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

~
Materials
t
Labour
~
Other Expenses
~ ~ ~
r
Direct
l
Indirect
l
Direct
l
Indirect
l
Direct
l
Indirect

1 1
Overheads

l t l
, Production or Administration Selling Overhead Distribution
Factory Overhead Overhead Overhead

By grouping of the above elements of cost, the following divisions of cost are obtained:
(1) Prime Cost = Direct Materials + Direct Labour + Direct Expenses
(2) Works Cost (Factory) = Prime Cost + Factory Overhead
Cost Sheet (or) Statement 01 Cost 31/

(3) Cost of Production = Factory Cost + Office and Administrative Overhead

(4) Cost of Sales (or) Total Cost = Cost of Production + Selling and
Distribution Overhead
(I) Materials Cost
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.
312 A Textbook of Financial 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
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
314 A Textbook of Financial 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
Rs.
Opening stock of raw materials 20,000
Opening stock of work in progress 10,000
Opening stock of finished goods 50,000
Raw materials purchased 5,00,000
Direct wages 3,80,000
Sales for the year 12,00,000
Closing stock of raw materials 75,000
Closing stock of work in progress 15,000
Factory overhead 80,000
Direct expenses 50,000
Office and Administrative overhead 60,000
Selling and Distribution expenses 30,000
Solution:
Cost Sheet for the year ......
Particulars Amount Rs. Amount Rs.
Opening Stock of Raw Materials 20,000
Purchases 5,00,000
5,20,000
Less : Closing Stock of Raw Materials 75,000
Cost of Raw Materials Consumed (I) 4,45,000
Add : Direct Wages 3,80,000
Direct Expenses 50,000 4,30,000
Prime Cost (2) 8,75,000
Add : Factory overheads 80,000
Add: Opening stock of work in progress 10,000
90,000
Less: Closing stock of Work in Progress 15,000 75,000
Works Cost (or) Factory Cost (3) 9,50,000
Add: Office & Administrative Overhead 60,000
Cost of Production (4) 10,10,000
Add: Opening Stock of Finished Goods 50,000
10,60,000
Less: Closing Stock of Finished Goods 50,000
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)
2,000 }
= 40,800 x 4,080
20,000
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
3/6 A Textbook of Financial 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 Total per Unit
Rs. Rs.
Direct Raw Materials 1,60,000 32.00
Direct wages 90,000 18.00
Prime cost 2,50,000 50.00
Add: Factory Overhead (6000 x Rs. 6) 36,000 7.20
Works Cost { } 2,86,000 57.20
Add : Office Overhead 2,86,000 x II~
42,900 8.58
Cost of Production 3,28,900 65.78
Add: Selling Overhead (5000 x Rs. 2) 10,000 2.00
Cost of Good Sold 3,38,900 67.78
Profit 61,100 12.22
Sales 5,000 x Rs. 80 4,00,000 80.00

Illustration: 4
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

.
Cost Sheet (or) Statement of Cost 317

Solution:
Cost Sheet for the year 0 0 0 0 0 0 0

Particullus Rso Rso

Direct materials 33,000
Direct wages 35,000
Direct expenses 3,000
Prime Cost (l) 71,000
Add : Factory overheads
Factory rent and rates 7,500
Indirect wages 10,500
Factory lighting 2,050
Factory heating 1,500
Power (Factory) 4,400
Director's remuneration (Factory) 2,000
Factory cleaning 1,000
Factory stationery 750
Water supply (Factory) 1,300
Factory Insurance 1,100
Depreciation of Plant & Machinery 2,000
Loose Tools written off 600 34,700
Works Cost (or) Factory Cost (2) 1,05,700
Add: Office and Administrative Overhead:
Office stationery 900
Director's remuneration (Office) 4,000
Sundry office expenses 200
Office insurance 500
Legal expenses (Office) 400
Depreciation of office building 1,000
Bank charges 100
Rent and rates (Office) 500 7,600
Cost of production (3) 1,13,300
Add : Selling and Distribution Overhead:
Rent of warehouse 300
Depreciation of delivery van 200
Bad debts 100
Advertising 300
Salesmen salaries 1,500
Up keep of delivery van 700
Commission on sales 1,500 4,600
Total Cost of Sales (4) 1,17,900
Profit 82,100
Sales 5000 tones @ Rs. 40 per unit 2,00,000

Illustration: 5
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 :
318 A Textbook of Financial Cost and Management Accounting
Work in progress (1.1.2002) Rs. 40,000
Raw materials (1.1.2002) Rs. 1,00,000
The information available from cOst records for the year ended 31 51 December, 2002 was as follows:
Rs.
Direct materials 8,00,000
Direct wages 3,00,000
Carriage inward 40,000
Indirect wages 90,000
Factory cost 2,75,000
Stock on raw materials (31.12.2002) 80,000
Work in progress (31.12.2002) 70,000
Sales (1,20,000 units) 25,00,000
Indirect materials 1,75,000
Office and Administrative overhead 80,000
Selling and Distribution overhead 1,00,000
Stock on finished goods (31.12.2002) 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
Cost Sheet (or) Statement o/Cost 319

Illustration: 6
The following particulars have been extracted from the books of Sharma & Co. Ltd., Chennai for the
year ended 31 51 March 2003
Raw Materials Consumed Rs. 1,82,000
Direct Wages Rs. 58,000
Other Direct Expenses Rs. 22,000
Factory Overheads 80% of direct wages
Office Overheads 10% of Work Cost
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 :

10% of work cost [3.08.400 , 10

100 ] 1.542 30,840

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
Rs.
Stock of raw materials (1.1.2003) 50,000
Purchase of raw materials 1,70,000
Stock of raw materials (31.12.2003) 80,000
Carriage Inward 10,000
Direct Wages 1,50,000
320 A Textbook of Financial Cost and Management Accounting
Indirect Wages 20,000
Other Direct Charges 30,000
Office rent and rates 1,000
Factory rent and rates 10,000
Indirect consumption of materials 1,000
Depreciation on plant 3,000
Depreciation on office furniture 200
Salesmen salary 4,000
Salary to office supervisor 5,000
Other factory expenses 11,400
Other office expenses 1,800
General Manager's remunerations:
Office Rs. 4,000
Factory Rs. 8,000
SeIling Dept. 12,000
Other seIling expenses 2,000
Traveling expenses of salesmen 2,200
Carriage & Freight outward 2,000
Sales 5,00,000
Advertisement 4,000

Solution:
Statement of Cost
Particulars Amount Amount
Rs. Rs.
Stock of raw materials (1.1.2003) 50,000
Add: Purchases 1,70,000
Carriage Inw~ds 10,000
2,30,000
Less: Stock of raw materials (31.12.2003) 80,000
Raw Materials Consumed (1) 1,50,000
Wages 1,50,000
Other Direct Charges 30,000
Prime Cost (2) 3,30,000
Add: Factory Overhead: (3)
Indirect Charges 20,000
Factory rent and rates 10,000
Indirect Materials 1,000
Depreciation of Plant 3,000
Other factory Expenses 11,400
General Manager's remuneration 8,000 53,400
Factory Cost (2+3) =4 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
Cost Sheet (or) Statement of Cost 321
Add: SeIling & Distribution Overheads: (7)
Salary to Salesmen 4,000
General Manager's Salary 12,000
Other Selling Expenses 2,000
Advertisement 4,000
Traveling expenses 2,200
Carriage and freight overhead 2,000 26,200
Cost of Goods Sold (8) 4,21,600
Profit (9) 78,400
Sales (10) 5,00,000

Illustration: 8
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 Rs. 2,50,000
(ii) Work in process inventory, 1.9.2003 Rs. 40,000
(iii) Direct materials inventory, 1.9.2003 Rs. 20,000
(iv) Finished goods inventory, 1.9.2003 Rs. 37,750
(v) Indirect manufacturing costs 40% of conversion cost
(vi) Sales revenues Rs. 7,50,000
(vii) Direct manufacturing labour Rs. 2,22,250
(viii) Prime costs Rs. 3,97,750
. (ix) Gross margin percentage based on revenues 30%
(x) Cost of Goods available for sale 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
=Rs. 1,75,500
Direct manufacturing labour cost
Conversion cost = 0.6
2,22,250
=
0.6
= Rs. 3,70,416.67
Indirect manufacturing cost
= Rs. 3,70,416.67 - Rs. 2,22,250
= Rs. 1,48,166.67
322 A Textbook of Financial Cost and Management Accounting

Schedule of Computations
Rs.
Direct materials 1.9.2003 20,000
Direct materials purchased 2,50,000
Direct materials available for use 2,70,000
Less: Direct material 31.10.2003 94,500
(Balancing figure)
Direct materials used 1,75,500
Add: Direct manufacturing labour cost 2,22,250
Prime costs (1) 3,97,750
Add: Indirect manufacturing cost 1,48,166.67
Manufacturing cost incurred during current period 5,45,916.67
Add: WIP 1.9.2003 40,000
Manufacturing cost to account for 5,85,916.67
Less: WIP 31.10.2003 67,891.67
Cost of goods manufactured (2) 5,18,025
Add: Finished goods 1.9.2003 37,750
Cost of goods available for sale 31.10.2003 5,55,775
Less: Finished gods 31.10.2003 30,775
Cost of goods sold (70% of 7,50,000) (3) 5,25,000
Alternatively:
Finished goods inventory 31.10.2003 Rs. 30,775
WIP inventory 31.10.2003 Rs. 67,891.67
Raw material inventory 31.10.2003 Rs. 94,500
QUESTIONS
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 of Production 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 31 st 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
Cost Sheet (or) Statement of Cost 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 Rs.15,OOO
Direct labour charges Rs. 9,000
Machine hour worked 900
Machine hour rate Rs. 5
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
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)
324 A Textbook of Financial 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.
Rs. Rs.
Work in progress in the beginning 1,02,000
Manufacturing Expenses 30,000 1,22,000
Work in Progress at the end:
At Prime Cost 90,000
Manufacturing Expenses 18,000 1,08,000
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
Rs.
Stock of materials on I" January 2003 30,000
Purchase of raw materials 4,50,000
Wages paid 2,30,000
Works overhead 92,000
Work in progress (1-1-2003) 12,000
Work in progress (31-12-2003) 15,000
Stock of raw materials on 31" December 2003 25,000
Stock of finished goods (1-1-2003) 60,000
Stock of finished goods (31-12-2003) 35,000
Selling and distribution expenses 20,000
Office and administration expenses 30,000
Sales 9,00,000
[Aos : Cost of production Rs. 8,04,000
Cost of goods sold Rs. 8,09,000
Profit Rs. 70,000]
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]
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 61,000
Opening stock of finished goods 40,800
Closing stock of raw materials 97,000
Closing stock of finished goods 20,000
Purchase of raw materials 50,000
Opening stock of work in progress 16,000
Closing stock of work in progress 18,000
Sales during the year 1,90,000
Direct wages 40,800
Factory expenses 21,000
Office expenses 11,000
Selling expenses 7,600
Distribution expenses 5,000
[Ans : Prime cost Rs. 54,800
Cost of goods sold Rs. 1,05,400
Net Profit Rs. 72,000]

000