PREPARATION OF COST

SHEET
 Learning Outcomes
• Identify the cost incurred and bifurcate it
on the basis of different elements of cost.

• To be able to project expected expenditure

in terms of cost
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.
PREPARATION OF 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 Goods Sold
Cost of Goods Sold = Cost of Production +O/S of finished goods-C/S of
finished goods
• 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.
FORMAT OF COST SHEET
Particulars Amount Amount

Opening Stock of Raw Material ***  

Add: Purchase of Raw materials ***  
Add: Purchase Expenses ***  
Less: Closing stock of Raw Materials ***  
Raw Materials Consumed ***  
Less;- Sale of Material Scrap (if any) ***  
Direct Wages (Labor) ***  
Direct Charges ***

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)
Works cost Incurred   ***
Add: Opening Stock of WIP ***  
Less: Closing Stock of WIP ***
Continued
Works cost (2)   ***
Add:- Administration Over Heads:-    
Office Rent ***
Asset Depreciation ***
General Charges ***
Audit Fees ***
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   ***
Add:- Selling and Distribution OH:-    
Sales man Commission ***
Sales man salary ***
Traveling Expenses ***
Advertisement ***
Delivery man expenses ***

Cost of Sales (5)   ***

Profit (balancing figure)   ***
Sales   ***
 Items of cost not to be included in
cost sheet
• Finance Expenses: Interest/Dividend paid/received
• Appropriation of profits and provisions: General
Reserve, Provision for tax
• Capital Profit/Losses: Profit/Loss on sale of asset
• Abnormal Expenses: Abnormal wastage of material,
labour or machine time
• Fictitious, intangible assets and bad debts written
off: Preliminary exp., goodwill, patents, discount on
issue of shares/debentures etc.
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
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
• Mr. Zia furnishes the following data related to the manufacture of a standard
product during the month of August 2016
•  
• Raw material consumed - Rs 15,000
• Direct labour - Rs 5,000
• Direct expenses - Rs 4000
• Machine hours worked - 900
• Machine hour rate - Rs 5
• Administration overheads - 20% of works cost
• Selling overheads - Rs 0.50 per unit
• Unit produced and sold - 17,100
Calculate cost of production from the following information:-
• Raw material purchased = Rs 42,500
• Freight paid = Rs 5,000
• Labour charges = Rs 12,500
• Direct expenses = Rs 10,000
• Factory overhead 80% of Direct labour charges
• Administrative overhead = 10% of work cost
 
Opening stock Closing stock
• Raw material Rs. 8,000 10,000
• Work in progress Rs.7,500 9,000
•  
• Prepare cost sheet in the book of M. B. Rehman from the following particulars.
• Opening stock: - Raw material = Rs 5,000
• Finished goods = Rs 4,000
• Closing stock: - Raw material = Rs 4,000
• Finished goods = Rs 5,000
• Raw material purchased = Rs 50,000
• Wages paid to laboures = Rs 20,000
• Chargeable expenses = Rs 2,000
• Rent and Taxes = Rs 7,400
• Power = Rs 3,000
• Experimental expenses = Rs 600
• Sale of wastage of material = Rs 200
• Office management salary = Rs 4,000
• Office printing & stationery = Rs 200
• Salaries to salesman = Rs 2,000
• Commission to travelling agents = Rs 1,000
• Sales = Rs 1, 00,000