance and works oncost • 44,000
Carriage inward 1,584
Stock on I January 2010
Raw materials . 22,000
Finished products (1,600 Tonnes)' 17,600
Stock on 30 June 2010
Raw materials • 24,464
Finished products (3,200 Tonnes)
Work-in-progress I January 2010 • 5,280
Work-in-progress 30 June 2010 • 17,600
Cost of factory supervision • 8,800
Sales of finished products
Advertising, discounts allowed and selling
cost 75 paise per tonne sold. 25,600
commodity was produced during the period.
You are required to prepare a cost
statement showing the cost and profit•
O. Modern Manufacturing Company
submits the following information on 31 March 2010'
Sales for the year
Inventories at the beginning of the
year:
Finished goods o,ooo
Work-in-progress (4,000
Purchases of materials: •
Materials inventory at the beginning (3,000
of the year
 Output or Unit
Costing (Cost Sheet) Cl 6.37
End of the year inventory e
Direct labour
Factory overheads were 60% of the direct æ65,ooo
Inventoriesat the end of the year labour cost.
were :
Work-in-progress
Finished goods
Otherexpenses for the year were: o,ooo
Selling expenses 10% of sales
Administrative expenses 5%
of sales.
Prepare statement of cost.
[Link] and records of Acme
Manufacturers present the
following data for the month of
Direct labour cost
06,000 (160% of factory overheads)
z'¯cost of goods sold
e6,ooo
Inventoryaccounts showed the following
opening and closing balances:
I January 31January
Raw materials
8,000 8,600
Work-in-progress
8,000 12,000
Finished goods
14,000 18,000
Sellingexpenses
3,400
Generaland administration expenses
2,600
Salesfor the months
75,000
Youare required to prepare a cost sheet showing cost of
goods manufactured and sold and
profit earned.
(CA, CSInter)
12. Rohit has a small furniture factory. He specializes in the manufacture
of small tables of
standardsize of which he can make 15,000 in a year. The cost per table
worked out as under
for the year 2009—10,when he made and sold 10,000 tables.

Materials 30
Labour 10
Overheads (fixed) recovered@ 50% of material cost 15
Total Cost 55

Prices are fixed by adding a standard margin of 10% to the total cost arrived at as above.
In 2010—11due to fall in the cost of materials, total cost worked out as under:

Materials 20
Labour 10
Overheads recovered @ 50% of material cost 10
Totalcost 40

Mr Rohit maintained a margin of 10% on the cost of sales. Sales were at the same level as in
2009—10. You are asked to:
(a) Determine profit or loss for the year
(b) Compute the price which should have been charged in 2010—11to yield the same profit
or loss as in 2010—11. (ICWA Inter)
6.38 Output or Unit Costing (Cost Sheet)
comprises:
3. The cost ofjnanuracturing 5,000 units of a commodity

Materials 20,000
Wages
Chargeable expenses 400
Fixed overheads 16,000
Variable overheads 4,000
units of the commodity, the cost of production
For manufacturing every I ,()0()extra
increases as follows:
Materials: Proportionately
Wages: 10% less than proportionately
Chargeable expenses: No extra cost
Fixed overheads: {200 extra
Variable overheads: 25% less than proportionately
You are required to:
(a) Calculate the estimated cost of producing 8,000 units of the commodity
(b) Show by how much it would differ if a flatrate of factory overhead based on wageswere
charged.
14. The cost structure of an article the selling price of which is «5,000 is as follows :
Direct materials 50%
Direct labour 20%
Overheads 30%
An increase of 15% in the cost ofmaterials and of 25% in the cost of labour is anticipated
These increased costs in relation to the present selling price would cause a 25% decreaseinthe
amount of present profit per article.
You are required:
(1) To prepare a statement of profit per article at present, and
(2) To compute the revised selling price to produce the same percentage of profit to salesas
before. (CA Inter)
15. Bajaj Enterprises is a manufacturer of scooters. It finds that in 2009, it cost to
manufacture 175 scooters which it sold for €5,400 each. The cost was made up Of:

Materials
Direct wages
Factory overheads 48,600
Office overheads 65,460
For the year 2010, it is estimated that:
(a) Each scooter will require materials oft 1,600
and labour oftl ,800.
(b) Factory overheads will bear the same
relation to wages as in the previous year•
(c) Office overheads percentage on factory cost
will be the same as in the past,
You are required to prepare a statement
showing the profit it would make per scooterlf
the price of the scooter is increased by 000.
6. elevision Entgrprises supply you the following
information for 10,000TV
valves
manufactured during the year ending 31.12.2009:

Direct materials 90,000

Direct wages 60,000
 Output o/ Una (Coo Sheet) 0 6.39
powersod consumable stores
indireo wages
lughong Of factory 5.500
Defectivewoo (cost of rectification) — O
salaries and managctncn' expenses —
opmse•.
proceeds of .
rcpa.r. and rnmntcnancm•and dcpreoa%on
net sellinp prjcc ('j pct unit sold and all units were sold,
I January 201 sclljnp prjcc was reduced to 'j pct umt It was
moductton cooid bc gncreascrf•n 200%,by duc to spare capacjty Pates malcnals
"d djred wage Will increase by 10'%,.
Yooare requjrcd to preparer
•beet for Ihc ycar variou%clcrncnt%of cost pct unit' and
(h) cost and 't%tcrncnt fin 2010 awurnjngthat units will bcproduced
and dunnp tbc year and [hctory ovcrbcad%Will bc rccovcrcd a percentageof direct
wage and office and %cljing a pcrccntagc of works cost. (CA Inter)
A %rnbcrMerchant purcha%cd [Link] of timbcr on I October at per c.f
thon in tijnbcr yard for J/jonth% wavjning. In thc timber yard, the following
ofcxpcnse.%wcrc incurrcd during scasoning pcriod:
(O Rentor the yard (arca p.m.
(j) Salanc•aof watch and ward ror pcrsorj%at ? p.m. each
(ii/) Incjdcntal expentc% [Or maintcnancc, lighting, ctc., at 50 p.m.
(IV) Annual 'sharc of zcncral ovcrhcad% of the
(v) Insuranu: chargcd of thc to bc %casoncdat J% p.a. on the value of the unseasoned
lop for thc perjod of
floor arca of lhc yard ha" bccn wt apart for scasoning of the timber and the
remmmngarca Tor%toring %tmoncd timbcr.
Lou in•volurncof Jog%duc to
Calculatc thc %CjJingratc ofthc %casonedlogs on J April 2011 so that 10% profit on the
may bc carnc/j. (ICWA inter)
are
a) parliculars obtaincd from the rccord%ofM/%. Jeevan Industries for the year 2012
pycn bcJow:

Opening Stock
• I .40,OOO
[Link] matcjial%
unit") 20.000
frini%hcdgood", (J
Purchasc% ,
180.000
wagc.%
70,000
Pacfory ovcrhcad% •
40,000
Office ovcrbcad% .
9.600
%cjjing ovcrjjcad% 928,000
%ajcs (3,200 units)
Clming %tocV— 19.600
Raw Material".
J/ini%hcd good% units)
 6.40 Output or Unit Costing (Cost Sheet)

(b) Prepare a cost sheet showing prime cost, factory cost, cost of production,
total
sales per unit. cost
During 2013 the industry expects to receive an order for 5,000 units. It is
estimated
(i) the prices ofraw materials and factory wages will rise by and that
respectively
(ii) there will be no change in the total factory overheads and office overheads.
(iii) Selling overheads per unit will remain the same.
Prepare an estimated cost sheet. The factory intends to earn the same rateof profit

(B. coon
19. The summarized Trading and Profit and Loss Account ofa Company for

To Cost of Materials By Sales

To Direct Wages
To Manufacturing Expenses 80,000
To Gross Profit

To Staff Salaries 60,000 By Gross Profit 250,000

To Rent and Rates 10,000
To Selling Expenses 50,000
To General Expenses
To Net Profit 90,000

During the year the companymanufactured2,000 motors.

For the year ending 30 September2009 is estimated that:
(a) Output and sales will be 2,100 mini motors.
(b) Price of materials will rise by 30% on the previours year's strend.
(c) Wage rates will rise by 33% %
(d) Manufacturing cost will rise by 25%.
(e) A bonus of 1/6 of salary is expected to be paid to office staff.
V) Selling cost and other expenses will rise in propoliion to the cost of materials.
You are required to submit a statement for the directors showing the price at whichthe
motors should be marketed so as to show a profit of 10% on the selling price.
(M. Com., Kerala)

20. From the following information prepare a cost sheet for the year ending 31-3-2009:

Raw Materials Used: Direct Labour:

Ll— 6 skilled workers @ 00 per day
for300
Mi. 200 tonnes @ {100 per tonne
days
M : 800 tonnes @ per tonne la—8 Unskilled workers @ perdayfor
300 days.
M3.•1,000 tonnes @ 00 per tonne
Direct expenses t 15,000
Factory overheads 75% of direct wages
Office overhead—10% of works cost
Selling overheads per unit sold
Units produced and sold during the month are 15,000 units. The company Adapted)
of 20% on selling price. (l.c. [Link];
 Output or Unit Costing (Cost Sheet) C] 6.41

ANSWERS

pra cticalQuestions
{10,080
l. profit
price 01.96 per unit
2. Sclling
production per set
3. Costof
[Hint: Total amount of opening and
closing stocks of work-in-progress
may be adjusted in factory cost]

5. Profitper unit P {2.90; Q {3.30

6. primecost {6, 75,000; Cost of production
7. Quotationprice 0,848.75
[Hint: Absorb factory overheads as a % of
wages and establishment and
general expenses as a % of works cost.]
8, Sellingprice 0.20 per unit, Cost of production
[Hint: Assume sales as 'x']
9. Costof production Value of finished stock 05,200; Profit
10. Profit 03,750
11. Profit 5,600; Purchases 06,000
[Hint: Purchases are calculated by working backward from the cost of goods
sold.]
12. Profit2009-10 es,ooo, Price 2010-11<50.50 per unit
[Hint: Fixed overheads are to be taken at
13. (a) (b)
14. Profit05,000; Revised profit 6,875; Revised selling price
15. Profit «1,563 per scooter
16. Prime cost Works cost
Cost of sales Profit
Estimatedprofit for 2010 08,900.
17. Totalcost <1 Sales value of 9,000 [Link] Profit Selling price
per [Link]
[Hint: Loss in Volume of logs @ 10% of 10,000, i.e., 1,000 [Link]
has been treated as normal loss. Thus quantity for sale is 9,000 [Link]]
18. Profit in 2012 Profit in 2013 Rate of proift 35.29% on total cost.
19. Selling price 048.14 per motor, total sales Z7,31,111.
20. sales