1

COST SHEET FORMAT

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
Direct Wages (Labour)
Direct Charges
***
***
***
***
***
***
***







Prime cost (1) ***
Add :- Factory Over Heads:
Factory Rent
Factory Power
Indirect Material
Indirect Wages
SupervisorSalary
Drawing Office Salary
Factory Insurance
Factory Asset Depreciation

***
***
***
***
***
***
***
***

Works cost Incurred ***
Add: Opening Stock of WIP
Less: Closing Stock of WIP
***
***

Works cost (2) ***
Add:- Administration Over Heads:-
Office Rent
Asset Depreciation
General Charges
Audit Fees
Bank Charges
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
Sales Tax
Bad Debts

***
***
***
***
***
***
***

Cost of Sales (5) ***
Profit (balancing figure) ***
Sales ***




2


MATERIAL

1) Reorder level = Maximum usage * Maximum lead time
(Or) Minimum level + (Average usage * Average Lead time)
(or) Safety stock + Lead time Consumption

2) Minimum level = Reorder level (Average usage * Average lead time)

3) Maximum level = Reorder level + Reorder quantity (Minimum usage *
Minimum lead time)
(Or) Safety Stock + EOQ

4) Average level = Minimum level +Maximum level (or)
2
Minimum level + Reorder quantity

5) Danger level (or) safety stock level
=Minimum usage * Minimum lead time (preferred)
(or) Average usage * Average lead time
(or) Average usage * Lead time for emergency purposes

6) EOQ (Economic Order Quantity ) = 2AO/C
Where A = Annual usage units
O = Ordering cost per unit
C = Annual carrying cost of one unit
i.e. Carrying cast % * Carrying cost of unit


7) Carrying Cost = Quantity Ordered/2 * Purchase Price for Inventory* Carrying
Cost Expressed as % of avg. inventory
(Or) Average Inventory * Carrying cost per order pa

8) Average inventory = EOQ/2

9) Order cost = Number of Orders * ordering cost

10) Number of Orders = Annual Demand / EOQ

11) Inventory Turnover (T.O) Ratio = Material consumed
Average Inventory


3

12) Inventory T.O Period = 365 .
Inventory Turn over Ratio

13) safety stock = Annual Demand *(Maximum lead time - Average lead time)
365
14) Total Inventory cost = Ordering cost + Carrying cost of inventory +Purchase cost


ABC Analysis :- Materials are categorized into

Particulars Quantity Value
A Important material 10% 70%
B Neither important nor unimportant 20% 20%
C UN Important 70% 10%





























4




LABOUR

1) Time rate system = Hours worked * Rate per hour (Basic wages)

2) Piece rate system:

i) Straight piece rate earnings = Number of units produced * Rate per unit

ii) Differential Piece rate

a) F.W.Taylors differential rate system
83% of piece rate when below standard
125% of piece rate when above or at standard

b) Merrick differential or multiple piece rate system

Efficiency level Piece rate
up to 83% Normal piece rate
83% to 100% 110% of Normal rate
Above 100% 120% of Normal rate

iii) Gantt Task and Bonus system

Output Payment
Below standard Time rate (guaranteed)
At standard 20% Bonus of Time rate
Above standard 120% of ordinary piece rate

iv) Emersons Efficiency system

Efficiency Payment
Below 66.7% Hourly Rate
from 66.7% Hourly rate (+) increasing bonus according to degree
to 100% of efficiency on the basis of step bonus rates
Above 100% Hourly rate (+) 20% Bonus (+) additional bonus of 1%
of hourly rate for every 1% increase in efficiency

v) Halsey Premium Plan = Basic wages + 50% of time saved * Hourly Rate


5

vi) Halsey Weir Premium Plan = Basic wages + 30% of time saved * Hourly rate

vii) Rowan Plan = Basic wages + Time saved * Basic Wages
Time allowed


ix) Barths System = Hourly rate * Std time *Time taken

Labour Turnover:-

1) Separation rate method = Separation during the period
Average No. of workers during the period

2) Replacement method
= Number of replacements
Average No. of workers during the period

3) Labour flux rate = No. of separation + No. of replacement
Average No. of workers during the period
























6
OVER HEAD

Reapportionment of service department expenses over production department :-

1) Direct redistribution method:
Service department costs are divided over production department.
Ignore service rended by one dept. to another

2) Step method of secondary distribution :
Service department which serves largest number of service department is
divided first and go on.

3) Reciprocal service method:

i) Simultaneous equation method
Find with the help of Equation.

ii) Repeated distribution method:
Service department cost separated repeatedly till figure of service dept. is
exhausted or too small.

iii) Trial and Error method:
Cost of service department is apportioned among them repeatedly till the
amount is negligible and the total is divided among production department.


Apportionment of overhead expenses Basis

a) Stores service expenses = Value of materials consumed

b) Factory rent = Floor area

c) Municipal rent, rates and taxes = floor area

d) Insurance on Building and machinery = Insurable value

e) Welfare department expenses


f) Supervision


Number of employees


7
g) Amenities to employees

h) Employees liability for insurance

j) Lighting power = Plug point

k) Stores over heads = Direct material

l) General over heads = Direct wages


Reapportionment of service department cost to production department :-

1) Maintenance dept. = Hours worked for each dept.

2) Pay roll and time keeping = Total labour (or) machine hours (or) Number of
employees in each department

3) Employment (or) Personnel department = Rate of labour T.O (or) No. of
employees of each department

4) Stores Keeping department = No. of requisitions (or) value of materials of each
department

5) Purchase department = No. of purchase orders value of materials of each
department

6) Welfare, ambulance, canteen, service, recreation room expenses
= No. of employees in each department.

7) Building service department = Relative area each dept.

8) Power house (electric power cost) = Housing power, horse power machine hours,
No. of electric points etc.

9) Power house = Floor area, cubic content.








8


Machine Hour Rate Format

Particular Amount
1. Standing Charges (Fixed Charges)
Supervisors Salary
Rent
General lighting
Departmental and General Overheads
Operator Wages
Insurance
Fringe Benefit

2. Machine Expenses (variable Expenses)
Depreciation
Repair & maintenance
Power
Chemical
Wages of helper
Electricity
Consumable Store

Total (1+2)


















.

Machine Rate per Hour= Total Amount Calculated on above / no of Productive
hours of machine


















9
Cost reconciliation statement

(When profit as per cost accounts is taken as a starting point)
Particular Rs. Rs

A. Profit as per Cost Accounts

B. Add. Items having the effect of higher profit in
financial accounts:
(a) Over-absorption of Factory Overhead/ Office & Adm.
Overheads/ Selling & Distribution Overhead in Cost
Accounts
(b) Over-valuation of Opening Stock of Raw Material /
Work-in-progress / Finished goods in Cost Accounts
(c) Under-valuation of Closing Stock if Raw Material /
Work-in-progress / Finished Goods in Cost Accounts
(d) Income excluded from Cost Accounts : (e.g.) Interest
& Dividend on Investments

Rent received

Transfer Fees received

C. Less: Items having the effect of lower profit in financial
accounts:
(a) Under-absorption of Factory Overhead/ Office &
Adm. Overheads/ Selling & Distribution Overhead in
Cost Accounts
(b) Under-valuation of Opening Stock of Raw Material /
Work-in-progress / Finished goods in Cost Accounts
(c) Over-valuation of Closing Stock if Raw Material /
Work-in-progress / Finished Goods in Cost Accounts
(d) Expenses excluded from Cost Accounts: (e.g.)

Bad Debts written off

Preliminary Expenses/ Discount on Issue Written off

Legal Charges

D. Profit as per Financial Accounts (A+B-C)

Note: in case of Loss, the amount shall appear as a
minus item.












..













.

.

.



.


..
















()
...



10

Note: When profit as per cost account is calculated from profit as per financial
accounts, then items which are added above will be deducted and vice-versa.









































11

JOINT PRODUCT AND BY PRODUCT COSTING

Methods of apportioning joint cost over joint products :

1) Physical unit method = Physical base to measure (i.e.) output quantity is used to
separate joint cost. Joint cost can be separated on the basis of ratio of output
quantity. While doing this wastage is also to be added back to find total quantity.

2) Average unit cost method = In this method joint cost is divided by total units
Produced of all products and average cost per unit is arrived and is multiplied
With number of units produced in each product.

3) Survey method or point value method = Product units are multiplied by points or
weights and the point is divide on that basis.

4) Standard cost method = Joint costs are separated on the basis of standard cost set
for respective joint products.

5) Contribution margin method = Cost are divided into two categories (i.e.) variable
and fixed. Variable costs are separated on unit produced. Fixed on the basis of
contribution ratios made by different products.

6) Market value method:-

a) Market value at the point of separation: Joint cost to sales revenue percentage
is found which is called as multiplying factor = Joint cost * 100
Sales Revenue
Joint cost for each product is apportioned by applying this % on sales revenue
of each product.
Sales revenue = Sales Revenue at the point of separation.
This method cannot be done till the sales revenue at the separation point is
given.

b) Market value after processing: Joint cost is apportioned on the basis of total
sales Value of each product after further processing.

c) Net Realizable value method = Form sales value following items are deducted
i) Estimated profit margin
ii) Selling and distribution expenses if any included.
iii) Post split off cost


12
The resultant amount is net realizable value. Joint cost is apportioned on this
basis.


Bi-product Method of accounting

Treat as other income in profit and loss a/c

Net Realizable value of Bi-product is reduced from cost of main product.

Instead of standard process, Standard cost or comparative price or re-use
price is credited to joint process a/c.































13
OPERATING COSTING

No. Enterprise Cost per unit
1. Railways or bus companies Per passenger-kilometer
2. Hospital Per patient/day, per bed/day
3. Canteen Meals served , cups of tea
4. Water supply service Per 1000 gallons
5. Boiler House 1000 kg of steam
6. Goods Transport Per tonne km, quintal km
7. Electricity Boards Per kilowatt hours
8. Road maintenance department Per mile or road maintenance
9. Bricks One thousand
10. Hotel Per room/day
All cost is classified into 3 categories:
1) Standing charges (or) fixed cost
2) Running cost (or) variable cost
3) Maintenance charges (or) semi variable cost
Running charges = Fuel, Driver Wages, Depreciation and oil etc.
Maintenance charges = Supervision salary, Repairs and Maintenance

Operating cost sheet :-

Particulars Total
cost
Cost per
km
A Standing charges :-
License fees
Insurance Premium
Road tax
Garage rent
Drivers wages
Attendant-cum-cleaners wages
Salaries and wages of other staff

Total
B Running charges :-
Repairs and maintenance
Cost of fuel (diesel, petrol etc.)
Lubricants, grease and oil
Cost of tires, tubes and other spare parts
Depreciation

Total
C Total charges [ (A) + (B) ]


14
CONTRACT COSTING



Format:-
Contract Account
Particulars Rs. Particulars Rs.
To Materials
a. Purchased directly
b. Issue from site
c. Supplied by contractee

**
**
**
By materials returned **
By Material sold (cost
price)

**
To Wages and salaries ** By WIP
Work certified
Work Uncertified

**
**
To Other direct Expenses **
To Sub-contractor fees **
To Plant & Machinery (purchase
price/Book
value)

**
By Materials at site **
To Indirect expenditure (apportioned
share of overheads)
** By Plant and
machinery(WDV)

**
To Notional profit (Surplus) **
Total Total **


Calculation Profit of Incomplete contract :-

1) When % of completion is less than or equal to 25% then no profit will be taken
into account.
.

2) When % of completion is above 25% but less than 50% :

= 1/3 * Notional Profit * {Cash received / Work certified}


3) When % of completion 50% to 90% :

= 2/3 * Notional Profit * {Cash received / Work certified}
[Balance is transferred to reserve a/c]

4) When the contract completed more than 90 %



15
a) Estimated total profit * {Work certified / Contract price}
b) Estimated total profit * {Cash received / Contract price}
c) Estimated total profit * {Cost of work done / Estimated total profit}
d) Estimated total profit*{Cost of work done*Cash received
Estimated total cost * Work certified}

5) Work-In-Progress is shown in Balance Sheet as follows:-

Balance sheet

Liabilities (RS) Asset (Rs)
Profit & loss a/c (will include)
Profit on contract (Specify
the contract number)
Less : Loss on contract
(Specify the contract number)
Sundry creditors (will include)
Wages accrued
Direct expenses accrued
Any other expenses
(Specify)
Work-in-progress
Value or work certified
Cost of work uncertified
Less :- Reserve for unrealized profit
Less :- Amount received from
contractee


6) Escalation Clause = This is to safeguard against likely change in price of cost
elements rise by and certain % over the prices prevailing at the time tendering the
contractee has to bear the cost.





















16
MARGINAL COSTING

Statement of profit:-

Particulars Amount
Sales ***
Less:-Variable cost ***
Contribution ***
Less:- Fixed cost ***
Profit ***

1) Sales = Total cost + Profit = Variable cost + Fixed cost + Profit

2) Total Cost = Variable cost + Fixed cost

3) Variable cost = It changes directly in proportion with volume

4) Variable cost Ratio = {Variable cost / Sales} * 100

5) Sales Variable cost = Fixed cost + Profit

6) Contribution = Sales * P/V Ratio

7) Profit Volume Ratio [P/V Ratio]:-
{Contribution / Sales} * 100
{Contribution per unit / Sales per unit} * 100
{Change in profit / Change in sales} * 100
{Change in contribution / Change in sales} * 100

8) Break Even Point [BEP]:-
Fixed cost / Contribution per unit [in units]
Fixed cost / P/V Ratio [in value] (or) Fixed Cost * Sales value per unit
(Sales Variable cost per unit)
9) Margin of safety [MOP]
Actual sales Break even sales
Net profit / P/V Ratio
Profit / Contribution per unit [In units]

10) Sales unit at Desired profit = {Fixed cost + Desired profit} / Cont. per unit

11) Sales value for Desired Profit = {Fixed cost + Desired profit} / P/V Ratio


17

12) At BEP Contribution = Fixed cost
13) Variable cost Ratio = Change in total cost * 100
Change in total sales

14) Indifference Point = Point at which two Product sales result in same amount of
profit
= Change in fixed cost (in units)
Change in variable cost per unit

= Change in fixed cost (in units)
Change in contribution per unit

= Change in Fixed cost (in Rs.)
Change in P/Ratio

= Change in Fixed cost (in Rs.)
Change in Variable cost ratio


























18
STANDARD COSTING

Method one of reading:-
Material:-
SP * SQ SP * AQ SP * RSQ AP * AQ
(1) (2) (3) (4)
a) Material cost variance = (1) (4)
b) Material price variance = (2)-(4)
c) Material usage variance = (1) (2)
d) Material mix variance = (3) (2)
e) Material yield variance = (1) (3)

Labour :-
SR*ST SR*AT (paid) SR*RST AR*AT SR*AT(worked)
(1) (2) (3) (4) (5)

a) Labour Cost variance = (1) (4)
b) Labour Rate variance = (2) (4)
c) Labour Efficiency variance = (1) (2)
d) Labour mix variance = (3) (5)
e) Labour Idle time variance = (5) (2)

Variable Overheads cost variance :-
SR * ST SR * AT AR * AT
(1) (2) (3)

a) Variable Overheads Cost Variance = (1) (3)
b) Variable Overheads Expenditure Variance = (2) (3)
c) Variable Overheads Efficiency Variance = (1) (2)

[Where: SR =Standard rate/hour = Budgeted variable OH
Budgeted Hours ]

Fixed Overheads Cost Variance:-
SR*ST SR*AT(worked) SR*RBT SR*BT AR*AT(paid)
(1) (2) (3) (4) (5)

a) Fixed Overheads Cost Variance = (1) (5)


19
b) Fixed Overheads Budgeted Variance = (4) (5)
c) Fixed Overheads Efficiency Variance = (1) (2)
d) Fixed Overheads Volume Variance = (1) (4)
e) Fixed Overheads Capacity Variance = (2) (3)
f) Fixed Overheads Calendar Variance = (3) (4)
Sales value variance:-
Budgeted Price*BQ BP*AQ BP*Budgeted mix AP*AQ
(1) (2) (3) (4)

a) Sales value variance = (4)-(1)
b) Sales price variance = (4) (2)
c) Sales volume variance = (2) (1)
d) Sales mix variance = (2) (3)
e) Sales quantity variance = (3) (1)

Note :-

i) Actual margin per unit (AMPU) = Actual sale price selling cost per unit

ii) Budgeted margin per unit (BMPU) = Budgeted sale price selling price per unit

Sales margin variance :-

BMPU*BQ BMPU*AQ BMPU*Budgeted mix AMPU*AQ
(1) (2) (3) (4)

a) Sales margin variance = (4) (1)
b) Sales margin price variance = (4) (2)
c) Sales margin volume variance = (2) (1)
d) Sales margin mix variance = (2) (3)
e) Sales margin quantity variance = (3) (1)

Control Ratio :-

1) Efficiency Ratio = Standard hours for actual output * 100
Actual hours worked

2) Capacity Ratio = Actual Hours Worked * 100
Budgeted Hours



20
3) Activity Ratio = Actual hours worked * 100
Budgeted Hours

Verification: Activity Ratio = Efficiency * Capacity Ratio
STANDARD COSTING

Method two of reading:-
Material:-

a) Material cost variance = SC AC = (SQ*AQ) (AQ*AP)

b) Material price variance = AQ (SP AP)

c) Material usage variance = SP (SQ AQ)

d) Material mix variance = SP (RSQ AQ)

e) Material yield variance = (AY SY for actual input) Standard material cost per
unit of output

f) Material revised usage variance (calculated instead of material yield variance)
= [standard quantity Revised standard
for actual output quantity ] * Standard price

Labour :-

a) Labour Cost variance = SC AC = (SH*SR) (AH*AR)

b) Labour Rate variance = AH (SR - AR)

c) Labour Efficiency or time variance = SR (SH AH)

d) Labour Mix or gang composition Variance = SR(RSH-AH)

e) Labour Idle Time Variance = Idle hours * SR

f) Labour Yield Variance = [Actual Output Standard output for actual input]
* Standard labour cost/unit of output

g) Labour Revised Efficiency Variance (instead of LYV) =
[Standard hours for actual output Revised standard hours] * Standard rate



21
Notes :- i) LCV = LRV + LMV + ITV + LYV
ii) LCV = LRV + LEV + ITV
iii) LEV = LMV, LYV (or) LREV


Overhead variance :- (general for both variable and fixed)

a) Standard overhead rate (per hour) = Budgeted Overheads
Budgeted Hours

b) Standard hours for actual output = Budgeted hours * Actual Output
Budgeted output

c) Standard OH = Standard hrs for actual output * Standard OH rate per hour

d) Absorbed OH = Actual hrs * Standard OH rate per hour

e) Budgeted OH = Budgeted hrs * Standard OH rate per hour

f) Actual OH = Actual hrs * Actual OH rate per hour

g) OH cost variance = Absorbed OH Actual OH

Variable Overheads variance :-

a) Variable OH Cost Variance = Standard OH Actual OH

b) Variable OH Exp. Variance = Absorbed OH Actual Variable OH

c) Variable OH Efficiency Variance = Standard OH Absorbed OH
= [Standard hours for Actual * Standard rate
actual output hours] for variable OH

Fixed Overheads variance :-

a) Fixed OH Cost Variance = Standard OH Actual OH

b) Fixed OH expenditure variance = Budgeted OH Actual OH

c) Fixed OH Efficiency Variance = Standard OH (units based) Absorbed OH
(Hours based)



22
d) Fixed OH Volume Variance = Standard OH Budgeted OH
= [Standard hrs for Budgeted * standard rate
actual output hours ]

e) Fixed OH capacity variance = Absorbed OHBudgeted OH

f) Fixed OH Calendar Variance = [Revised budgeted hrs Budgeted hrs]
* Standard rate/hrs

Note:- When there is calendar variance capacity variance is calculated as follows :-
Capacity variance = [Actual hours Revised * Standard
(Revised) Budgeted hrs] rate/hour

Verification :-

i) variable OH cost variance = Variable OH Expenditure variance
+ Variable OH Efficiency variance

ii) Fixed OH cost variance = Fixed OH Expenditure variance + Fixed OH volume
variance

iii) Fixed OH volume variance = Fixed OH Efficiency variance + Capacity variance
+ Calander variance
Sales variances :-

Turnover method (or) sales value method :-

a) Sales value variance = Actual Sales Budgeted Sales

b) Sales price variance = [Actual Price Standard price] * Actual quantity
= Actual sales standard sales

c) Sales volume variance = [Actual-Budgeted quantity] *Standard price
= Standard sales Budgeted sales

d) Sales mix variance = [Actual quantity Revised standard quantity] * Standard
price
= Standard sales Revised sales

e) Sales quantity variance = [Revised standard variance Budgeted quantity]
* Standard price
= Revised Standard sales Budgeted sales


23




Profit method:-

a) Total sales margin variance = (Actual ProfitBudgeted price)
= {Actual quantity * Actual profit per unit}-
{Budgeted quantity * Standard profit per unit}
b) Sales margin price variance=Actual profitStandard profit
= {Actual Profit per unit Standard profit per unit} * Actual quantity of sales

c) Sales margin volume variance = Standard profit Budgeted Profit
= {Actual quantity Budgeted quantity} * Standard profit per unit

d) Sales margin mix variance = Standard profit Revised Standard profit
= {Actual quantity Revised standard quantity} * Standard profit per unit

e) Sales margin quantity variance = Revised standard profit - Budgeted profit
= {Revised standard quantity Budgeted quantity} * Standard profit per unit

STANDARD COSTING
Diagrammatic Representation: -
Material Variance: -


Material cost variance = SC AC = (SQ*AQ) (AQ*AP)
Labour Variances:-


24

Labour Cost variance = SC AC = (SH*SR) (AH*AR)
Fixed Overhead Variance : -
a) Standard OH = Standard hrs for actual output * Standard OH rate per hour

b) Absorbed OH = Actual hrs * Standard OH rate per hour

c) Budgeted OH = Budgeted hrs * Standard OH rate per hour

d) Actual OH = Actual hrs * Actual OH rate per hour

e) Revised Budgeted Hour = Actual Days * Budgeted Hours per day
(Expected hours for actual days worked)

When Calendar variance is asked then for capacity variance Budgeted
Overhead is (Budgeted days * Standard OH rate per day

Revised Budgeted Hour (Budgeted hours for actual days) = Actual days * Budgeted


25
hours per day









Variable Overhead Variance : -



Sales Value Variances : -


Sales value variance = Actual Sales Budgeted Sales
Sales Margin Variances : -



26


Total sales margin variance = (Actual ProfitBudgeted price)
= {Actual quantity * Actual profit per unit}-
{Budgeted quantity * Standard profit per unit}

[Where :-

SC = Standard Cost, AC = Actual Cost
SP = Standard Price, SQ = Standard Quantity
AP = Actual Price, AQ = Actual Quantity
AY = Actual Yield, SY = Standard Yield
RSQ = Revised Standard Quantity, SR = Standard Rate,
ST = Standard Time AR = Actual Rate,
AT = Actual Time RST = Revised Standard Time,
BP = Budgeted Price, BQ = Budgeted Quantity
RBT = Revised Budgeted Time
BMPU = Budgeted Margin per Unit
AMPU = Actual Margin per Unit