st AccoT

4.66
by the following
to the jobMachine
methods
chargeable hour rate () DiDelhi:
(B. Com., rect
charges (i)
Calculate the overhead Labour hou rate, and
The percentage
12. Cost rate, (ü) relates to
followinginformation 2,8801
3,200, (üi) the activities of a production department for a certan periot
?4,000, (iü) Rs,
[Ans.
a factory:
{ 72,000
Materials used { 60,000
Direct wages
Hours of machine
Labour hours worked
operation 20,000000
24,
department { 48,000
to the the relevant data
Overheads chargeable
department during the period, were :
out in the { 4,000
order carried
On oneMaterials used
Labour hours
1,650
{ 3,300
Direct wages 1,200
Machine hours this order by using the following three
Prepare a
comparative statement of
cost of
methods
Rate Method; (ii) Machine Hour Rat
recovery of overheads : Method: (1) Direct Labour Cost
Hour Rate
() Direct Labour (B. Com., Delhi, Caliat
Method.
10,180]
10,600: () 9,940; (i~1) 2
[Ans. Works Cost (1)
of Supreme Industries for the year 2007.
the budget
13. The following is ? 56,000
Factory overheads 84,000
Direct material cost 1,12,000
Direct labour cost
Direct labour hours 28,000 on account of repairs,
etc.)
2,000 hrs. as idle hours
Machine hours 58,000 (includes following methods :
prepare the overhead absorption rates using the
() From the above figures, method,
(a) Direct material cost percentage
method,
(b) Direct labour cost percentage
(c) Direct labour hour, and
(d) Machine hour. application of each of tit
comparative statement of works cost showing the result of
(ii) Prepare a data :
above rates to job order No. 707 from the following 7 40
Direct material cost
7 80
Direct labour cost
40 (B. Com. Delhi)
Direct labour hours
45
Machine hours
(Ans. (1) (a) 66.67%, (b) 50%, (c) ? 2; (d) Re. 1 : operations
(i) (a) ? 166, (b) 160. (c) ? 200, (d) ? 165] machine op
and
14. Atlas Engineering Lrd. acepts averiety of jobs which require both manual
The Profit and Loss Account for the period 2011-2012 is as follows : lakhs ofrupees
(In
75
Sales
Cost
Direct materials 10
Dverheads 4.67

Directlabour
5
PrimeCost
ProductionOverhead 15
Production Cost 30
45
Administrative, Selling and Distribution Overheads
15 60
Profit
15
Other data:
the period
Labour hours for period 25,000
Machine hours for the 15,000
of jobs for the period
No. has been received recently from a customer and the production
Anenquiry 300
department has prepared
of
following estimate the prime cost required for the job :
the

Directmaterial 2,500
Directlabour 2,000
Prime Cost 4,500
required = 80; Machine hours for the period =50
Labour hours
required to
(a) are
You Calculate by different methods, six overhead absorption rates for absorption of overhead and
each.
comment on the suitability of
(b) Calculate the production overhead cost of the order based on each of the above rates.
(ICWA Inter)
[Ans.
9% of material %of labour %of prime cost MHR DLHR
Rate per unit
300% 600% 200% 200 ? 120
Rate 10,000
Overhead () 7,500 12,000 9,000 10,000 9.600 10,000]
Camnute the machine hour rate in respect or machine No. 1 from the following information:
Cost of the machine ?11,000. Scrap value ? 1,000
Effective working life of the machine 10,000 hours
Repairs for the effective life period 71,500
Standing charges for the month (for 40 machines of equal size) ? 1,600
Number of hours in a month 120
Power consumption for the machine is 6 units per hour at 10 paise per unit. (B. Com., Madras)
[Ans. 2.08]
16. Calculate machine hour rate :
Cost of machine Rs, 18,700
Estimated scrap value after the expiry of its useful life of 9 years 700
Annual running time of the machine 4,000 hours
Power consumed by machine 5 units per hour
Rate of power 8 paise per unit
Annual factory expenses ?9,120
Charge one-sixth of the annual factory expenses to the machine in question. (B. Com., Delhi)
17.
[Ans. 1.28]
Calculate the
1. Bought of
machine hour rate from the following details :
2.
Instal ationmachinery 45,000
charges 5,000
4.68

years
3. Life of machine 5
per Vear 2,500
4. Working hours
Repairs charges 75% of depreciation per hour @15 paise per
5. consumed: 10 units unit
6. Electic power
hours
Lubricating oil 4 per day of 8
7.
mable stores @R 10 per day of hours
8. Cons per day of 8 hours
@ 8
9. Wages of machine operator
Ans. 2.55)
18. Calculate the machine
Cost of machine
hour rate for machine A from the following date :
716,000
([Link].
Estimated scrap value 7 1,000
Effective working life 10,000 hours
Running time per four-weekly period 160 hours
Average cost of repairs and maintenance charges per four
weekly period 7 120
Stzanding charges allocated to machine Aper four-weekly period 40
Power used by machine 4 units per hour
paise an hour at a cost j
[Ans. 3]
19. Compute a machine hour rate so as to cover the overhead
Per hour
expenses given below : ([Link].
Per annum
Electric pOwer 75 p.
Steam
20 p.
Water 5 p.
Repairs 680
Rent
Other information available is : 350
?Original cost of machine
Present Book Value 15,000
Replacement Value 3,000
Rate of depreciation 10.000
Running hours of the machine 10% per annum
2,400 per annum
(Ans. ? 2.05) (B. Com., Atr
[Rint. Depreciation has been
20. A machine calculated on the
costing 20,000 is expected to run fororiginal cost of machine.]
estimated to be worth? 2,000. 10 years at the end of which its scrap val
be 1,800 and the
machine Installation charges ?
is expected to run are 200. Repairs for 10
yearslife is estinate!"
would be 15 units per hour for 2,190 hours in a year. Its power consumpof
department and has two pointsat5
of his time to this
out [Link] lighting. The foreman has1/4th
The machine
occupies to devote area
of the about1.
machine.
p.m. The foreman is paid a The rent for the lighting
p.a. and expenses on oil, salary of ? 960 departmentis 300 p.m. and charges for is
p.m. Find out the insurance
etc., are 9 per
month. hourly rate, assuming
[Ans. Machine Hour Rate ? Hons. Delhi Bang
4.059] (B. Com.,
 4.69
Overheads

hour rate from the following particulars :

Calculate machine
21. machine ?23,000.
Cost ofthe hours.
(a) life 15,000
(h) Estimated scrap value 500.
(c)Estimated working hour per annum 2,000.
Estimated
Amounttaken as loaan at 10% to purchase the machine 15,000 (balance being provided by the
(a)
(e)firm itself)
hour @10 paise per unit.
Power 20 units per 1,500.
() and maintenance per annum
(g) Repairs of operators 2(looking after three other machines also).
() Number operator per month 200.
() Wages per chargeable to the machine 2,400 p.a.
() Overheadspremium per annum is 1% ot the cost of the machine. (B. Com. Osmania)
(k) Insurance
(Ans. 6.17]
not been included but wages of operator have been included.]
[Hint:.Interest has of 5% at the end of its effective life
machine costs 7 90,000 and is deemed to have a scrap value
22, A per annum but it is estimated
years). Ordinarily the machine is expected to run for 2,400 hours
(19 maintenance and further 750 hours will be lost due
at 150hours will be lost tor normal repairs and
The other details in respect of the machine shop are :
to staggering. and provident fund contribution of each of two operators (each operator
(a) Wages, bonus machines) 6,000 per year
is incharge of two 3,000 per year
the shop
(b) Rent and rates of 250 per month
shop
(c) General lighting of the 200 per quarter
the machine
(d) Insurance premium for 250 per month
machine
(e) Cost of repairs and maintenance per 500 per month
) Shop supervisor's salary hour-20 units/rate of
(a) Power consumption of the machine per
power per 100 units 10 4,000 per year
(h) Other factory overhead attributable to the shop 1/5th of his time
is expected to devote
There are four identical machines in the shop. The supervisor hour rate from the above details.
machine
for supervising the machine. Compute a comprehensive (B. Com. Hons., Delhi)
[Ans. 12]
[Hint : 1. Computation of Machine Hours Hours
2,400
Annual working hours
150
Less : (a) Required for normal maintenance and repairs 900
750
(b) Hours lost due to staggering
1,500
Normal working hours per annum
Hours lost due to staggering have been treated as normal loSs.
including direct wages of machine operators.
C. Lomprehensive machine hour rate means a rate
c3. rom the following particulars. calculate the Machine Hour Rate :
Total machine hours worked 2,200 p.a.
Setting up time 200 hours.
Expenses for the Machine : 6,000 p.a.
Rent
4.70

Lighting 600 p.a.

Repairs 1,200 p.a.
machines were paid 60 per month 2,400 p.a.
Supervision
Two attendants looking after four
machine 10units per hour at the
rate of? 20 per 100 units. Cost each. Power
of the machine
at the end is estimated at 600. Life period 16,000 hours.
240 per month.
Sundry supplies for the machine shop machine shop. Supervisor
is expected to
c,[Link]
There are four identical machines in the
equally for all the machines.
devote
[Ans. 7.24)
24. In a actory department, a machine costs
hours and its scrap value is estimated at
1,500.
11,500. It is expected that

area of
it will work
for
([Link].,bout
The rent for the department is 400 p. m. and 25% of the the
conducting the operation of the machine.
One foreman and an operator are employed on a salary of 800 and depar
400 p.m.
tment
on one more machine of a similar type.
The other expenses for the month in the department are as follows : respectivey t
Light charges for the department 80, having 16 light points in all. out of
used at this machine. Total power consumed for two machines of equal H.P. iswhich
[Link]
4
for the machine is 50 and repairs 40.
You are required to compute the machine hour rate for the month when it
is
hours a week.
[Ans. ? 6.56]
expected to
(B. Com., work
Bang:
25. In afactory department, there are three machines to which the
Machine A
following expenses have been aloce:
639
B 607
951
In addition, there is an overhead crane to bring materials to the
allocated to this machine are 570. ; machine as necessary. The ere
During the period of expenditure, the machines were used as
follows :
Machine A Machine B Machine C
Hrs. Hrs.
With use of crane Hrs.
160
Without use of cane 130 480
428
Total 577
588
707 480
Calculate machine hour rate for each machine
used and those in which it is
not. distinquishing between the hours in wnici
[Ans. Without crane ? 1.09. Re. 0.86,
[Hint. This is similar to 1.98 With crane 1.83,
Problem 4.16 1.60, * [Link] J
26. A machine was solved)
was ? 75 lakhs. purchased for 5
The following lakhs. The total cost of al inclusive of the new n
Expected life of the machine 10further particulars are availablemachinery
Scrap value at the end of years
ten years
Repairs and maintenance for the ?5,000
Expected number of working hoursmachine during the
Insurance premium annually for all ofthethe machine peryear? 2,000.
year 4,000 hours.
machines 4,500
 4.71

Overheads

for the machine per hour ( 75 paise per unit) 25 units.

consumption
Electricity machine 100 sq. ft.
occupiedbythe machines 1,500 sq. ft.
Area
occupied by other
Area department 800. for the
month of the department, out of which three points are
per points for the whole
Rent charges for 20
Lighting month
120per of the data givern above.
machine ? the new machine on the basis
(B. Com., Hons., Delhi)
machine hour rate for
Compute the
-31.9041 rates. The
Machine Hour
Rate
applies overheads on the basis of pre-determined
[Ans.
uses a
historical cost system and the company for the year ended 31st
March, 2023
XYZCo. available from the records of
27. followingdata are
8,50,000
Manufacturing overhead incurred
7,50,000
Manufacturing overhead applied 2,40,000
Work-in-progress 4,80,000
Finished goods stock 16,80,000
Cost of goods sold absorbed overhead showing the implication
of
disposal of under Delhi)
supplementary rate methodcompany.
for (B. Com. Hons.
Apply profit of the 70,000, WIP 10,000 and
the method on the overhead 1,00,000 to be charged to cost of sales
fAne IInder-absorbed and
finished goods 20,000.]
2.50 per direct labour hour. Both opening
at
absorbs factory overhead costs
a0 Baban Industries work-in-progress and finished goods inventories arebeen zero. The following data are
sold:
closing balances of 2007 and the fact that all goods produced have
available for the year 50,000
Direct labour hours used 7 1,00,000
Direct labour cost 25,000
Indirect labour cost 10,000
Indirect materials cost 50,000
Depreciation of plant and equipment 750,000
Miscellaneous factory overheads
calculate factory overheads incurred and factory
sold,
Assuming that all goods
produced have been (B. Com., Hons. Delhi)
overhead absorbed.
hour.]
0.20 per direct labour
[Ans. Supplementary rate Re.
 Unitor Output Costing
CHAPTER

5 (Cost Sheet)
Chapter Outline
Sheet, Production Statement, Treatment of Stocks, Items not
Introduction, Cost Exhaustive Cost Sheet, Treatment of Administration
Cost Sheet, Problems and
includedin Price Quotations and Estimated Cost Sheets,
and1 Scrap,
Overhead Examination Questions.
Solutions,

Introduction
costing or unit costing is a method of cost ascertainment which is used in
Output costing,singlehave the following features
:
those industries which product with variations
Production consists of a single product or a few varieties of the same
()
etc., and
in size, shape, quality, continuous basis. Output Costing is used in
is uniform and on
(i) Production commonly used are " Steel mills
industries in which this method is
Examples of " Brick works
steel, sugar, paper, brick works, quarries, breweries, dairies, " Paper mills
cement, a tonne of cement or steel or
ptc. Cost units in these industries are "Breweries
gallon of milk, etc.
Sugar, 1,000 bricks, a barrel of beer, a "Cement mills, etc.

Costing Procedure
Cost Sheet' is prepared periodically.
In order to ascertain cost of products, a statement known as
cost per unit is the average cost. It is
As the production is uniform and cost units are identical, the cost sheet is designed to
ascertained by dividing the total cost by the number of units produced. The
show the total cost as well as cost per unit of output for the given penod.

COST SHEET

Meaning of Cost Sheet

of total
AcOst sheet is a statement that is prepared periodically to show the various components
OT aproduct. It also shows data of the previous period for comparison. It can compute the selling
prce product by adding profit in the total cost. A cost sheet can be prepared either by using
historical/ actual cost or on the basis of estimated costs.
detailed
eet lS defined by C1MA, U.K. as "a document which provides for the assembly of the
cOst of a cost centre or cost
unit."
5.1
 5.2

components of
Thus cost sheet shows in detail the vanous cost
and total cost. It is prepared at regularof
factory cost of production goods
quarterty yearily etc. Comparative figures of the Drevious period also
so that assessment can be made about the progress of the business.
Production Statement
used
may
intervals, prSOhoducedwn
he e.g.,
inWeek Ihe
The term Production Statement is
statement is an expanded form of a cost interchangeably
sheet In with
addition to costcost sheet
o

includes items of sales stocks and profits. When the

showm in a T-shape account, it is known as Production
[Link]
details of cost sheet
Account. Other names Howepvreorduciotnhe p
a
and Statement of cost and Profit.
Purposes. Cost shet serves the following purposes:
1 treveals the total cost and cost per unit of
goods
2. t discioses the break-up of total cost into differentproduced
prOusedductioaren Cossttates

3. It provdes a comparative study of the cost of

previous period. currentcomponents of
cost.
period with that of
4. It acts as a guide to
management in fixation of selling prices the oresy
and
Method of Preparing Cost Sheet
ACOst sheet is prepared by
clarifying costs according to elements
quotation of tende
overhead.
1 Mateniais - Cost of materials includes
pu:chases, eq., camiage inward, octroi, custom cost of materials purchased plus
materials, labs
all
2. Labour - Adistinction is to be made duty on imported materials, etc tea expenses
cost which is also known as between direct labour and
unproductve wages are added in the factory
indirect
productive wages, is taken in the prime cost. labour. Direct
Indirect labee
3. Overheads - Overheads are overhead.
() Factory Overhead.
classified into three broad categories :
(ö) Offce Overhead.
(i) Selling and Distribution Overhead.
Treatment of Stocks
Socks may be of
of firished goods. three types : (a) Stocks of raw materials. (b) Stocks of
(0) Stock of Raw
work-in-progress. (0)

calculating the value of Materials.

raw
In cost sheet, materials
consumed in production raw ae s
added in purchases and the materials consumed during
value of closing stock is the period, opening stock of mate
ezample with assumed fiqures, the treatment of stock ofsubtracted from purchases. n
raw material has been shoWn :

Add: Operúng stock of raw materials 30,000

Purchases 80,000

Less: 1,10,000
Closing stock of raw materials 17,000
Cost ofmaterials consumed 93,000
(b) Stock of Work-in-Progress. This is the stock of semi-finished goods, i.e., the goodswhit
in manufacturing process. The cost of work-in-progress consists of cost of materials consumed
 Sheet) sheet,
Costing(Cost the
preparation of cost stock
in Opening
Output
factory overhead. [Link] of factory cost. figure. In the
Unitor of the at the subtracted from this
proportionate partwork-in-progress are adjusted
stock is
work-in-progress.
stocks of and closing the stock of
cost treatment of
added to works
and a closing
wages and is assumed to show the
work-in-progress
opening have
h been 93,000
example. figures 22,000
of
following Direct materialsconsumed 5,000
1,20,000
Direct wages
Direct expenses Prime Cost 24,000
1,44,000
Factoryoverhead 14,000
Add: work-in-progress 1.58.000
8,000
stock of
Add : Opening 1,50,000
work-in-progresS Cost
stock of Works Cost or Factory The
Less:
Closing calculation of cost of production.
resulting
the
is adjusted afterfrom the cost of production. The
Finished Goods. This stock figures :
Sttock of and closing stock is subtracted continuing the same assumed
added to below,
(c) This is shown
stock is
opening be the Cost of Goods Sold. 1,50.000
figure will Factory cost 10,000
1,60,000
Add: Administration overhead Cost of Production 30,000

finished qoods 1,90,000

Add : Opening stock of 22,000
goods 1,68,000
stock of finished Cost of Goods
Sold
Less: Closing
in the question, it will be
goods is not given
the value of closing stock of finished
Note. In case cost of production. specimen cost sheet.
valued at the current illustrated in the following
stocks is
treatment of the above three types of
The
Administrative Overheads into
Treatment of Administrative Overheads need to be analysedother
Accounting Standards in India, the relating to production activities i.e., Cost
Cost those not the
As per
related to production activities and to production activities shall be included inactivities
those overhead in relation than manufacturing
activities. The administrative relation to activities other the cost of
Production. Administrative overhead in
management, etc. shall be excluded from added in
of office expenses, project activities are
eg., narketing, corporate administrative overhead relating to production in nature i.e., are
production. This means that Production. If administrative overheads are general with selling and
of
Works Cost to arrive at Cost activities, this is taken after cost of production along
not relating to production cost of sales.
distribution overhead to arrive at total cost or overhead may be given. If it is not, then administrative
administrative
questions, the nature of related to production activities or it may be assumed that those are
to be
ed may be assumed to be production activities or alternatively these may be assumedtreated
are
Darl nature i.e., not related to and partly general in nature. In Cost Sheet, these below.
aclated to production activities overhead is shown in the Specimen Cost Sheet given on
dngy. Treatment of administrative
5.4

Specimen Cost Sheet for the period. Cost Accu

Production units.

Particulars
Total cost
Opening stock of raw maternals XXX
Cost per n
Add: Purchases XXX
Add: Expenses on puchases XXX
XXX
Less : Closing stock of raw matenals XXX
Cost of material consumed
Direct wages
Direct expenses
Prime Cost
Add. Factory overhead
Add : Opening stock of work-in-progress
Less: Closing stock of work-in-progress
Factory or Works Cost
Add Administrative overhead related to
production activities
Cost of Production
Add: Opening stock of firished goods
Less : Closing stock of finished goods
Cost of Goods Sold
Add : Selling and distribution overhead
Add : Administration overheads
(General)
Cost of Sales
Profit ( or Loss)
Sales
Illustration 5.1
The Bangalore Ltd. supplies you the following information and
requires you to prepare a cost sheet.
Stock of raw materiais on ist Sept.,
Stock of raw materials on 3Oth Sept.,2022
2022 75,000
Direct wages 91,500
Indirect wages 52,500
Sales
2,750
Work-in-progress on 1st Sept., 2022 2,00,000
Work-in-progress on 30th Sept., 2022 28,000
Purchases of raw materials
35.000
Factory rent, rates and power
Depreciation of plant and machinery 66,000
Expenses on purchases 15.000
3,500
Carriage outward
1,500
Advertising 2,500
Office rent and taxes
Travellers' wages and commission 3,500
Stock of finished goods on 1st Sept., 2022 2,500
Stock of finished goods on 30th Sept., 2022 6.500
54,000
31,000
(B. Com.. Delhi. Andhra)
 Sheet)
Output
Costing(Cost 5.5

nit
or Cost Sheet
for the Month ending 30th Sept., 2022
Solution

Stock ofraw
material (1st Sept.) 75,000
Opening 66,000
Expenses
onpurchases
Purchases 1,500

material (30th Sept.) 1,42,500

Stock of
raw 91,500
Closing
Materialsconsumed 51,000
Directwages
52,500
Prime Cost
1,03,500
Work-in-progress (1st Sept.) 28,000
Opening
FactoryOverheads:
2,750
Indirect wages power
rates and 15.000
Factoryrent, annd machinery 3,500 21,250
Depreciation of plant
1,52,750
Sept.)
Work-in-progress (30th 35,000
Cosing Works Cost
ess 1,17,750
Administration Overheads :
Dfice and taxes 2,500
Ofice rernt and Cost of Production 1,20,250
of finished goods
(1st Sept. ) 54,000
Opening Stock
1,74,250
Sept.)
Stock of finished goods (30th
31,000
Closing
Les: Cost of Goods Sold 1,43,250

Selling and Distribution Overheads :

Carriage outward 2,500
3,500
Advertising 12,500
Travellers wages and commission
6,500
Cost of Sales 1,55,750
Profit 44.250

Sales 2,00,000

AMlustration 5.2
Ihe following cost information relates to the product 'A produced by a company, for the year
ended 31.12.2022.
Opening Direct Material 20,000
Diuect Material Purchases 440,000
Qlosing Direct Material 60,000
Diect Employee Cost 360,000
Carriage Irward 2,400
Chargeable Expenses 7,600
Depreci
&
ation Plant and Machinery
Waste
on 20,000
1,000
ReGasnt&-FaWater-Factory
ctory 12,400
3,000
5.6

Repairs-Factory
Cost AceUL
Office Salaries 14,400
Stationery-Works
Stationery-Office
30,1,600
000
Manager's Salary 1,600
Depreciation-Office Fumiture 60,000
Sales Commission 1,600
Advertising 8,000
Carriage 0utward 10,000
Administrative Overheads relating to production 6,400
Administrative Overheads not relating to production 2,000
Packing Cost (Primary) 10,000
Packing Expenses (Secondary) 4,000
Opening Stock of Finished Goods (1,000 units) 5,000
Closing Stock of Finished Goods (3,000 units) 70,000
Director's Fees 2,40,000
14.000
The company produced 10,000 units during the period. You are required to
prepare
showing the total cost and profit. The company maintains a margin of 20% on total coetaCostCos Shte
Solution
Cost Sheet
for the year ending 31-12-2022

Direct material op. stock 20,000

Add Purchases (+) 4,40,000
Less: Closing stock () 60,000
Direct materials consumed 4,00,000
Diect empioyee cost 3,60,000
Chargeable exp. 7600
Prime Cost 7,67,600
Factory Overhead :
Carriage Inwards 2,400
Dep. on Plant etc. 20,000
0il and Waste
1,000
Rent factory 12,400
Gas, water etc. 3,000
Repairs 14,400
Stationery 2400
59,600
Packing Cost (Primary) 4,000
Works Cost 8,27,300
Adm. Overhead
Office Salary 30,000
Office Stationery 1,600
Manager's Salary 60,000
Dep. of Office Furniture 1,600
Adm. Overhead (Production) 2,000 1,09.20
Directure Fees
14,000 9,36,500
Cost of Production
 5.7
Sheet)
Costing(Cost
Output
70,000
Uni
o t r Funished Goods
Stockof () 2,80,950*
Add: Op. stock of funished goods
C. Cost of Goods Sold 7,25,550
Les:
Overhead.
Dist. 8,000
andcommissum
Sales
selling 10,000
Advertising 6400
Carriageoutward
10,000
Adm. Overhead 39,400
Packing Exp. (Secondary) 5,000
Total Cost 7,64,950
1,52,990
Profit (20% of total cost)
Sales 9,17,940

*ClosingStock Valuation
9,36,500
x 3000 units
Units 10, 000
=72,80,950
accounts, closing stock of finished goods is taken at cost of production.
In cost
ITEMS EXCLUDED FROM COST
of financial nature and thus not included
while preparing a cost sheet:
items are
The following 8. Donations
[Link] discount
9. Income-tax paid
2. Interest paid
written off 10. Dividend paid
3. Preliminary expenses 11. Profit/loss on sale of fixed assets
4. Goodwill written off 12. Damages payable at law, etc.
5. Provision for taxation 13. Discount on issue of shares
6. Provision for bad debts
7. Transfer to reserves 14. Appropriation to sinking fund
Exhaustive Cost Sheet (Detailed)
Units produced
Total cost Cost per unit
Particulars

Opening Stock of Direct Raw Materials

Add : Purchases
Add : Carriage Inward
Ad : Octroi, Customs Duty and other
Less : Closing Stock of Direct Raw expenses on purchases
Cost of Direct Materials Materials
Direct or Consumed
Direct (or Productive Wages
Chargeable) Expenses Prime Cost

(Contd...)
5.8

Whorhs or Fatory Overheads

Indisert Mials
Indiseet Wages
ertime emiu

Fatry Ret nd Tazes

Insurece
Factory Ligtting
Supertsor
Werks Sttinery
Carter d Keltzre Ers

Begreiton t Pat Maxctinery

Ouaity Certro Cost

Add: fa ond
Cfee Sazries Administrative Ovehezds (Related to Works Cost
Disectud's Fees Production):
Office Statinery ard
Sundry Office ExzensesPrizting
Depreci
Depseci z
atti
inn
atd Beairs f
cf tffice Office Equipmert
Subscri Furriture
çtion to Trade Journals
Ofce Ligtting
EstDiraectbiüostt'smTtentavelCharingnesErpenses
Postage
Legal Charges
Audit Fees
Add: Opering Stock of Firished
Less : Cosing Goods Cost of Production
Stock of
Add : Selling and Firished Goods
Distribution Overheads : Cost of Goods
Sold
 (Cost Sheet) 5.9
OutputCosting
Unítor
Advertising
ShomroomExpenses
BadDebts
and Expenses
Salesmen:Salaries
Packingxpense:
Carriageutward
Agents
Commissin of Sales
CourntingHouse Salaries
Cost ofCatalngues
Delivery Vans
Expenses of
Collection Charges
IravellingExpenses
CostofTenders
Warehouse Expenses
Cost of Mailing Literature
Sales Manager's Salaries
Sales Director's Fees
Showtootn Expernses
Sales Office Expenses
Depreciation and Pepairs of Delivery Vans
Branches
Expenses of Sales
Administration Overheads (General)
Cost of Sales (or Total Cost)
PROFIT
Sales

etc.
Treatment of Scrap/By-prodncts
cuttings, trimmings, borings from
In certain manufacturing industries, scrap arises in the form of
realisable value of scrap is deducted
metals or timber, etc. Scrap generally can be sold at a price. Thesheet. This is shown in the following
from factory overheads or factory cost while preparing the cost
illustration.
ustration 5.3
From the following information prepare a cost sheet to show :
Profit.
(a) Prime cost; (b) Works cost; (c) Cost of production ; (d) Cost of sales; and (e)
32,250
Raw materials purchased 850
Carriage on purchases 18,450
Direct wages 2,750
Factory overhead 2,450
Selling overhead 1,850
Office overhead
Sales 75,000
250
Sale of factory scrap
9,750
Opening stock of finished goods 11,100
Closing stock of finished goods
(B. Com. Kerala)
 5.10 Cost Accou
Solution
the period
Cost Sheet for

Raw materials
35,250
850
Add: Carriage on purchases
Direct wages (a) Prime Cost

Factory overhead

Less : Sale of factory scrap

(b) Works Cost 513%
Office overhead
(c) Cost of Production
Add : Opening stock of finished goods

Less : Closing stock of finished goods

975,
Selling overhead
Cost of Goods Sold 11,10
(d) Cost of Sales
(e) Profit
60,0
Sales 15,00
75,00
PRICE QUOTATIONS OR
Quite often the management has toTENDERS AND ESTIMATED COST SHEET
tenders for goods to be supplied. For this quote prices of its products in advance or has to
estimated cost is prepared to show purpose
cost sheet, cost sheet the
an estimated cost sheet subnt
has to be prepared. Such
direct wagesestimated
of direct materials, cost of products to be a
the basis of past costs
changes in the future price after talking into account and various types of
overheads manufactured. In thion
are
absorptioninike percentage of directlevel. Overheads are presenton conditions and alsopre-determined
the
the anticipatei
discussed the overhead chapter. materials, or wagesabsorbed the basis of a
or machine hour
rate, suitable method d
etc.
addedCaltocularrive
ation at Proft. After the total cost has
of
the price to be been estimated, a
These methods wer
aspercenta ge of selling
100 on which profit price. In quoted.
order to calculate the profit may be givendesired
Such percentage of profit i
Example 1 percentage is given and then amount of profit, it isaseasya percentage of cost a
that fique
Given: Total cost calculate the amount of tO assume
profit.
Profit
Suppose=100cost× =50,000cost
= 20% of
When Profit 20% = 100
Profit = 50,cost000is ?20%
50,000 =20
=? 10,000
 CCosting
(Cost Sheet) 5.11
Output
Unitor
= 50,000
Example
2 Total cost
- 20% of selling price
Given: Profit selling price
Suppose =? 100
x 20% = 20
Profit = 100
= Selling Price - Profit
Cost = 100- 20 =80
Sowhenprofitis 20% or
1/5 of selling price, it is 20/80 = 1/4 or 25% of cost.
calculated as follows: When total cost is
the profit will be = 12,500
50,000, 50,000 x 25%
Profit =
Example3 = 50,000
Selling price
Given: Profit = 20% of cost
Suppose cost = 100
Profit 100 x 20% = 20
Selling price = Cost + Profit
= 100 + 20 = 120
of cost is equal to 20/120 or 1/6 of selling price. Thus, the profit
So profit of 20% will be
calculated as follows:
8333.33.
Profit =50,000 x 1/6 =
E-TENDERS
is an electronic process of sending and receiving tenders. It uses
e-Tendering makes a huge difference to the procurementonline platforms for pIocurement
process as it offers improved
iclhility and compliance. The entire process of tendering is completed online.
Difference between tender and e-tender
E-procurement is paper less electronic system of
manual tendering requires dealing with paper work. uploading/downloading of documents whereas
tender process lacks transparency and is quite E-tendering is a transparent device whereas manual
cumbersome.

Problem 5.1
PROBLEMS AND SOLUTIONS
M. Gopal furnishes the
the month of April 2022 : following data relating to the manufacture of a standard product during
Raw materials consumed
Direct labour charges 15,000
Machine hours worked { 9,000
Machine hour rate 900
Admi
Sellingnistratio
overhead
Units produced
n overheads 75
5,700
Units sold Re. 0.50 per unit
You 17,100
() theare required to prepare a cost 16,000 at 4 per unit
(i) cost cost per sheet from the above, showing :
per unitunit,
sold and profit for the
period.
 5.12

to be prepared when:related toproduction

sheet is
CostAdministration overheadsare related to production
(a) Administration overheadsare not related to
production
b) Administration overhead 3,420 are
(BBM &B. and balance
(c) productionactivities. Com.
Solution (a) Cost Sheet
for the month of April 2022
Bangalore (ki:
Total
Direct materials
15,000
Direct labou
Prime Cost 9,000
Production overheads (900 machine hrs. @5
per hour) 24,4,500
000
Works Cost
Administration overhead 28,500
Cost of Production 5,700
Less: Closing Stock on 30th April, 2022 (1,100 units @2 per unit) 34.200
Cost of Goods Sold 2,200
Selling overhead (@Re. 0.50 per unit for 16,000) 32,000
Cost of Sales
8,000
Profit 40,000
Sales (16,000 urits) 24,000 13)
64,000
Solution (b)
Cost Sheet
for the month of April 2022

Total per
Direct materials
Direct labour
15,000
9,000 052
Production overheads (900 hrs. (@ 5per
Prime Cost
hour) 24,000 14

4,500
Less: Closing Stock on Cost of Production
firished goods (1,100 units @ 28,500
1

Selling and dist. overhead 1,666)*

Cost of Goods Sold
1,833
201
Adm. overhead (General) (16,000 units (@?0.50 per unit) 26,667
8,000 035
Profit 5,700
Cost of Sales (Total
Sales (16,000 units cost) 40,167
@4 per unit) 23,633

*Closing stock of fhirish goods is 64,000

valued at cost of
production.
 Output
Costing(Cost Sheet) 5.13
or
Unit
Solution
(c) Cost Sheet
for the month of April 2022
Total per unit

Directmaterials 15,000 0.877

Diectlabour 9,000 0.526
Prime Cost
overheads (900 machine hrs. @5 per hour) 24,000 1.403
Production 4,500 0.263
Works Cost
Admiisstration
overhead (related to production) 28,500 1.666
3,420 0.200
Cost of Production
Closing Stock on finished goods (1,100 units @ 1.866) 31,920 1.866
Less:
Cost of Goods Sold 2.053
Selling overhead 29,867
Adm. overhead (General) 1.866
8,000 0.500
Cost of Sales 2,280 0.143
Profit 40,147 2,509
Sales (16,000 units) 23,853 1.491
Problem 5.2
64,000 4.000
From the following information for
following components : (a) Prime Cost, the month of January,
(b) Factory Cost, (c) Cost ofprepare a cost sheet to
Direct material Production, (d) Total [Link] the
Direct wages
Factory rent and rates 57,000
Office rent and rates
Plant repairs and 28,500
Plant depreciationmaintenance 2,500
500
Factory heating and
Factory manager'
Ofice salaries
s lighting
salary 1,000
1,250
Director's remuneration 400
TelPrinetphone
ing andandstationery
postage 2,000
1,600
Legal charges 1,500
Adveesmrten'isesmesalnt aries
SalShowr
200
100
Sales oom rent 150
Assume 1.500
administration overhead relate to
production.
2,500
1,16,000
500
5.14

Solution
month of Jan.
Cost Sheet for the

Dirt matenals
Drt wages Prime Cost

Fton Oarhead
Fatry ent and rates
Plant repair and maintenance
2,500
Plant deprEciation
Factory heating and ighting
1,1,205000
Factory manager's salary 400
Factory Cost 2,000
Oe nd Aministration Oerhead:
0ffice salanes
Director's remuneration 1,600
Telephone and postage
Office rent and rates
1,500
200
Printing and stationery 500
Legal charges 100
150
Cost of Production
Selling and Distribution Overhead:
Advertisement
Salesmen's salaries 1,500
ShowTOOm rent 2,500
500
Total Cost (or cost of sales)
PROFIT 101
Sales 1:

11:
Problem 5.3
From the following
particulars, prepare a cost statement :
Stock, 1-1-2022: Raw
materials
Finished goods
Stock, 31-1-2022: Raw
30,500
20,400
materials
Finished goods
Purchase of raw materials
48.500
10.000
Work-i
Wor k
Sales -inn-progress,
-prOgress, 1-1-2022
31-1-2022
25,000
8,000
Direct wages 9,000
95,000
Factory expenses
Office expenses related to 20,400
Selling expenses production 10,500
Distribution expenses 5,400
3,800
2,500
 5.15
0utput
Costing(Cost Sheet)
or
Unit
calculatethe
percentage of works expenses to direct wages and the percentage of office
Also works cost.
(B. Com., Bangalore)
to
expenses
Statement of Costs
Solution
for the month ended 31-1-2022

materials, 1 -1 -2022 30,500

raw 25,000
Stockof raw materials
Purchaseof 55,500
-2022 48,500
Add.
raw
materials, 31-1
Stockof consumed
Materials
7,000
Less: 20,400
Direct wages Prime Cost 27,400
10,500
expenses
Works or factory 37,900
1-1-2022 8,000
Work-in-progress, 45,900
Add: 9,000
Less: Work-in-progress, 31-1-2022
Works Cost or Factory Cost 36.900
5.400
Office expenses 42,300
Cost of Production
20,400
Stock, 1-1-2022
Add: Finished 62,700
10,000
Stock, 31-1-2022
Less : Finished Cost of Goods Sold 52,700
6.300
expenses (3,800 + 2,500)
Selling and distribution 59,000
Cost of Sales
36,000
Profit
95,000
Sales

Calculation of Overhead Rates:

I. Percentage of works expenses to direct wages
Rs. 10,500
Works expenses x 100 = x 100 = 51.47%
Direct wages 20,400

2. Percentage of office expenses to works cost

Office expenses 5,400 - 14.63%
x 100 = x 100
Works costs 36,900

Problem 5.4
for the year 2022:
In Tespect of a factory the following particulars have been extracted
6,00,000
Cost of materials 5,00,000
Wages
 Cost Acou
5.16

Factoryoverheads relatedto
production 33,06,,00 00
Administration
Sellingcharges
charges
21,,420,4,00000
Distributioncharges
Profit
has tobe
executed
andthe
in 2023
estimated expenses are :
4,20,0 0
order
Awork thatinwages
Assuming 2023, 5,000.
therate of factory overheads has gone up by 20%, istribution chatyg
Materials8.000,
administration charges have gone each up by
andsellingand the same rate of profit on the selling
down by
gone overheads
haveFactory
10%
arebebased
the product
as to earn
sold so Once
as in
2020
on wages and addministration, selling and distribution overheads.
priceshov (B. Coom., Delhi,
factory cost.
Solution Statement of cost
Bangale
for the year 2022

Direct Materials 6,00,000

Wages
5,00,000
Prime Cost 11,00,000
Factory Overheads 3,00,000
Factory or Works Cost 14,00,000
Administration Charges 3,36,000
Cost of Production 17,36,000
Selling Charges 2,24,000
Distribution Charges 1,40,000
Total Cost or Cost of Sales 21,00,000
Profit 4,20,000
Sales 25,20,000

Calculation of Rates:

1. Factory overhead as a percentage of 3,00,000

wages x 100 = 60%
5,00,000
2. 3,36,000
Administration charges as a percentage of factory cost = 14,00,000 x 100 = 24%

3. Selling charges as a 2,24,000

percentage of factory cost 14,00.000 × 100 = 16%
 (Cost Sheet) 5.17
Output Costing
or
Unit.

of 1,40,000
Distribution charges as a percentage factory cost 14,00,000 x 100 = 10%
4.
percentage of total cost 4,20,000
x 100 = 20%
Prrofit as a 21,00,000
5.
Statement of Estimated Cost and Profit on Work Order in 2023
Materials 8,000
Wages 5,000
Prime Cost
13,000
Overheads (60% of wages, increased by 20%, i.e., 72°%)
Factory 3,600
Factory Cost
16,600
Administration Charges (24% of factory cost, increased by 15%%, i.e.,
Cost of Production
27.6%) 4,581
Selling Charges (16% of factory cost, increased by 15%, i.e., 18.4%) 21,181
3,054
Distribution Charges (10% of factory cost, decreased by 10%, i.e., 9%) 1,494
Cost of Sales
Profit (20% on cost 25,729
of sales)
5,146
Price to be quoted
30,875
Problemn 5.5
The accounts of a machine manutacturing company disclose the following information for the
months ending 31st Dec., 2022. six

Materials used
1,50,000
Direct wages
Factory overhead expenses 1,20,000
24,000
Administration expenses Ielated to production
Prepare a Cost Sheet of the machines and 17,640
the manufacture of a calculate price which the company should quote for
the
wages of 750, so thatmachine requiring materials
the price may yield a valued at 1,250 and expenditure on
For the purpose of price profit of 20% on the selling
price.
productive
charge office overhead as a quotation, charge factory overhead as a
percentage of works cost. percentage of direct wages and
(B.B.M. Bangalore; B. Com., Madurai Kamraj)
 5.18
Cost Aed
Solution Cost Sheet
of six months
ending 31st Dec. 2022
for theperiod

Materials used
Direct wages Prime Cost

overhead expenses
Factory Works or Factory Cost
Administration and general expenses
Cost of Production

Factory overheads x 100 = 24,000 x

%of factory overhead to irect wages = Direct wages
1,20,000 100 =20%
Office overheads 17,640
%of office overhead to factory cost = x 100 =
Factory cost 2,94,000 * 100 = 60%
Statement showing the Quotation of Price of a Machine
Materials
Wages 123
Prime Cost
Factory overhead (20% on wages) 2,00
Office overhead (6% on factory cost) Factory Cost
2,150:
Total Cost or Cost of Production 1291
*Profit (25% of total cost) 2,273
560
Selling Price 2,8481
"Profit of 20% on selling price is equal to
25% of total cost.
Problem 5.6
The following extracts of
costing information relate to
Purchases of raw materials commodity Xfor the year ending 31-12-2022
Direct wages
Rent, rates and
Carriage inwards insurance
Stock (1-1-2022) : Raw materials
10
Finished pIoducts
Stock (31-12-2022) : Raw 200 tonnes
materials 10
Cost of factory
Sale of supervision products
finished products
Finished 400 tonnes

Adyertising
the year.
and
Prepare a Costselling cost is 40 paise per
150
Sheet. tonne sold. 3,000 tonnes of the (B.B.M.
soldduat
were Adggte
commodity
Bangatore
 5.19
Output
Costing (Cost Sheet)
or
Unit

Solution Cost Sheet for the year ending 31st Dec.,2022

Stock 1,000
Opening 6,000
Materials:
Add:Purchases
Add: Carriage Inwards 100
Raw 7,100
Less:ClosingStock 1,100
6,000
consumed
maternals 5,000
of Prime Cost 11,000
ost
Directwages

FactoryOverheads: 2,000
Rent, insurance, etc.
400 2,400
Factory supervision Cost of Production 13,400
of finished goods 800
Opening stock 14,200
Add:
400 tonnes
of finished goods 13, 400x 1,675
Less:
Cllosing stock 3,200 tonnes
Cost of Goods Sold 12,525
1,200
per tonne sold for 3,000 tonnes)
overhead (@ 40 paise Cost of Sales 13,725
Selling Profit 1,275
Sales 15.000

Problem 5.8
following details are available from a company's books:
The
10,800
on 1-1-2022
Stock of raw material 28,000
on 1-1-2022
Stock of finished goods 2,94,000
Purchases during the year 1,98,800
Productive wages 5,92,000
Sales of finished goods 30,000
Stock of finished goods on 31-12-2022 13,600
Stock of raw material on 31-12-2022 43,736
Works overhead 35,524
Office expenses related to production
plant. The costing department estimates that the
The company is about to send a tender for large20,000 and wages for making the plant would cost
material required for its production would cost
12,000. ender is to be made keeping a net profit of 20% on the selling price. State what would be
( (B. Com., Lucknow)
the amount of the tender, if based on the percentages.