Cost Sheet - Cost Accounting T. Y. B. Com. Sem V 1644476726
Cost Sheet - Cost Accounting T. Y. B. Com. Sem V 1644476726
Cost Sheet - Cost Accounting T. Y. B. Com. Sem V 1644476726
Profit
Sales
Selling and Loss
Distribution
Value
Overheads Total Cost
of Sales
Office and Cost of
Administration Production/
Overheads Cost of
Works/Factory Goods Sold
Works/
Overheads
Factory Cost
Direct Material Prime Cost
Direct Labour
Direct Expenses
1 1
(1) 100% 50%
1 2
1 1 %1
3
(2) 50% 33
2 3
1 %1 1
(3) 33
3
25 %
3 4
% 1 1
(4) 25 20 %
4
5
2 %
% 1 3
1
(5) 20 16
5 6
1 1
(6) 11.11% 10%
9 10
(1) All the cost are classified into Direct Costs or Indirect Costs.
(2) Items of costs are arranged in the order of first, Material then Labour and in the last expenses.
(3) All Direct Costs are also termed as Prime Costs. In a Cost Sheet all the items of Prime Cost are
recorded first strictly in the order of Material, Labour and Expenses.
146 Cost Accounting
(4) Then all indirect costs also termed as overheads are recorded.
(5) In case of indirect costs the items are broadly categorised into three main groups:
(a) Works/Factory Cost: In this case all factory overheads are recorded such as indirect
works material, indirect factory labour and indirect factory expenses. All indirect costs
related to factory is recorded here.
(b) Office and Administration Cost: In this case all administration overheads are recorded
such as indirect administration material, indirect administration labour and indirect
administration expenses. All indirect costs related to administration is recorded here.
(c) Selling and Distribution Cost: In this case all selling and distribution overheads are
recorded such as indirect selling and distribution material, indirect selling and distribution
labour and indirect selling and distribution expenses. Both selling expenses as well as
Distribution expenses are considered together in this case.
(6) Finance expenses are not to be considered in the costs sheet. E.g., Interest paid, Bad debts, etc.
(7) Non-operating incomes and non-operating expenses are not to be considered in the cost sheet.
E.g., Profit or Loss on Sale of Fixed Assets, Fictitious Assets written-off, etc.
Method of Preparing Cost Sheet:
In case of a cost sheet all the costs are classified into three main elements, i.e.,
(a) Materials
(b) Labour
(c) Expenses
Further each of the above items are classified into direct and indirect costs.
(1) Direct Materials: It includes the cost of direct (main) raw material plus all expenses relating to
purchases of such direct material such as carriage inward, octroi duty, custom duty on imported
materials, etc.
(2) Direct Labour/Wages: It is also known as productive wages. It is the wages paid for the staff
(employees) who are engaged directly in productive activities. Employees who take in the raw
materials and introduce it in the machine for production purpose is termed as direct labour.
E.g., Wages paid to carpenter who converts wood into a fine piece of furniture.
(3) Direct (or chargeable) Expenses: Direct expenses are such expenses which are incurred
directly with the production activities. According to CIMA, United Kingdom, "Direct expenses
are those expenses which can be identified with and allocated to cost centres or units". E.g.,
Carriage Inwards incurred for purchase of raw materials, Hire charges of special equipment
required for a job, etc.
(4) Overheads: Overheads is an aggregate of all indirect expenses. It comprises of:
(a) Factory overheads.
(b) Office overheads.
(c) Selling and Distribution overheads.
Cost Sheet 147
CLASSIFICATION OF COSTS
The term 'cost' is defined in a variety of ways. Its simple meaning is ‘total expense’.
Cost can be classified in a number of ways:
(a) Direct Costs.
(b) Indirect Cost
(c) Fixed Cost
(d) Variable Cost.
(e) Semi-variable Cost.
Direct Cost:
Direct cost are those costs which can be conveniently associated wholly with a particular unit of
a final product. Direct costs can be directly identified with and allocated to cost centres or cost units.
E.g.:
(i) Materials which form part of the finished product — cost of wood in a firm manufacturing
furniture.
(ii) Wages payable to worker who is directly involved in production — carpenter's wages in a firm
manufacturing furniture.
(iii) Carriage expenses on raw materials.
(iv) Workers' wages.
(v) Raw material charges
Indirect Cost:
The Institute of Cost and Management Accountants (UK) defines indirect cost as the, "Cost which
cannot be allocated but which can be apportioned to or absorbed by cost centers or cost units." They are
incurred for the benefit of more than one product, activity or job and must be apportioned by some
appropriate bases to the various functions. Costs which cannot be associated or connected with a
particular unit of the final product is termed as indirect costs. Indirect costs cannot be identified and
allocated with cost centers or cost units and therefore they are apportioned on some equitable basis to
cost centers or cost units.
E.g.:
(i) Advertisement expenses
(ii) Office rent
148 Cost Accounting
(iii) Packing expenses [Note: Primary Packing Materials - Direct Cost Secondary Packing Materials
- Indirect Cost]
(iv) Depreciation on Furniture
(v) Legal expenses
(vi) Cost of consumable stores.
(vii) Salaries of foreman, supervisor, factory manager
(viii) Rent and rates,
(ix) Printing and stationery,
(x) Telephone expenses,
(xi) Heat and light,
(xii) Maintenance, etc.
Overheads:
Overheads means indirect cost. Overheads are also termed as "On costs". Overheads is an aggregate
of indirect materials, indirect labour and indirect expenses.
(a) Factory overheads,
(b) Administrative overheads, and
(c) Selling and Distribution overheads
SOLVED PROBLEMS
Illustration 1
[M.U., T.Y.B.Com., Modified]
The accounts of Z Ltd for the year ended 31st December, 2010, shows the following:
Particulars (`)
Work Office Salaries 6,500
Administrative Office Salaries 12,600
Cash Discounts allowed 2,900
Carriage Outward 4,300
Carriage Inward 7,150
Bad debts written off 6,500
Repairs to Plant and Machinery 4,450
Rent, rates,taxes, Insurance etc
Factory 8,500
Office 2,000
Cost Sheet 149
Sales 4,61,000
Stock of Raw materials:
1st Jan., 2010 48,000
31st Dec., 2010 62,800
Materials Purchased 1.85,00
Travelling Expenses 2,100
Travellers Salaries and Commission 7,700
Productive Wages 1,26,000
Depreciation on Plant and Machinery 6,500
Depreciation on Office Furniture 300
Director’s Fees 6,000
Gas and Water (Factory) 1,200
Gas and Water (Office) 400
Manager’s Salary (1/4 Office and 3/4 Factory) 10,000
General Expenses 3,400
You are required to prepare a cost statement for the year ended 31st December, 2010.
Solution
Z Ltd.
Cost Statement for the year ended 31st December, 2010
Particulars ` `
Raw Materials Consumed:
Stock of Raw Materials as on 1st Jan., 2010 48,000
Add: Materials Purchased 1,85,000
Add: Carnage Inward 7,150
Less: Stock of Raw Materials as on 31st Dec., 20010 62,800
Raw Materials Consumed 1,77,350
Productive Wages 1,26,000
PRIME COST 3,03,350
Add: Works/Factory Overheads:
Work Office Salaries 6,500
Repairs to Plant and Machinery 4,450
Rent, Rates, Taxes, Insurance etc. – Factory 8,500
Depreciation on Plant and Machinery 6,500
Gas and Water (Factory) 1,200
Manager’s Salary (3/4) 7,500
Works or Factory Overheads 34,650
150 Cost Accounting
Solution
Swadeshi Electronics Ltd.
Cost Sheet for the year ended 31st March, 2012
[Output: 15,000 Units]
Estimated Cost Sheet for the year ending 31st March, 2013
[Output: 20,000 Units]
Particulars Total Cost per Unit
` ` `
Direct Materials 3,96,000 19.80
Direct Wages 2,16,000 10.80
Prime Cost 6,12,000 30.60
Add: Works/Factory Overheads:
Fixed Overheads 45,000 22.50
Variable Overheads 2,40,000 12.00
Factory Overheads 2,85,000 14.25
Works/Factory Cost 8,97,000 44.85
Add: Office and Administration Overheads:
Administrative Overheads 63,000 3.15
Cost of Production/Cost of Goods Sold 9,60,000 48.00
154 Cost Accounting
Solution
Cost Statement for the year ended 2010
Particulars ` `
Rew Materials Consumed:
Opening Stock of Raw Materials 3,00,000
Add: Purchases 8,00,000
Add: Carnage Inward 10,000
Less: Closing Stock of Raw Materials 4,00,000
Raw Materials Consumed 7,10,000
Wages Direct 7,00,000
Chargeable Expenses 2,00,000
PRIME COST 16,10,000
Add: Works/Factory Overheads:
Wages Indirect 1,00,000
Rent and Rates - Factory 40,000
Indirect Materials 15,000
Drawing Office Salaries 10,000
Depreciation - Plant 5,000
Other Factory Expenses 57,000
Managing Director’s Remuneration 40,000
Add: W.I.P. as on 1-9-2010 20,000
Less: W.I.P. as on 31-12-2010 10,000
Less: Sale of By-product 10,000
Works or Factory Overheads 2,67,000
WORKS/FACTORY COST 18,77,000
Add: Office and Administration Overheads:
Rent and Rates - Office 5,000
Depreciation - Office Furniture 1,000
Salary-Office 25,000
Other Office Expenses 9,000
Managing Director’s Remuneration 20,000
Office and Administration Overheads 60,000
COST OF PRODUCTION 19,37,000
Add: Stockof Finished Goodsason1.1-2010 10,000
19,47,000
Less: Stock of Finished Goods as on 31-12-2010 50,000
156 Cost Accounting
Prepare a statement for the two years, 2011 -2012 and 2012-2013 showing cost and profit per fan
and total cost and total profit, giving maximum possible break-up of cost.
Solution
M/s. Cool and Comforts Ltd.
Cost Sheet for the year ended 31st March. 2012
[Output: 2,000 Fans]
Particulars Total Cost per
` ` Unit (`)
Materials Consumed 1,20,000 60.0
Wages 1.80.000 90.0
Prime Cost 3,00,000 150.0
Add: Works/Factory Overheads:
Manufacturing Expenses 75,000 37.5
Works/Factory Cost 3,75,000 187.5
Add: Office and Administration Overheads:
Rent, Rates and Taxes 15,000 7.5
General Expenses 30,000 15.0
Management Expenses 90,000 45.0
Total Office and Administration Overheads 1,35,000 67.5
Cost of Production/Cost of Goods Sold 5,10,000 255.0
Add: Selling and Distribution Overheads
Selling and Distribution Expenses 45,000 22.5
Total Cost of Sales 5,55,000 277.5
Add: Profit 45,000 22.5
Sales Value 6,00,000 300.0
Estimated Cost Sheet for the year ending 31st March, 2006
[Output: 3,000 Fans]
Particulars Total Cost per
` ` Unit (`)
Materials Consumed 2,16,000 72.00
Wages 2.97,000 99.00
Prime Cost 5,13,000 171.00
Add: Works/Factory Overheads:
Manufacturing Expenses 1,28,250 42.75
Works/Factory Cost 6,41,250 213.75
Add: Office and Administration Overheads:
Rent, Rates and Taxes 15,000 5.00
General Expenses 30,000 10.00
Management Expenses 90,000 30.00
160 Cost Accounting
Direct Expenses:
Royalty on Raw Material Consumed 1,20,000 3
Prime Cost 10,00,000 25
Add: Works/Factory Overheads:
Works Overheads 8 × 25,000 2,00,000 5
Works/Factory Cost 12,00,000 30
Add: Office and Administration Overheads:
Office Overheads 4,00,000 10
Cost of Production 40,000 16,00,000 40
Less: Closing Stock 4,000 1,60,000 40
Cost of Goods Sold 36,000 14,40,000 40
Add: Selling and Distribution Overheads
Sales Commission 36,000 1,44,000 4
Total Cost of Sales 36,000 15,84,000 44
Add: Profit 36,000 5,76,000 16
Sales Value 36,000 21,60,000 60
Illustration 8
[CS Modified]
Prepare a cost sheet showing the total and per tonne cost of paper manufactured by Times Paper
Mills Ltd. For the month of March, 2012. There were 26 working days in the month. Also find the profit
earned by the company. The details are as under:
Direct Raw materials:
Paper pulp 6,000 tons @ ` 900 per tonne.
Direct labour:
280 Skilled workmen ` 250 per day
300 Semiskilled workmen ` 150 per day
470 Unskilled workmen ` 100 per day
Direct expenses:
Special equipment hire charges ` 12,000 per day
Special dyes ` 250 per tonne of total raw material input
Work overheads: Variable @ 50% of direct wages
Fixed ` 2,70,000 p.m.
Administration overheads @ 12% of works cost
Selling and distribution overheads ` 80 per tonne sold.
Opening stock of paper 500 tonnes valued @ ` 2,501.60 per ton
Closing stock of paper 300 tonnes valued at cost of production.
Solution
Times Paper Mills Ltd.
[Working Days: 26]
Cost Sheet for the month of March, 2012
Particulars Tons Total Cost per
` ` Unit (`)
Direct Raw Materials:
Paper Pulp 6,000 54,00,000 900.00
Direct Labour:
Skilled Workmen 280 × 250 × 26 18,20,000 303.33
Semiskilled Workmen 300 × 150 × 26 11,70,000 195.00
Unskilled Workmen 470 × 100 × 26 12,22,000 203.66
Direct Labour 42,12,000 702.00
Dieect Expenses:
Special Equipments Hire Charges 12,000 × 26 3,12,000 52.00
Special Dyes 6,000 15,00,000 250.00
Direct Expenses 18,12,000 302.00
PRIME COST 6,000 1,14,24,000 1,904.00
Add: Works/Factory Overheads:
Variable 21,06,000 351.00
Fixed 2,70,000 45.00
Works/Factory Overheads 23,76,000 396.00
Works or Factory Cost 6,000 1,38,00,000 2,300.00
Add: Office and Administration Overheads:
Administration Overheads 16,56,000 276.00
Cost of Production 6,000 1,54,56,000 2,576.00
Add: Opening Stock of Paper 500 12,50,800 2,501.60
6,500 1,67,06,800 2,570.27
Less: Closing Stock of Paper 300 7,72,800 2,576.00
Cost of Goods Sold 6,200 1,59,34,000 2,655.66
Add: Selling and Distribution Overheads 6,200 4,96,000 80.00
Total Cost of Sales 6,200 1,64,30,000 2,650.00
Add: Profit 6,200 21,70,000 350.00
Sales Value 6,200 1,86,00,000 3,000.00
Cost Sheet 163
Illustration 9
The following particulars are extracted from the books of a company relating to commodity Aplha
for the half year ending 30th June, 2012.
`
Purchase of raw materials 1,30,000
Direct wages 1,00,000
Rent, rates, insurance and works on cost 45,000
Carriage inward 1,500
Stock on 1-1-2012
Raw materials 20,000
Finished products (1,600 tonnes) 17,600
Stock on 30-6-2012
Raw materials 25,000
Finished products (3,200 tonnes) 37,600
Work-in-progress on 1-1-2012 4,500
Work-in-progress on 30-6-2012 16,000
Factory supervision 10,000
Sales – Finished product 3,00,000
Advertising discount allowed and selling cost at Re.0.50 per tonne sold. 25,000 tonnes of commodity
was sold during the period.
You are required to ascertain:
1. Prime Cost
2. Factory Cost
3. Cost of Sales
4. Profit
5. No. of tonnes of the commodity sold.
Solution
Cost Sheet of Commodity Alpha for the period ending 30-6-2009
Particular ` `
Raw materials
Opening stock 20,000
Add: Purchases 1,30,000
1,50,000
Less: Closing stock 25,000
1,25,000
Add: Carriage inwards Materials Consumed 1,500
1,26,500
164 Cost Accounting
On 31st March 2010 Materials on hand totaled ` 24,000 where as the work-in-progress was
estimated as ` 8,500. 1800 units were produced out of which 650 remained unsold. Prepare cost sheet
& show the profit earned.
(4) In 2009 selling price was ` 10 per article & total sales were ` 1,00,000. In 2010, selling price
was increased by 10%. Total sales realized ` 1,26,500.
In 2009, materials cost was 40% of sales value. In 2010, Prices of raw material rose by 10%.
In 2009, wages were ` 30,000. In 2010, the wages cost was ` 33,000. In 2009, other expenses
were 10% of sales value. These expenses rose in 2010 by ` 1,500.
Prepare cost statement for the years 2009 & 2010. Find out the net profit for 2009, & 2010.
[Ans.:(1) Total Cost- 2009-` 80,000 Cost Per Unit 8.00 & 2010- ` 95,100 Cost Per Unit 8.27
(2) Net profit - 2009-` 20,000 Cost Per Unit 2.00 & 2010- ` 31,400 Cost Per Unit 2.73]
(5) From the following information prepare a cost statement showing maximum possible break up
of cost & total profit:
[MU T.Y.B.Com., Modified]
`
Sales for January 2010 30,00,000
Cost of goods sold 24,80,000
Administration expenses 1,80,000
Selling expenses 40,000
1.1.10 31.1.10
` `
Raw material stock 3,20,000 4,00,000
Work-in-progress 3,20,000 4,80,000
Finished goods 4,20,000 3,40,000
Cost Sheet 167
The wastage in raw material is normal. The purchase price of raw materials remained unchanged
through 2009. The stock of finished mixture at the end of the year is to be valued at factory cost. Raw
materials are consumed on FIFO basis. From the above information you are required to prepare a cost
statement shoeing the prime cost, works cost & total cost of the mixture produced during the year.
[Ans.: Prime Cost- ` 3,77,800 Works Cost- ` 5,16,200 Total Cost- ` 16,89,797]
(7) The following figures are extracted from the Trial Balance of Gogetter Co. on 30th September,
2012.
[MU T.Y.B.Com Modified]
Particulars `
Inventories
Finished goods 80,000
Raw Materials 1,40,000
Work-in-progress 2,00,000
Office Appliances 17,400
Plant & Machinery 4,60,500
Buildings 2,00,000
Sales 7,68,000
Sales Return & Rebates 14,000
Materials Purchased 3,20,000
Freight incurred on Materials 16,000
Purchase Returns 4,800
Direct Labour 1,60,000
Indirect Labour 18,000
Factory Supervision 10,000
Repairs & Unkeep – factory 14,000
Heat, Light, & Power 65,000
Rates & Taxes 6,300
Miscellaneous Factory Expenses 18,700
Sales Commission 33,600
Sales Travelling 11,000
Sales Promotion 22,500
Distribution Dept. Salaries & Expense 18,000
Office Expenses 8,600
Interest on Borrowed Funds 2,000
Further details are available as follows:
(i) Closing Inventories:
Finished Goods 1,15,000
Raw Materials 1,80,000
Work in progress 1,92,000
Cost Sheet 169
(11) A company produced two knids of electric pumps XA and XB details of which are
XA XB
Pumps manufactured 25,000 12,000
Direct cost: ` 3,140 ` 2,650
Materials 9,400 5,700
Wages 2,100 1,410
Power, etc. 14,640 9,760
Total
Other costs
Factory supervision, etc. ` 3,600
Packing wages and expenses 400
Management and selling expenses 4,400
You are required to prepare a statement showing the cost of each kind of pump when ready for
dispatch, taking the following into considerations.
(i) Factory supervision to be charged in proportion to direct costs.
(ii) Packing expenses to be apportioned in the ratio that direct costs plus factory supervision costs
of XA bear to similar costs of XB.
(iii) Management and selling expenses to be charged in production to the pups manufactured.
[Ans.: Total Cost- XA- 20,013 XB- ` 12,788]
(12) A manufacturer commenced production on 1st January, 2012 of a standard article in two
grades A and B. Both are produced form the same raw material and are sold to wholesalers at
a uniform price – Grade A at ` 150 per dozen and Grade B at ` 240 per dozen. Sale price are
based on the following estimated figures:
[CIMA London Modified]
Cost per Article
Grade A Grade B
Direct material cost 1.50 3.00
Direct wages 5.00 7.00
Production overhead 2.50 3.50
Works cost 9.00 13.50
Selling and Distribution overhead 0.90 1.35
Total Cost 9.90 14.85
On making up accounts for year ended 31st December 2012, the following faits were ascertained:
Cost of Material Used Grade A Grade B
Direct wages 15,000 20,000
Product wages 38,250 76,500
Product overheads (Total) ` 68,125
Selling & Distribution overhead (Total) ` 32,700
172 Cost Accounting
During the year sales amounted to ` 1,05,000 in respect of Grades A articles and ` 1,80,000 in
respect of Grade B articles, and stock on hand at 31st Dec, 2009, valued at work cost as per his costing
were ` 5,400 of Grade A and ` 13,500 of Grade B.
From the information given above, you are required to prepare a statement of revised costing
showing the cost per article sold during 2012.
[Ans.: Total Cost- A- 83,160 B- ` 1,33,650]
(13) The managing director of a small manufacturing concern consults you as to the minimum price
at which he can sell the output of one of the departments of the company which is intended for
mass production in future. The company’s records show the following particulate for this
department for the past year:
Production & Sales (100 Units) Works overheads 7,000
Materials 13,000 Office overheads 2,800
Direct labor 7,000 Selling overheads 3,200
Direct charges 1,000 Profit 5,000
You ascertain that 40% of the works overheads fluctuate directly with production and 70% of the
selling overheads fluctuate with sales. It is anticipated that the department would produce 500 units per
annum and that direct labour charges per unit will be reduced by 20%. While fixed selling overheads
charges are expected to show an increase of 25% but otherwise no changes are anticipated.
[Ans.: Actual Total Cost -` 39,000 Cost Per Unit 390.00 & Estimated
` 1,35,100 Cost Per Unit 270.00]
(14) The cost of manufacturing 5,000 units of a commodity comprises –
Materials 20,000 Fixed factory overhead 16,000
Direct labour 25,000 Variable factory overhead 4,000
Chargeable expenses 400
For manufacturing every 1,000 extra units of the commodity the cost of production increases as
follows:
Materials: Proportionately. Fixed factory overheads: ` 200 extra. Wages: 10% less than
proportionately. Variable factory overheads 25% less than proportionately.
Chargeable Expenses: No extra cost whatsoever.
Calculate the estimate cost of producing 8,000 units of the commodity and show by how it would
differ if a flat rate of factory overhead based on wages were charged.
[Ans.: Actual Works Cost - ` 65,400 Cost Per Unit 13.08 &
Estimated ` 89,800 Cost Per Unit 11.23]
(15) Electronics Ltd., furnish the following information for 10,000 TV valves manufactured during
the year 2009.
[ICWA Modified]
Cost Sheet 173
You are required to work out the total cost per vacuum cleaner for 2009-10 and the selling price at
which it should be marketed in order to make of profit of 20% on sale value.
[Ans.:(1) Total Cost- 2009- ` 2,80,700 Cost Per Unit 311.88 & 2010-
` 4,56,686 Cost Per Unit 304.45
(2) Net profit - 2009- ` 69,300 Cost Per Unit 77.00 & 2010-
` 1,14,171 Cost Per Unit 76.11]
(18) M/s Bata Shoe Co. manufacturers two types of shoes A and B. Production costs for the year
ended 31st March, 2010 were:
[MU T.Y.B.Com., Modified]
Direct materials ` 15,00,000
Direct wages 8,40,000
Production overheads 3,60,000
` 27,00,000
There was no work-in-progress at the beginning or at the end of the year. It is ascertained that:
(a) Direct Materials in type A shoes consists twice as much as that in type B shoes.
(b) The direct wages for type B shoes were 60% of those for type A shoes.
(c) Production overhead was the same per pair of A and B type.
(d) Administrative overheads for each type were 150% of direct wages.
(e) Production during the year were: Type A 40,000 pairs of which 36,000 were sold. Type B
1,20,000 pairs of which 1,00,000 were sold.
(f) Selling cost was ` 1.50 per pair.
(g) Selling price was ` 44 for type A and ` 28 per pair for type B.
[Ans.: Total Cost- A- 13,50,000 B- ` 22,50,000 Profit- A- 2,34,000 B- ` 5,50,000]
(19) X and Y shoe polish company Ltd. manufactures black and brown polish in one standard size
of tin retailing at ` 1.08 and ` 1.20 respectively. The following data is supplied to you.
[CA Modified]
Direct Materials: Polish 7,38,000
Tins 2,88,000
Direct Wages 2,44,800
Production overheads 3,67,200
Administrative & selling overheads 1,22,400
Sales for the year were: Black 14,000,000 tins & Brown 6,00,000 tins. The opening & closing
stock were:
Black Brown
Opening stock (Tins) 48,000 1,60,000
Closing stock (Tins) 1,08,000 60,000
176 Cost Accounting
The opening stock of the black & brown polish was valued at its production cost of paise 30.4 per
tin & paise 86.4 per tin respectively. The cost of raw material for brown polish is 10% higher than that
for black there is no difference in the cost of tins. Direct wages for brown are 8% higher than those for
black polish & production overheads are considered to vary with direct wages. Administrative & selling
overheads are absorbed at a uniform rate per tin of polish sold. Prepare a statement to show the cost &
profit per tin of polish
[Ans.: Total Cost- Black- 12,44,160 Brown- ` 5,54,400
Profit- Black- 3,11,040 Brown- ` 1,65,600]
(20) A Company manufactures a mixer which is sold for ` 1,200/-
[ICWA Modified]
(a) Materials constituted at 45% of cost sales.
(b) Labour constituted 40% of cost sales
(c) Overhead expenses constituted 15% of cost of sales.
(d) An increase of 15% in material cost & 10% in labour cost is expected.
(e) The anticipated increased costs in relation to the present sales price would cause 35%
decrease in the amount of the present gross profit.
If the only figure available are those given above, what must be the selling price to given the same
percentage of gross profit as before?
[Ans.: Actual Total Cost -` 900 Profit ` 300 & Estimated ` 996.75 Profit ` 195.00]
(21) The cost structure of an article the selling price of which is ` 45,000 is as follows:
[CA Modified]
Direct Materials 50% Direct Labour………… 20%
Overheads 30%
An increase of 15% in the cost of material & of 25% in the cost of labour is anticipated. These
increased costs in relation to the present selling would cause a 25% decrease in the amount of present
profit per article.
You are required:
(1) To prepare a statement of profit per article at present &
(2) The revised selling price to produce the same percentage of profit to sales as before.
[Ans.: Actual Total Cost -` 33,750 Profit ` 11,250 & Estimated
` 37,968.75 Profit ` 12,656.25]
(22) A factory produces uniform type of articles & has a capacity of 8,000 units per week. The
following information shows the different elements of cost for 3 consecutive weeks when the
output has changed from week to week.
[CA Modified]
Cost Sheet 177
`
Direct Expenses 4,20,000
Telephone Charges 3,52,695
Office computer purchased 2,75,350
Factory Rent & Insurance 3,54,760
Machinery purchased 4,25,560
Machinery Repairs 98,847
Commission on Sales 3,37,650
Factory Salaries 2,19,588
Carriages Outward 1,54,090
Packing Expenses 1,94,450
Bank Interest 1,65,895
Factory Electricity 2,61,880
Delivery Van Expenses 1,06,850
Coal Consumed 3,80,125
Depreciation on Machinery 2,49,600
Depreciation on Computer 2,04,180
Depreciation on Delivery Van 1,57,360
Office Salaries 1,89,325
Printing & Stationery 1,13,000
During the year 2,400 tons of sugar was produced. The Company’s profit target for the year, for
fixing the open market selling price on the basis of cost sheet, is 10% of its average paid-up capital of
` 1,42,56,000. Prepare cost sheet & find various components of total cost & per unit cost & suggest the
selling price for open market.
[Ans.: Total Cost- ` 50,54,400 & Profit- ` 14,25,600
Open Market Price ` 2,500 per tone]
(28) Vaijanth Polymers manufactures & sells a typical brand of tiffin boxes under its own brand
name the installed capacity of the plant is 1,20,000 units per year, distribution evenly over each
month of calendar year. The Cost Accountants of the company has informed you about the
cost structure of the product, which is as follows:
[ICWA Modified]
Raw Materials ` 20 per unit
Direct Labour `12 per unit
Direct Expenses ` 2 per unit
Variable Overheads ` 16 per unit
Fixed Overheads ` 16 per unit.
Fixed overheads for the year ` 3,00,000
180 Cost Accounting
(30) The present sales turnover of a factory is 2000 articles at ` 500 each. By reason of a price
reduction of 10% the size of order is expected to increase by 50%. The present cost structure
of the factory is as follows.
[CIMA London Modified]
Materials 40%
Variable wages & expenses 30%
Fixed overheads 15%
Profit 15%
100%
Present the present & estimated cost sheet. Is it advisable for the company to go for a price
reduction?
[Ans.: Actual Sales - ` 10,00,000 Profit ` 1,50,000 & Estimated
` 13,50,000 Profit ` 2,02,500]
(II) Theory Questions
(1) What is a cost sheet? What are the purposes of a cost sheet?
(2) Give composition of a selling price.
(3) Write short notes on
(a) Works Cost.
(b) Elements of Cost
(4) “Fixed costs are variable per unit while variable costs are fixed per unit” Comment.
(5) Define the term cost. What are the different elements of cost?
(III) Objective Questions
(I) State whether the following statements are True or False.
(1) Cost of a product is decided as per cost attach concept.
(2) Interest on captital is a non-cost item
(3) Cost sheet shows total cost and cost per unit.
(4) Prime cost includes factory overheads.
(5) Cost of production includes selling overheads.
(6) Carriage on material increases cost of materials.
(7) Waste having realisable value is called as scrap.
(8) Fixed cost remains constant irrespective of output.
(9) Variable cost is also called as product cost.
[Ans. True: (1,2, 3, 6, 7, 8, 9). False: (4, 5)]
182 Cost Accounting
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