Q1.What is meant by cost sheet?Explain the importance of cost sheet.

A cost sheet is a report on which is accumulated all of the costs associated with a product or production job. A
cost sheet is used to compile the margin earned on a product or job, and can form the basis for the setting of
prices on similar products in the future. It can also be used as the basis for a variety of cost control measures .
Cost sheet is very important because it acts as the basis or foundation to ascertain costs and determine selling
price of the output.

1. It provides details of total cost under logical classification.

2. It provides cost per unit in different stages.
3. It helps in comparison and control of cost.
4. Cost sheet is helpful in estimation of cost for preparation of tenders and quotations.
5. It acts as basis for fixation of selling price.

Q2.Define various components of total cost.

Prime cost

It consists of costs of direct material, direct labour and direct expenses. It is also known as basic, first or
flat cost.

Factory cost

It comprises of prime cost and, in addition, overheads which includes cost of indirect material, indirect
labour, and indirect expenses of the factory. The cost is also known as work costs, production or
manufacturing cost.

Office cost

If office and administrative overheads are added to factory cost, office cost is arrived at this is also termed
as administrative cost or the total cost of production.

Total cost

Selling and distribution overheads are added to the total cost of production to get the total cost or the cost
of sales.

The various components of total cost can be depicted through the help of the following chart:

Components of total cost

Direct material plus Prime cost or direct cost or first cost

Direct labour plus
Direct expenses

Prime cost plus Works cost or factory cost or production cost or manufacturing cost
Works overheads

Office cost plus selling

and distribution overheads Cost of sales or total cost

Numericals:

Q. From the following information prepare a cost sheet for period ended on
31st March 2010.

Solution:

Particular Amount(in Rs) Amount(inRs)

Opening stock 12500
(+)Purchase of raw material
(-)Closing stock
136000
8500
Cost consumed 140000
Direct wages 54000
Direct Expensive 12000
Prime cost 206000
Factory Overhead 54000
Work cost
Office and administration 52000
overhead
Cost of production 312000
(+)Opening stock of finish 12000
goods Good are for sales 324000
(-)Closing stock of finish goods
15000
Cost of goods sold 309000
Selling and distribution 26600
overhead 335000
Cost of sales
Profit
67000
Sales 402000
Q. The following information is given to you from which you are required to
prepare cost sheet for the period ended on 31st march 2009.

Solution:

Particulars Amount(in Rs) Total cost Cost per unit

Opening stock 20000
(+)Purchase 122000
(-)Closing stock
10000
Cost of raw material 132000 11.00
consumed
Direct wages 36000 3.00
Direct expenses 24000 2.00
Prime cost 192000 16.00
Factory 18000 1.50
Overhead(50% of
direct wages i.e
12000*1.50) Work factory
overheads 210000 17.50
Office 42000 3.50
overheads(20% of
works cost)
Total cost of 252000
production
(+)Opening stock of 125000
finished goods
Cost of goods 300000
available for sales
(12000+500)
37500
(-)Closing stock of
finished goods
Cost of goods
sold(12500- 527000 21.18
1500=11000units)
(+)Selling and 33000 560000 3.00
distribution 560000 24.18
overheads
Cost of sales
(+)Profit 112000 6.04
 Sales 672000 30.22

BY:

AKANKSHA NANEN TOPPO

ROLL NO-MBA/10043/18