COST ACCOUNTING

Module II : Unit Costing /Cost Sheet/ Output Costing

Example 1 :

Prepare a Cost Sheet from the following information of Reliable Ltd. For the year ending 31-03-17.

Particulars Rs.
Raw materials Purchased 15,50,000
Freight paid on raw materials purchase 40,000
Productive wages paid 750,000
Unproductive wages paid 220,000
Productive wages outstanding 70,000
Royalty on production (direct) 180,000
Fuel and Power 45,000
Factory Rent 63,000
Insurance on machinery 17,000
Loading and Unloading charges on purchase of raw materials 35,000
Loss on sale of old machinery 54,000
Depreciation on machinery 83,000
Lighting – factory 7,000
Lighting – office 3,000
Factory cleaning 4,000
Advertising 37,000
Carriage outwards 13,000
Income tax 60,400
Factory Telephone 8,900
Plant repairs and maintenance 25,000
Office Computer depreciation 120,000
Office Stationery 21,000
Travelling Expenses – salesmen 35,000
Travelling Expenses – office staff 18,000
Donations 13,500
Salaries of sales staff 70,000
Opening Stock of Finished Goods 120,000
Closing Stock of Finished Goods 150,000
Marketing expenses 14,000
Bank charges and interest 3,400
Expenses on office cars 35,000
Office managers salary 54,000
Bad debts 7,000
Sales 36,00,000

Example 2 :

From the books of account of M/s. Jamuna Enterprises, the following details have been extracted for
the year ending March 31, 2015. During the year, the firm manufactured 10,000 units.

Particulars Rs.
Stock of materials – Opening 1,88,000
Closing 2,00,000
Materials purchased during the year 8,32,000
Direct wages paid 2,38,400
Indirect wages 16,000
Salaries to administrative staff 40,000

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 Freight – Inward 32,000
Outward 20,000
Sales 15,00,000
Cash discount allowed 14,000
Bad debts written off 18,800
Repairs of plant and machinery 42,400
Rent, rates and taxes – Factory 12,000
Office 6,400
Office Staff Travelling Expenses 12,400
Closing Stock of Finished Goods 1000 units
Salesmen’s salaries and commissions 33,600
Depreciation written off – Plant and Machinery 28,900
Office Furniture 2,400
Director’s fees 24,000
Electricity charges (factory) 48,000
Fuel (for boiler) 64,000
Sale of scrap 500
Opening Stock of Work in Progress 10,500
Closing Stock of Work in Progress 12,500
General Administrative charges 24,800
Manager’s salary 48,000
The manager’s time is shared between the factory and the office in the ratio of 20:80. From above details
you are required to prepare a cost sheet.

Example 3 :

Manjeet manufacturing Company submits the following information on 31 st March 2015.

Pariculars Rs.
Sales for the year (25000 units) 2,75,000
Inventories at the beginning of the year were :
Finished Goods (1000 units) 7,000
Work in progress 4,000
Purchase of materials 1,10,000
Materials inventory at the beginning of the year 3,000
Materials inventory at the end of the year 4,000
Direct labour 65,000
Factory overheads was 60% of direct labour cost
Inventories at the end of the year were :
Finished Goods (1500 units) (?)
Work in progress 6,000
Other expenses for the year were :
Selling expenses 10% of sales
Administrative expenses 5% of sales
Prepare Cost sheet with relevant details. Round off Cost per unit upto two decimal points.

Example 4 (HW) :

The following information was received from the books of Sheetal & Co. for the quarter ending on
March 31 st , 2009.

Particulars Rs.

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 Stock of material on 31-3-2009 70,000
Stock of material on 01-1-2009 1,00,000
Purchase of materials 8,03,290
Office Travelling expenses 5,100
Carriage inwards 4,500
Carriage outwards 9,150
Drawing office Salaries 7,000
Depreciation on plant 8,000
Factory rent, rates and insurance 11,200
Office rent, rates and insurance 29,100
Showroom expenses 9,000
Productive wages paid 2,27,000
Repairs of machine, plant & tools 10,000
Expenses of Office stationery 11,350
Travelling Salesmen’s salaries and commission 9,000
Depreciation on office furniture 700
Director’s fees 8,000
Factory Fuel, gas and water 17,900
Manager’s salary 18,000
Income tax paid 12,000
Donations 4,600
Office Expenses 5,000
Air conditioning charges (office) 4,000
Labour welfare expenses 7,200
Outstanding productive wages 33,000
Sales 13,70,000

Prepare cost sheet giving following information, assuming manager devotes 2/3 of his time to factory.

i. Works overhead and its percentage on wages

ii. Net Profit and its percentage on total cost.

Example 5 (HW) :

From the following information relating to Sharma Industries Ltd. For the year ending 31 st March, 2016,
you are required to prepare statement of cost showing a) Prime Cost b)Factory Overhead c) Factory
Cost d) Total Cost e) Profit & Loss for the period assuming the company manufactured 5,000 units and
sold 4,500 units. There was no opening stock of finished goods.

Particulars Rs.
Direct wages 2,40,000
Direct materials purchased 3,22,000
Purchase returns 13,000
Drawing office salaries 3,100
Carriage on direct materials 4,200
Chargeable expenses on materials 2,800
Provision for bad debts 2,400
Office Expenses 6,400
Factory rent and rates 14,600
Depreciation on plant 8,600
Showroom rent 3,000
Misc. Selling Expenses 3,200
Office Lighting 900
Factory Gas and water 3,400
Power 2,800
Factory cleaner 2,000
Salesman Travelling expenses 6,000
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 Showroom telephone expenses 1,500
Labour welfare expenses 4,600
Sale of scrap 450
Factory Supervision 3,500
Sales 640,000

Example 6 :

The following figures are extracted from the trial balance of Gogether on September 30, 2015.

Particulars Rs.
Opening Inventories :
Finished Stock 80,000
Raw Materials 1,40,000
Work In Progress 2,00,000
Office Appliances 17,400
Plant and Machinery 4,60,500
Building 2,00,000
Sales 7,68,000
Sales Returns 14,000
Materials Purchased 3,20,000
Freight incurred on raw materials 16,000
Purchase Returns 4,800
Direct Labour 1,60,000
Indirect Labour 18,000
Factory Supervision 10,000
Repairs and Upkeep – factory 14,000
Heat, Light and Power 65,000
Rates and taxes 6,300
Miscellaneous Factory Expenses 18,700
Sales Commission 33,600
Sales Travelling 11,000
Sales Promotion 22,500
Distribution Dept – Salaries and Expenses 18,000
Office Salaries and Expenses 8,600
Interest on Borrowed Funds 2,000
Closing Inventories :
Finished Goods 1,15,000
Raw Materials 1,80,000
Work in Progress 1,92,000
Accrued Expenses :
Direct Labour 8,000
Indirect Labour 1,200
Interest on Borrowed Funds 2,000

Other Information :

a) Depreciation to be provided on : Office appliance @ 5%, Plant @ 10% and Building @ 4%.
b) Distribution of the following : Heat, light and Power and Depreciation on building is to be
distributed to factory, office and selling & distribution in the ratio of 8 : 1 : 1.
c) Rates and taxes 2/3 to factory and 1/3 to office.

Prepare a detailed Cost sheet and find the final profit.

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Example 7 (HW) :

Popeye Company is a metal and wood cutting manufacturer, selling products to the home construction
market. Consider the following data for the month of October, 2016.

Sandpaper 5,000
Carriage inward and freight on Raw Material 1,75,000
Lubricants and coolants 12,500
Miscellaneous indirect manufacturing labour 1,00,000
Direct manufacturing labour 7,50,000
Direct materials (01-10-16) 1,00,000
Direct materials (31-10-16) 1,25,000
Finished Goods (01-10-16) 2,50,000
Finished Goods (31-10-16) 3,75,000
Work in progress (01-10-16) 25,000
Work in progress (31-10-16) 35,000
Plant leasing costs 1,35,000
Depreciation on plant equipment 90,000
Property taxes on plant equipment 10,000
Fire insurance on plant equipment 7,500
Direct materials purchased 11,50,000
Sales revenues 34,00,000
Marketing promotions 1,50,000
Marketing salaries 2,50,000
Distribution costs 1,75,000
Customer service costs 2,50,000

Prepare Cost sheet and find out the profit for the month of October 2016.

Example 8 :

Anmol Enginneering Works Ltd. Manufactured and sold 1000 sewing machines in 2015. Following are
the particulars obtained from the records of the company.

Particulars Rs.
Cost of materials 80,000
Wages paid 1,20,000
Manufacturing expenses 50,000
Salaries of managerial staff 60,000
Office Rent, rates and insurance 10,000
Selling expenses 30,000
General Administration expenses 20,000
Sales 4,00,000

The Company plans to manufacture 1200 sewing machines in 2016. You are required to submit a
statement showing the price at which machines would be sold so as to show a profit of 10% on the
selling price. The following additional information is supplied to you :

a) The price of materials will rise by 20% of the previous year’s cost per unit
b) Wages rates will rise by 5 %
c) Manufacturing expenses per unit will rise in proportion to the combined cost of materials and
wages
d) Selling expenses per unit will remain unchanged
e) Other expenses will remain unaffected by the rise in output.
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Example 9 :

Mohini Shoes Co. manufactures two types of shoes A and B. Production costs for the year ended March
31 st , 2015 were :

Particulars Rs.
Direct materials 15,00,000
Direct Wages 8,40,000
Production overheads 3,60,000
Total 27,00,000

There was no work in progress at the beginning or at the end of the year. It is ascertained that

i. Direct material in type A shoes consists of twice as much as that in type B shoes.
ii. The direct wages for type B shoes were 60% of those of type A shoes.
iii. Production overhead was the same per pair of A and B type.
iv. Administrative overhead for each type was 150% of direct wages
v. Selling cost was Rs. 1.50 per pair.
vi. 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
vii. Selling price was Rs. 44 for type A and Rs. 28 for type B per pair.

Prepare statement showing total and per unit cost and profit.

Example 10 :

In respect of a factory, the following particulars have been extracted for the year 2017 :

Cost of materials 6,00,000

Wages 5,00,000
Factory overheads 3,00,000
Administration charges 3,36,000
Selling charges 2,24,000
Distribution charges 1,40,000
Profit 4,20,000
A special work order No. 125 has to be executed in 2018 and the estimated expenses are :
Material Rs. 8,000, wages Rs. 5,000.
The company has a policy of recovering Factory overheads on wages. Administration, selling and
distribution overheads are recovered based on factory cost.

Assuming that, in 2018, the rate of factory overheads has gone up by 20%, distribution charges have
gone down by 10% and administration and selling charges have each gone up by 15 %, at what price
should the product be sold so as to earn the same rate of profits as in 201 7?

Example 11 :

Following figures are extracted from the records of a Company for the year 2015 -16 : (Amount in
Rupees)

Particulars Rs.
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 Direct Materials 60,000
Direct Wages 50,000
Works Overheads 30,000
Administrative Overheads 33,600
Selling Overheads 22,400
Distribution Overheads 14,000
Profit 52,500
One material has been manufactured and supplied to Mr. X, in 2016-17 for which following expenses
were incurred :

Direct Material 4,000

Direct Wages 2,000

In 2016-17 works overhead increased by 20%, distribution overhead decreased by 10% and
administrative and selling overhead each were increased by 12.5%.

The company has a policy of recovering Factory overheads on wages. Administration, selling and
distribution overheads are recovered based on factory cost.

At What price the above supply should be billed to Mr. X so as to earn the same rate of profit on selling
price as earned in 2015-16.

Example 12 :

Production Account
Particulars Rs. Particulars Rs.

To Raw Materials consumed 2,18,200 By Prime Cost 3,63,200

To Direct wages 1,45,000

3,63,200 3,63,200

To Prime Cost 3,63,200 By Factory Cost 4,05,750

To Factory Overheads 42,550

4,05,750 4,05,750

To Factory Cost 4,05,750 By Cost of Production 4,25,400

To Administrative Overheads 19,650

4,25,400 4,25,400

To Cost of Production 4,25,400 By Cost of sales 4,62,650

To Selling and Distribution o/h 37,250

4,62,650 4,62,650

To Cost of sales 4,62,650 By Sales 4,87,000

To Net Profit 24,350

4,87,000 4,87,000
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Following is the production account of Ojas Manufacturing Company who has produced 1,000 units
during the previous year 2015-16.

From the above data, you are required to prepare an estimated cost sheet for the year 2016-17
wherein the company estimates a production of 2000 units. The following is the additional
information provided by the company :
a) Out of the total Production during the year, 1500 units are likely to be sold.
b) Raw material cost has gone up by Rs. 1.80 per unit.
c) Direct wages cost has gone up by 20%.
d) Factory overheads are to be taken at a recovery rate based on direct wages.
e) Total Administrative cost has increased by 20%.
f) Selling and Distribution Costs per unit has gone up by Rs. 0.75.
g) The Company wants the same rate of profit on sales as the previous year.

(F.Y. B.Com – Mid term – September 2017)

Example 13 :

PMS manufacturing Company manufactures two products by the name of Beta and Zeta through two
different machines. The following is the information provided by the company for the year 2017 -18 :

Factory Overhead Amount in

Fixed : rupees
Lighting 15,000
Factory Rent 1,00,000
Manager’s Salary 24,000
-
Variable :
Power for machines 93,750
Lubricants for machinery 7,500
Other variable overheads 25,000
Total 2,62,250

Other information pertaining to the company for the year 2017 -18 are as follows :

Particulars Beta Zeta

Units produced 50,000 75,000
Time taken per unit 1 hour 1 hour
Light points 6 9
Area 2,000 sq. feet 3,000 sq. feet

Additional Information :

1. The Raw material cost is expected to be Rs. 7,00,000 in the following year. The raw material
used in one unit of Beta is twice as that used in one unit of Zeta.
2. The company pays the labour force on piece rate system. The piece rate was Rs. 4 per unit in
the previous year. This rate is expected to rise by 25%.
3. The company estimates that the fixed factory overheads are likely to rise by 20% and the
variable overheads are expected to increase by 10%.
4. The company also tells you that there will be no change in the production levels in the
following year but the sales are likely to go down to 40,000 and 60,000 units for Beta and
Zeta respectively.
5. The factory manager dedicates equal time to both the departments where Beta and Zeta are
produced.
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 6. The administrative overheads in the Previous year were Rs. 3,15,000. No change is expected
in these overheads. The company apportions this overhead based on units produced.
7. Selling and distribution overheads are Rs. 2 per unit and the company wants to earn a profit of
20% on sales in the following year.

Prepare an estimated product wise cost sheet for the following year with detailed bifurcatio n of
expenses.Working notes form part of your answer.

(FYB. Com (H) – Mid term exam – September 2019)

Example 14 :

Bharat Pharmaceuticals have successfully Tested 2 Vaccines for Covid treatment,

Defeatcovid' and 'Cohit'. The following are the details of the costs incurred during the month of
Jan 2021. The Company wants you to prepare a cost sheet and compute the Price at which each
of the vaccinations can be sold to the masses.

Particulars Amount in Rs. (Total Cost )

Direct Material 1,16,00,000
Direct Labour 78,00,000
Production Overhead 58,20,000
Research & Development, Quality control and Testing cost 60,00,000

It was ascertained that-

a) The Company has confirmed sales order for 6,70,000 units of Defeatcovid and 4,80,000 units of Cohit.
The company plans to keep a stock at January end of 40,000 units of Defeatcovid and 35,000 units of Cohit
The stock at the beginning of the month was 10,000 units of Defeatcovid and 15,000 units of Cohit.
b) Direct Material cost per vaccine for Cohit is 1.5 times than that for Defeatcovid
c) Direct Labour cost per vaccine for Defeatcovid is 40% of those for Cohit
d) Production Overhead be absorbed as a percentage of Prime Cost
e) Research and Development cost, Quality control and Testing cost are believed to be Administrative in
Nature. They are incurred uniformly on the two vaccines and hence to be absorbed at same level per unit
of both vaccines produced
f) Production cost is assumed to be uniform over the period and hence opening and closing stocks are to
be valued at the cost of production applicable in the month of January
g) Selling Overheads are Rs. 7 per unit
h) The Company desires to earn a profit of 1/6 of Sales Realisation

(FYBBA Final Exam – Sem 2- April 2021)

Example 15 :

Aaskra Private Limited is engaged in the manufacture of Trusoe Brand of shoes. The company has the capacity
to produce 10,000 pairs of shoes operating at 100% capacity. The cost incurred for the current level (100%
Capacity) of production for Drake black are given below.

Particulars Amount in Rs.

Cost of Materials Consumed 25,00,000

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 Direct wages 15,00,000

Factory Overheads :
a) Fixed 60,000
b) Variable 2,00,000 2,60,000
Administrative Overheads 2,76,000
Selling and Distribution Overheads
a) Fixed 58,000
b) Variable 4,00,000 4,58,000
Total 49,94,000
Add : Profit 4,06,000
SALES 54,00,000

Considering the market demand, the management has decided to manufacture two types of shoes, namely Drake
Black and Dawn White in the ratio of 2 : 1 and also reduce its operations to 90% Capacity. No additional capital
investment is envisaged.

The company provides you with the following information for the revised production requirements:

(i) The Raw Material cost is expected to rise by 10%. Dawn White will consume twice the material required for
Drake Black.

(ii) Due to a probability of short supply of labour, the company estimates that direct wages will also see a rise of
20%. Dawn White requires only 70% of the amount of labour compared to Drake Black

(iii) The company has a policy to absorb variable factory overheads as a percentage of prime cost. This rate is
expected to go up by 20%.

iv) Variable Selling and Distribution Overheads per unit are expected to fall by 20%

v) All Fixed Overheads are to be distributed based on units produced/sold.

(vi) The Details of Closing Stock (in units) are as follows :

a) Drake Black 1,000
b) Dawn white 750
The company has a policy of rounding off the cost of production per unit to the nearest rupee for valuation
purposes
(vii) Drake Black and Dawn White are expected to fetch a selling Price of Rs. 600 and 850 respectively

You are required to make a product wise cost sheet and show the various costs and profit that will be earned.
Working notes form part of your answer.
(Final Examination – FYB Com (H) – January 2022)

Example 16:

Woodworks Pvt. Ltd. is engaged in making different types of furniture. The most prominent segment
which manufactures Stools, Chairs and Tables were told to submit a detailed cost sheet to the
Management for the Financial Year 2021-22. The following data was made available to you:

Particulars Rs.
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 Total Raw Material Cost 4,62,000
Total Labour :
Cutting of wood 68,000
Smoothening of wood (as a % of Direct Labour) 27,200
Assembling of Furniture Rs. 50 per piece

Other information is as follows:

1. The general trend that has been observed is that 1 table is equivalent to 4 stools and 2 chairs
are equivalent to 1 table for the purpose of cost of Raw materials.
2. The direct labour applied in stools and Chairs each, is half of that applied in tables.
3. Over and above indirect labour, other production overheads are recovered based on the
previous year trend. The Direct Labour (Cutting) in the previous year was 54,000 and the
other production overheads amounted to Rs. 81,000.
4. The Administrative Overheads for the year amounted to Rs. 48,000 which are borne on the
basis of units produced among all three products.
5. The details of stock in nos. are as under :

Particulars Stools Chairs Tables

Stock at the end of the year 50 40 10
Stock at the beginning of the year 40 @ Rs 600 35 @ 900 5 @ Rs.
p.u. p.u. 1700 p.u.
Sales for the year 590 295 55

6. The Selling and Distribution Overheads consist of Showroom Rent, which is Rs. 47,000 and
agent commission which is Rs. 10 per unit.
7. Please round off the Cost of Production per unit to the nearest rupee if necessary.

Being the Cost Accountant of the company, you are required to make the Product wise Cost Sheet in
the required format to present to the Management showing total cost and Sales Revenue if the
company earns a profit of 15% on Sales.

(Mid term Examination – FYBCom (H) – November 2022)

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