Innovative Institute (9717168088) B.Com.

Chapter -1

General Principal – Cost Sheet

What is the reason behind origin of Cost Accounting:-

Cost Accounting has come in existence due to major limitations of Financial Accounting.
Financial Accounting only provides information about overall business and not for a
department or a unit. It only provides overall picture of a business and not the detail of
cost incurred in producing an article or a component. Cost element always ignored in
Financial Accounting. Financial Accounts only provides profit of a business but not
provides the cost data.

Cost Accounting made from “Two Different Word”

Cost Accounting
And

In this subject, the concentration is on different element of Cost, different methods that
determines cost of a product or service. Costing technique is mainly use in manufacturing
unit

Introduction of Cost Accounting or why Cost Accounting is studied: -

In Cost Accounting, we have to learn

 What is the real cost of a Product and how the cost of a product is determined

 What will be the selling price of the Product

 How the cost of the product will be reduced or cost of the product will controlled

 What profit will earned by the organization from the sale of Product

 Which product will continue or the business is profitable. It means data which
provide by Cost Accounting are helpful in Decision Making

Cost Accounting 7 By – Dheeraj Kr. Singh

Innovative Institute (9717168088) B.Com.

Total cost of a product is group under three main Categories in cost

Accounting

 Materials Cost
 Labour Cost
 Expenses

Elements of Cost

Materials Labour Other

Cost Cost Expenses

In cost Accounting, it is possible to calculate what cost is incurred in

manufacturing this computer

Three type of cost is involve in making this Computer

Material Cost

Direct Material Indirect Material

Plastic, Metal Screws, switch

Wire and Glass Battery, Software

Labour Cost Expenses

Direct Labour Indirect Labour

Direct Expenses Indirect Expenses

Assembler, Salesman, Delivery Excise Duty, Advertisement and

Software Engineer Boy Display Expenses
Custom Duty

Cost Accounting 8 By – Dheeraj Kr. Singh

Innovative Institute (9717168088) B.Com.

Meaning of “Element of Cost”:-

There are three broad elements of Cost – Materials Cost, Labour Cost and Expenses.
Each of these three costs may be direct and indirect.

Materials:-
Substance by which the product is made are called materials. Materials may be Direct or
Indirect

Direct Materials : - Materials by which a product is identified is called Direct Materials

or Materials by which product is known in the market is called Direct Materials . For
example, Cloth in Dress making; Plastic in Plastic Chair; Iron in Iron Chair

Indirect Materials: - Materials, which are also present in the product but not easily
identified in the product is called indirect materials. It is use in very little quantity in the
product. For example, Consumable Stores, Oil, Lubricant and Cotton waste and other
factory Supplies, Materials of little value used in Production such as Screws, Nuts, Bolts,
Enamel, Paints and Nails, Small tools, Printing and Stationery etc.

Labour:-
Workers which are engage in organization are called Labour or employees who do
“Physical Work” are called Labour. Labour may be Direct or Indirect

Direct Labour: - Labour Force which are directly engage in converting Raw Materials
in to Finished goods or directly involve in producing goods are called Direct Labour
Example of Direct Laborer are Machine Operator, Carpenter, Weaver, Shoemaker, Baker,
etc. These wages can be conveniently identified with a Particular Product, Job or Process

Indirect Labour: - Labour Force which are not directly engage in producing goods are
called Indirect Labour and wages paid to these workers are called Indirect Labour Cost.
Examples of Indirect Laborer are Supervisor, Inspector, Clerk, Cleaner, Storekeeper,
Foremen, Maintenance worker, Directors, Manager, Salesman, Peon, etc.

Expenses: - All Expenses incurred in producing goods other than Materials and Labour
is calling Expenses. Expenses may be direct or indirect

Direct Expenses: - Expenses which are directly charged to the product is called Direct
Expenses or expenses which can be identified on the product are called Direct Expenses.
For Example: Excise Duty, Royalty, Surveyor’s Fees, Expenses – Direct- Factory, Hire
Charges of some Special Machinery required for a particular Contract, Cost of Defective
Work incurred in connection with a particular job or contract

Indirect Expenses: - Expenses, which are not charge on a particular product, is called
Indirect Expenses. These are Common Expenses

Cost Accounting 9 By – Dheeraj Kr. Singh

Innovative Institute (9717168088) B.Com.

Elements of Cost

Material Labour Other

Cost Cost Expenses

Direct Indirect Direct Indirect Direct Indirect

Material Material Labour Labour Expenses Expenses
Cost Cost Cost Cost

Indirect Cost
or
Overheads

Factory or Production or Office and Administration Selling and Distribution

Works Overheads Overheads Overheads

This is depends on No. of This is depends on No. of

This is depends on No. of
units produce units produce
units sold

Certain times Selling and Distribution Costs may be group separately

Selling and Distribution
Overheads

Selling Overhead Distribution Overhead

Cost Sheet:-
Cost Sheet is a periodical document, which is prepared weekly, fortnightly, monthly or
quarterly. It is define as “a statement which provides for the assembly of the estimated
detail cost of a cost centre or a cost unit”. Cost Sheet are prepared for the use of
management
(i) To compare the cost of two periods and
(ii) To fix the selling price of the product
The total cost is analyzed in to Prime Cost, Factory Cost, Office Cost or Cost of
Production

Cost Accounting 10 By – Dheeraj Kr. Singh

Innovative Institute (9717168088) B.Com.

Format of “Cost Sheet”

Particulars Rs. Rs.

Direct Raw Materials xxxx
Direct Labour xxxx
Direct Expenses xxxx
Prime Cost or Basic Cost xxxxx
Add; Factory or Production or Manufacturing or Works xxxx
Overheads
Factory Cost or Works Cost or Manufacturing xxxxx
Cost
Add: Office and Administration Overhead xxxxx
Total Cost of Production or Office Cost xxxxx
Add: Selling and Distribution Overhead xxxx
Cost of Sales or Total Cost xxxxx
Add: Profit or Profit Margin xxxx
Sales Revenue or Total Sales xxxxx
Example 1:-
Prepare Cost Sheet from the following data provided by Aruna Industries Ltd. for the following
year ended 31st March 2014;

Particulars Rs.
Raw Materials 15,000
Direct Labour 9,000
Direct Expenses 2,000
Factory Expenses 11,000
Office Expenses 5,000
Selling Expenses 3,000
Sales 50,000

Cost Sheet

Particulars Rs.
Raw Materials 15,000
Direct Labour 9,000
Direct Expenses 2,000
Prime Cost 26,000
Add: Factory Overhead 11,000
Factory Cost / Work Cost 37,000
Add: Office & Administration Overhead 5,000
Cost of Production 42,000
Add: Selling & Distribution Overhead 3,000
Total Cost / Cost of Sales 45,000
Add: Profit 5,000
Total Sales 50,000

Cost Accounting 11 By – Dheeraj Kr. Singh

Innovative Institute (9717168088) B.Com.

Format of “Detailed Cost Sheet”

(When opening Stock and Closing Stock of Raw Materials, Semi Finished Goods / Work
in progress and Finished Goods are given)
Particulars Rs. Rs.
Direct Raw Materials Consumed :-
Opening Stock of Raw Materials xxxx
Add: Purchase of Raw Materials during the Period xxxx
xxxx xxxx
Less: Closing Stock of Raw Materials (xxxx)
Direct Labour xxxx
Direct Expenses xxxx
Prime Cost or Basic Cost xxxxx
Add: Factory or Production or Manufacturing Overheads xxxx
Gross Factory Cost or Gross Works Cost xxxxx
Add: Opening Semi Finished Goods or Work in Progress xxxx

Processed Cost xxxx

Less: Closing Semi Finished Goods or Work in Progress xxxx

Factory Cost or Works Cost or Manufacturing xxxxx

Cost
Add: Office and Administration Overhead xxxxx
Cost of Production or Office Cost xxxxx
Add: Opening Stock of Finished Goods xxxx

Cost of Goods available for sale xxxx

Less: Closing Stock of Finished Goods xxxx

Cost of Goods Sold xxxxx

Add: Selling and Distribution Overhead xxxx
Cost of Sales or Total Cost xxxxx
Add: Profit or Profit Margin xxxx
Sales Revenue or Total Sales xxxxx

Opening Stock of Finished Sales of Finished Goods +

Goods + Production of Finished
Goods = Closing Stock of Finished
Goods

Cost Accounting 12 By – Dheeraj Kr. Singh

Innovative Institute (9717168088) B.Com.

Example 2:-
From the followings information prepare Cost Sheet to find out the amount of profit

Particulars Rs.
Raw Materials Purchased 28,800
Work Overheads 10,000
Stock :
Raw Materials :
1st January 2014 4,000
31st January 2014 4,800
Finished Goods ( 800 Quintals) as on 1st January 2014 3,200
Work in progress :
1st January 2014 960
31st January 2014 3,200
Direct Labour 20,000
Direct Expenses 2,000
Office and Administration Overheads 1,600
Sales (Finished Goods) 70,000

Advertising discount allowed and selling cost is Re. 0.40 per quintal. During the month 12,800 quintals of
the commodity were produced

B.Com (P) 1998 Amended

Cost Sheet

Particulars Rs. Rs.

Direct Raw Materials Consumed
Opening Stock of Raw Materials 4,000
Add: Raw Materials purchased 28,800
32,800
Less: Closing Stock of Raw Materials 4,800 28,000
Direct Labour 20,000
Direct Expenses 2,000
Prime Cost 50,000
Add: Work overheads 10,000
Gross Factory Cost 60,000
Add: Opening work in Progress 960
Less: Closing work in Progress 3,200
Factory Cost 57,760
Add: Office and Administration Overheads 1,600
Cost of Production 59,360
Add: Openings Stock of Finished Goods 3,200
Cost of Goods sold 62,560
Add: Selling and Distribution Overheads:
Advertising, Discount Allowed & Selling Cost
(13,600 × 0.40) 5,440
Total Cost 68,000
Add: Profit (Balancing Figure) 2,000
Total Sales 70,000

Note: - Selling &Distribution expenses are incur on “No. of units sold”

Cost Accounting 13 By – Dheeraj Kr. Singh

Innovative Institute (9717168088) B.Com.

Format of “Cost Sheet”

Direct Materials
 All Materials or components Specifically purchased,
Produced or requisitioned from Stores xxxx
 Primary Packing Materials such as Carton, Wrapping,
Cardboard, Boxes etc. xxxx
 Materials Used in Packing xxxx
 Purchased or Partly Produced Goods xxxx
 Freight on Materials or Carriage inward xxxx
Less:- Abnormal Loss of Raw Materials (xxxx)
Purchase Returns (xxxx)
Raw Materials Wastage (xxxx) xxxx
(Direct Materials is also described as raw Materials, Process
Materials, Prime Materials, Production Materials, Stores
Materials, Construction Materials etc.)
Direct Labour
 Wages paid to laborers xxxx
 Labour required to producing xxxx
 Manufacturing Wages xxxx
 Factory or Productive Wages xxxx
 Overtime Wages xxxx
(Direct Labour is also described as Process Labour, xxxx
Productive Labour, Operating Labour, Manufacturing
Labour, Direct Wages etc.)
Direct Expenses
 Chargeable Expenses xxxx
 Excise Duty, Royalty, Surveyor’s Fees xxxx
 Expenses –Direct- Factory xxxx
 Hire Charges of some Special Machinery required for
a particular Contract xxxx
 Cost of Defective Work incurred in connection with a xxxx
particular job or contract xxxx

Prime Cost or Basic Cost xxxx

Add: Factory or Production or Manufacturing Overheads xxxx

Less: Sale of Factory Wastage or Factory Scrap of (xxxx) xxxx
Materials

Factory Cost or Works Cost xxxxx

Add: Office and Administration Overhead xxxxx

Cost of Production
xxxxx
Add: Selling and Distribution Overhead xxxx

Cost of Sales or Total Cost xxxx

Add: Profit or Profit Margin xxxx
Sales Revenue or Total Sales xxxxx

Cost Accounting 14 By – Dheeraj Kr. Singh

Innovative Institute (9717168088) B.Com.

Factory or Production Office and Selling and

or Manufacturing Administration Distribution Overheads
Costs Overheads
Indirect Materials :- Indirect Materials :- Indirect Materials :-
 Consumable Stores  Office Printing and Stationery  Packing Materials
 Oil, Lubricant and Cotton  Materials Used in selling the
Waste and other factory
Indirect Labour:- Product
Supplies  Office Manager’s Salary
 Materials of little value used  Company Secretary’s Salary Indirect Labour:-
in Production such as Screws,  Fees of the Board  Salaries of Sales men
Nuts, Bolts, Enamel, Paints and  Office Consultancy  Salary of Godown Keepers
Nails, Small tools  Salary of Office Staff  Sales men’s Commission
 Cost of Moulds  Director’s Fees  Marketing Director’s Salary
 Salary of Administrative  Marketing Consultancy
Indirect Labour:- Directors
Indirect Expenses:-
 Wages of Foreman
 Wages of Fire man
Indirect Expenses:-  Advertisement and Display in
 Work Consultancy  Rent, Rates and Taxes for Shop
 Indirect Wages Office Land and Buildings  Price List, Catalogues etc.
 Store-Keeper Wages  Insurance of Office Building  Carriage outward
 Salary of Work Manager  Legal Charges  Entertainment of Marketing
 Unproductive Wages  Audit Fees Division
 Wages of Indirect Worker  Bank Charges  Sample, Free Gift etc
 Works Director’s Salary  General Expenses  Bad and Doubtful Debts
 Expenses of Training Staff  Office Expenses  Depreciation and Running
 Financial Charges Expenses of Delivery Van,
Indirect Expenses:-  Telephone, Postage and Trucks etc
 Rent, Rates and Taxes for Telegram  Travelling Expenses of
Factory Land and Buildings  Counting House Salaries Marketing Staff
 Insurance of Factory Building,  Depreciation of Office Building  Commission allowed to
Plant etc.  Repair, Renewal and customers
 Depreciation of Plant and Maintenance of Office  Legal Charges incurred for
Machinery, Loose Tools Building recovery of Debts
 Factory Employees State  Office Lighting, Heating,  Sales Designing Expenses
Insurance Refrigeration and Air  Sales and Estimating office
 Factory Employees Welfare conditioning expenses
Service  Certain type of Expenses on  Market Research Expenses
 Pay for Holiday and Sick Leave Subscription  Showroom Expenses
 Contribution to Provident  Counting office salary  Insurance of Godown
Fund of Factory Staff  Freight on Sales
 Works Stationery and  Rent of Warehouse
telephone Expenses  Discount on sales
 Repair and Maintenance of  Shortage in Stock s of Finished
Factory Goods
 Drawing Office Salaries  Commission of Travelling
 Factory Lighting, Heating, Agents
Refrigeration and Air  Sales Commission
conditioning  Lighting Sales Deptt.
 Designing Expenses  Printing and Stationery of
 Production Control, Progress Sales Deptt.
department and inspection  Warehouse Charges
overhead  Sales Promotion
 Experimental Expenses  Distribution Deptt.’s Salary
 Power or Electric Power or and Expenses
Motive Power, Power and Fuel  Upkeep of Delivery Van
 Haulage  Loading Charges
 Factory Cleaning  Collection Charges
 Water Supply  Cost of Preparing Tenders
 Estimating Expenses  Agent’s Commission
 Insurance of Stock of Raw
Materials

Cost Accounting 15 By – Dheeraj Kr. Singh

 Innovative Institute (9717168088) B.Com.

Items Excluded From Cost Accounts

Appropriation of Profits Items of Pure Finance Abnormal Gain and Losses
 Appropriation of Sinking Fund  Provision for Bad Debts  Loss
on sale of Plant or any
 Dividends Paid  Charitable Donations other Fixed Assets
 Taxes on Incomes or Profits  Interest Received on Bank  Profit on sale of Plant or any
other Fixed Assets
 Transfer to General Reserve Deposits
 Amount Written off such as  Penalty Payable under Law
Goodwill, Preliminary  Losses due to Scrapping of
Expenses, Underwriting Machine
Commission, etc.  Transfer Fees received
 Capital Expenditure  Interest, Dividend etc. received
Specifically charged to on Investment
Revenue
 Cash Discount
 Interest on Hire Purchase
Instalment

Items Included in the Cost Accounts only

(Notional Expenses)

⇒ Charges in lieu of Rent Where Premises are owned

⇒ Interest on Capital employed in Production, but upon which no Interest is actually

paid if the firm decided to treat Interest as part of Cost

⇒ Salary for the Proprietor where he works but does not charged as a salary

Important Points:-

 Stock or Inventory consists three items

1. Raw Materials
2. Work in Progress or Semi-Finished Goods
3. Finished Goods
 Cost of Production means cost incurred to Producing Finished Goods

𝐂𝐨𝐬𝐭 𝐨𝐟 𝐏𝐫𝐨𝐝𝐮𝐜𝐭𝐢𝐨𝐧
Cost of Production Per Unit = = Rs. …… Per unit
𝐍𝐨.𝐨𝐟 𝐔𝐧𝐢𝐭𝐬 𝐏𝐫𝐨𝐝𝐮𝐜𝐞𝐝

If Cost of Production is Rs.1,50,000 and Goods produced is 15,000 units then Cost
𝟏,𝟓𝟎,𝟎𝟎𝟎
of Production per unit is Rs. 10 or 𝟏𝟓,𝟎𝟎𝟎

 Closing Stock of Finished Goods are Valued at current period of “Cost of

Production per unit”

 Opening Stock of Finished Goods are valued at previous period of Cost of

Production per unit (but certain time Cost of production per unit of previous
period is not given then it is also calculated at current period of Cost of Production
per unit).

Cost Accounting 16 By – Dheeraj Kr. Singh

Innovative Institute (9717168088) B.Com.

Easy Rules of Relationship between Profits on Cost & Profits on Sale

Profit on Cost Profit on Sales

Numerator divided by Denominator Numerator divided by Denominator Plus
minus Numerator Numerator
Minus Plus
𝟐
20 % on Cost or 1/5 on Cost 1/6 on Sales or 16 % on Sales
𝟑
25 % on Cost or 1/4 on Cost 1/5 on Sales or 20 % on Sales
𝟏
33 % on Cost or 1/3 on Cost 1/4 on Sales or 25% on Sales
𝟑
𝟏
50 % on Cost or 1/2 on Cost 1/3 on Sales or 33 % on Sales
𝟑
𝟐
66 % on Cost or 2/3 on Cost 2/5 on Sales or 40 % on Sales
𝟑
100 % on Cost or 1/1 on Cost 1/2 on Sales or 50 % on Sales
𝟐
200 % on Cost or 2/1 on Cost 2/3 on Sales or 66 % on Sales
𝟑
300 % on Cost or 3/1 on Cost 3/4 on Sales or 75 % on Sales
400 % on Cost or 4/1 on Cost 4/5 on Sales or 80 % on Sales

Example 3:-
The cost of the sales product P is made up as follows:
Particulars Rs.
Materials used in manufacturing 54,000
Materials used in primary packing 10,000
Materials used in selling the product 1,500
Materials used in the factory 750
Materials used in the office 1,250
Labour required in producing 10,000
Labour required for factory supervision 2,000
Direct expenses 5,000
Indirect expenses (factory) 1,000
Administration expenses 1,250
Depreciation on office building and equipment 750
Depreciation on factory building 1,750
Selling expenses 3,500
Freight on Materials purchased 6,000
Advertising 1,250
Assuming that all goods manufactured are sold, what should be the selling price to obtain a profit of 20%
on selling price?

B.Com (P) 2012 External (9 Marks)

Cost Sheet of Product P

Particulars Rs. Rs.

Direct Materials
Materials used in manufacturing 54,000
Materials used in primary packing 10,000
Freight on Materials purchased 6,000 70,000
Direct Labour
Labour required in producing 10,000
Direct Expenses 5,000

Cost Accounting 17 By – Dheeraj Kr. Singh

Innovative Institute (9717168088) B.Com.

Prime Cost 85,000

Add: Factory Overheads
Materials used in factory 750
Labour required for factory supervision 2,000
Indirect expenses (factory) 1,000
Depreciation on factory building 1,750
Factory Cost 90,500
Add: Office and Administration Overheads
Materials used in the office 1,250
Administration expenses 1,250
Depreciation on office building and Equipment 750
Cost of Production 93,750
Add: Selling and Distribution overheads:
Materials used in selling the product 1,500
Selling expenses 3,500
Advertising 1,250
Cost of Sales 1,00,000
Profit 25,000
Selling Price 1,25,000

Profit = 20% on selling Price = 1/5th on selling price = 1/4th on cost

𝟏
= × 1,00,000 = Rs. 25,000
𝟒

Computation of Raw Materials Purchased - (By Using Reserve Method)

When Prime Cost is Given

Prime Cost xxx

Less: Direct Labour or Direct Wages (xxx)
Less: Direct Expenses (xxx)
Direct Materials Consumed xxxx
Add: Closing Stock xxx
Less: Opening Stock (xxx)
Less: Expenses on Purchase such as Carriage (if any) (xxx)
Raw Materials Purchased xxxx
Example 4:-
Compute cost of raw Materials Purchased from the data given below:

Rs.
Opening Stock of Raw Materials 10,000
Closing Stock of Raw Materials 15,000
Expenses of purchases 5,000
Direct Wages 50,000
Prime Cost 1,00,000
Solution:-
Computation of Raw Materials Purchased
Rs.
Prime Cost 1,00,000
Less: Direct wages 50,000
Direct Materials consumed 50,000
Add: Closing Stock 15,000
65,000
Less: Opening Stock 10,000
Expenses on purchases 5,000 15,000

Materials Purchased 50,000

Cost Accounting 18 By – Dheeraj Kr. Singh

Innovative Institute (9717168088) B.Com.

Example 5:-
Find out the cost of raw Materials purchased from the data given below:
Rs.
Prime Cost 2,00,000
Closing Stock of raw materials 20,000
Direct labour cost 1,00,000
Expenses on purchases 10,000
Solution:-
Computation of Raw Materials Purchased
Rs.
Prime Cost 2,00,000
Less: Direct labour 1,00,000
1,00,000
Add: Closing Stock of Raw Materials 20,000
1,20,000
Less: Expenses on Purchases 10,000
Cost of raw Materials Purchased 1,10,000

Computation of Raw Materials Purchased - (By Using Reserve Method)

When “Cost of Goods sold” is Given
Cost of Goods Sold xxx
Add: Closing Stock of Finished Goods xxx
Less: Opening Stock of Finished Goods (xxx)
Cost of Production xxxx
Less: office and Administration Overhead (xxx)
Factory Cost xxxx
Add: Closing Stock of Work in Progress xxx
Less: Opening Stock of Work in Progress (xxx)
Gross Factory Cost xxxx
Less : Factory Overhead (xxx)
Prime Cost xxxx
Example 6:-
Compute manufacturing expenses from the data given below:
Rs.
Opening Stock of raw Materials 5,000
Purchases 25,000
Expenses on Purchases 1,000
Direct wages 20,000
Direct Expenses 1,000
Closing Stock of Raw Materials 7,000
Manufacturing Cost 80,000
Solution:-
Computation of Manufacturing Overheads
Particulars Rs. Rs. Rs.
Manufacturing Cost 80,000
Less:- Prime Cost
Raw Materials Consumed
Opening Stock 5,000
Add: Purchases 25,000
Expenses on purchases 1,000
31,000
Less: Closing Stock 7,000 24,000
Direct Wages 20,000
Direct Expenses 1,000 45,000
Manufacturing Overheads 35,000

Cost Accounting 19 By – Dheeraj Kr. Singh

Innovative Institute (9717168088) B.Com.

Assignments (25)
Type 1:- Simple Questions 15 Questions
Type 2:- Complex Questions 10 Questions

Type 1:- Simple Questions 15

Q.1
Prepare a Cost Sheet from the following:

Particulars Rs.
Sales 8,00,000
Materials 1-1-2014 40,000
Materials 31-12-2014 32,000
Work-in-progress 1-1-2014 55,000
Work-in-progress 31-12-2014 72,000
Finished Goods 1-1-2014 64,000
Finished Goods 31-12-2014 1,51,300
Materials Purchased 1,52,000
Direct Labour 1,45,000
Manufacturing Overheads 1,08,000
Selling Expenses 50,000
General Office Expenses 40,000

B.Com (P) 2011(External) [9 Marks]

Cost Sheet
Particulars Rs. Rs.
Raw Materials Consumed :
Opening Stock 40,000
Add: Materials Purchased 1,52,000
1,92,000
Less: Closing Stock 32,000 1,60,000
Direct Labour 1,45,000
Prime Cost 3,05,000
Add: Manufacturing Overheads 1,08,000
Gross Factory Cost 4,13,000
Add: Opening Work-in-Progress 55,000
4,68,000
Less: Closing Work-in-Progress 72,000
Factory Cost 3,96,000
Add: General Office Expenses 40,000
Cost of Production 4,36,000
Add: Opening Stock of Finished Goods 64,000
5,00,000
Less: Closing Stock of Finished Goods 1,51,300
Cost of Goods Sold 3,48,700
Add: Selling Expenses 50,000
Cost of Sales 3,98,700
Profit 4,01,300
Sales
8,00,000

Cost Accounting 20 By – Dheeraj Kr. Singh

Innovative Institute (9717168088) B.Com.

Q.2
The Vardhman Ltd. manufactures one product. The summary of its activities for the year 2014 is below.
Unit Rs.
Sales 80,000 8,00,000
Materials inventory 1-1-2014 40,000
Materials inventory 31-12-2014 32,000
W.I.P. 1-1-2014 55,000
W.I.P. 31-12-2014 72,000
Finished goods 1-1-2014 16,000 64,000
Finished goods 31-12-2014 34,000
Materials purchased 1,52,000
Direct labour 1,45,000
Manufacturing overheads 1,08,000
Selling expenses 50,000
General expenses 40,000

Prepare a Cost Sheet.

B.Com (H) 2003

Cost Sheet

Rs. Rs.
Direct Raw Materials Consumed
Opening Stock of Raw Materials 40,000
Add: Raw Materials purchased 1,52,000
1,92,000
Less: Closing Stock of Raw Materials 32,000 1,60,000
Direct Labour 1,45,000
Prime Cost 3,05,000
Add: Manufacturing overheads 1,08,000
Gross Factory Cost 4,13,000
Add: Opening Work in Progress 55,000
Less: Closing Work in Progress 72,000
Factory Cost 3,96,000
Add: Office and administration overheads
General Expenses 40,000
Cost of Production of 98,000 units 4,36,000
Add: Openings Stock of Finished Goods 64,000
Less: Closing Stock of Finished Goods (34,000 units @4.45 per unit) 1,51,300
Cost of Goods sold 3,48,700
Add: Selling and distribution overheads: 50,000
Total Cost 3,98,700
Add: Profit (Balancing Figure) 4,01,300
Total Sales 8,00,000

Working Note: -

𝑻𝒐𝒕𝒂𝒍 𝒄𝒐𝒔𝒕 𝒐𝒇 𝑷𝒓𝒐𝒅𝒖𝒄𝒕𝒊𝒐𝒏 𝟒,𝟑𝟔,𝟎𝟎𝟎

1. Cost of production per unit = = = Rs.4.45 per unit
𝑵𝒐.𝒐𝒇 𝒖𝒏𝒊𝒕𝒔 𝒑𝒓𝒐𝒅𝒖𝒄𝒆𝒅 𝟗𝟖,𝟎𝟎𝟎

2. Calculation of No. of units produced

Opening Stock + Production = Closing Stock + Sales
⇒ 16,000 + Production = 34,000 + 80,000
⇒ Production = 1,14,000 – 16,000 = 98,000 units

Cost Accounting 21 By – Dheeraj Kr. Singh

Innovative Institute (9717168088) B.Com.

Q.3
Prepare Cost Sheet from the following data provided by Aruna Industries Ltd. for the year ending 31st
March 2014:

Particulars Rs.
Raw Materials Rs. 15,000
Direct Labour Rs. 9,000
Machine Hours 900
Machine Hour Rate Rs.5
Production 17,100 units
Sales 16,000 units
Selling price per unit Rs. 4
Selling overheads per unit 50 paise
Office overheads are 20% of works cost

B.Com (P) 2007(Regular) [6 Marks]

Cost Sheet
Particulars Rs.
Raw Materials 15,000
Direct Labour 9,000
Prime Cost 24,000
Factory overheads (900 × Rs. 5) 4,500
Work Cost 28,500
Office overheads 20% of work cost 5,700
Cost of Production 34,200
Less: Closing Stock of finished goods (1,100 × Rs. 2) 2,200
Cost of goods sold 32,000
Selling overheads ( 0.50 paise × 16,000) 8,000
Total Cost 40,000
Profit (Balancing Figure) 24,000
Sales (Rs. 4 × 16,000) 64,000
Working Note:-

𝐓𝐨𝐭𝐚𝐥 𝐂𝐨𝐬𝐭 𝐨𝐟 𝐏𝐫𝐨𝐝𝐮𝐜𝐭𝐢𝐨𝐧 𝟑𝟒,𝟐𝟎𝟎

Cost of Production per unit = = = Rs. 2 Per unit
𝐓𝐨𝐭𝐚𝐥 𝐎𝐮𝐭𝐩𝐮𝐭 𝟏𝟕,𝟏𝟎𝟎

Units produced = 17,100 units

Units sold = 16,000 units
Closing Stock of Finished Goods = 17,100 – 16,000 = 1,100 units

Q.4
From the following prepare a Cost Sheet and quote a suitable Price:

Particulars Rs.
Total Production 5,000 tons
Cost of raw Materials 20,00,000
Carriage Inwards 2,00,000
Direct Wages 20,00,000
Indirect Wages 1,00,000
Office Expenses 10,00,000
Selling Expenses 10,00,000
Payment of Income Tax 3,00,000
Dividend paid 5,00,000
A profit margin of 50% on cost is desired.

B.Com (P) 2009 (Regular) [6 Marks]

Cost Accounting 22 By – Dheeraj Kr. Singh

Innovative Institute (9717168088) B.Com.

Cost Sheet

Particulars Rs.
Direct Materials
Cost of Raw Materials 20,00,000
Add: Carriage Inwards 2,00,000 22,00,000
Direct wages 20,00,000
Prime Cost 42,00,000
Factory Overheads:
Indirect wages 1,00,000
Factory Cost 43,00,000
Office and Administration overheads:
Office Expenses 10,00,000
Cost of Production 53,00,000
Selling and Distribution overheads:
Selling Overheads 10,00,000
Total Cost 63,00,000
Profit (50% on Cost) 31,50,000
Sales 94,50,000
𝟗𝟒,𝟓𝟎,𝟎𝟎𝟎
Selling Price to be quoted = = Rs. 1,890 per tonne
𝟓,𝟎𝟎𝟎

Note: - Income Tax and Dividend paid are appropriations of profits and hence not consider in Cost Sheet

Q.5
From the following Prepare a Cost Sheet:-
(i) Cost of Materials @ Rs. 13 per unit
(ii) Labour Cost @ Rs. 7.50 per unit.
(iii) Factory Overheads Rs. 45,000
(iv) Administration Overheads Rs. 50,000
(v) Selling Overheads Rs. 2.50 per unit sold.
(vi) Opening Stock of Finished goods – 500 unit @ Rs. 19.75
(vii) Closing Stock of Finished goods – 250 units
(viii) Sales - 10,250 units at a Profit of 20% on sales.

B.Com (P) 2009(External) [7 Marks] 2013 Regular [7 Marks]

Cost Sheet
Particulars Rs.
Cost of Materials (10,000 × Rs. 13) 1,30,000
Labour Cost (10,000 × Rs. 7.50) 75,000
Prime Cost 2,05,000
Add: Factory Overheads 45,000
Factory Cost 2,50,000
Add: Administration overheads: 50,000
Cost of Production of 10,000 units 3,00,000
Add: Opening Stock of Finished Goods (500 units @ Rs. 19.75) 9,875
3,09,875
Less: Closing Stock of Finished Goods ( 3,00,000 / 10,000) × 250 7,500
Cost of Goods sold 3,02,375
Add: Selling Overheads (10,250 × Rs. 2.50) 25,625
Cost of Sales 3,28,000
𝟏
Profit (Rs. 3,28,000 × ) 82,000
𝟒
Sales 4,10,000

Working Note: -
Calculation of Units Produced:-
Opening Stock + Production = Closing Stock + Sales
⇒ 500 + Production = 250 + 10,250
⇒ Production = 10,500 – 500 = 10,000 units

Cost Accounting 23 By – Dheeraj Kr. Singh

Innovative Institute (9717168088) B.Com.

Q.6
From the following information Prepare a Cost Sheet:-
(i) Cost of Materials @ Rs. 15 per unit
(ii) Labour Cost @ Rs. 7 per unit.
(iii) Factory Overheads Rs. 40,000
(iv) Administration Overheads Rs. 40,000
(v) Selling Overheads Rs. 2.50 per unit sold.
(vi) Opening Stock of Finished goods – 500 unit @ Rs. 20
(vii) Closing Stock of Finished goods – 250 units
(viii) Sales - 10,250 units at a Profit of 20% on sales.

B.Com (P) 2013(External) [9Marks]

[C.OG.S. Rs. 3,02,500 ; Profit Rs.82,031]
Q.7
X Ltd. has received an enquiry for the Supply of 1,000 Premium Shirts.
The costs are estimated as under:
Raw Materials 2,500 Mtrs @ Rs. 40 per Mtr
Direct Wages 10,000 Hrs @ Rs. 4 per hours
Variable Overheads: Factory Rs. 2.40 per labour hours
Selling and Distribution Rs. 16,000.
Fixed Overheads: Factory Rs. 6,000
Selling and Distribution Rs. 14,000
Prepare a Cost Sheet showing the Price to be quoted per Shirt, which results in a Profit of 20% on Selling
Price.

B.Com (P) 2010(Regular) [6Marks]

Cost Sheet
Particulars Rs.
Raw Materials
(2,500 Mtrs @ 40 per mtr) 1,00,000
Direct Wages
(10,000 Hrs @ Rs. 4 Per hr) 40,000
Prime Cost 1,40,000
Factory Overheads
Variable ( 10,000 hrs @ Rs. 2.4 per labour hrs) 24,000
Fixed 6,000
Factory Cost 1,70,000
Selling and Distribution Overheads
Variable 16,000
Fixed 14,000
Cost of Sales 2,00,000
Profit (25% on cost) 50,000
Sales 2,50,000
𝟐,𝟓𝟎,𝟎𝟎𝟎
Price to be quoted per Shirt = = Rs. 250 per shirt
𝟏,𝟎𝟎𝟎
𝟐𝟎 𝟐𝟎
Profit = 20% on selling price = on selling price = on cost or 1/4 on cost
𝟏𝟎𝟎 𝟖𝟎

Cost Accounting 24 By – Dheeraj Kr. Singh

Innovative Institute (9717168088) B.Com.

Q.8
Below is the enumerated expenditure in the manufacturing of a product:

Particulars Rs.
Raw Materials 28,000
Fuel 6,900
Electric power 1,340
Process and general wages 63,500
Repairs 2,400
Haulage 1,060
Light and water 400
Rent 2,000
Rates and insurances 300
Office salaries and general expenses 7,000
Administration(office) 5,000
Depreciation on machinery 2,500
Total 1,20,000
Quintals manufactured 17,200

Prepare a Cost Sheet showing the cost per each item of expenses and the total cost per quintal.

Cost Sheet
Particulars Rs.
Raw Materials 28,000
Direct wages – Process and general wages 63,500
Prime Cost 91,500
Factory Overheads:
Fuel 6,900
Electric Power 1,340
Repairs 2,400
Haulage 1,060
Light and Water 400
Rent 2,000
Rates and Insurance 300
Depreciation on Machinery 2,500
Factory / Works Cost 1,08,400
Office and Administration Overheads:
Office Salaries and General Expenses 7,000
Administration (office) 5,000
Total Cost 1,20,400
𝟏,𝟐𝟎,𝟒𝟎𝟎
Total Cost per quintal = = Rs.7 per quintal
𝟏𝟕,𝟐𝟎𝟎

Q.9
From the following, prepare a Cost Sheet:
Particulars Rs.
Raw Materials 6,000
Direct Wages 5,000
Factory Overheads 2,400
Opening Stock of Finished Goods 800[200kg]
Closing Stock of Finished Goods ..…..[400 kg]
Sale of Finished Product 20,000 [3,000 kg]
Advertisement & Selling Expenses 1,475
Profit desire is 30% on Sales.

B.Com (P) 2010(External) [7Marks]

Cost Accounting 25 By – Dheeraj Kr. Singh

Innovative Institute (9717168088) B.Com.

Cost Sheet
Particulars Rs.
Raw Materials 6,000
Direct Wages 5,000
Prime Cost 11,000
Factory Overheads 2,400
Factory Cost /Cost of Production 13,400
Add: Opening Stock of Finished Goods 800
14,200
Less: Closing Stock of Finished Goods 1,675
Cost of goods Sold 12,525
Add: Advertisement & Selling Expenses 1,475
Cost of Sales 14,000
Add: Profit (30/70 of 20,000) 6,000
Sales 20,000
Working Note: -
1. Calculation of Units Produced:-
Opening Stock + Production = Sales + Closing Stock
⇒ 200 + Production = 3,000 + 400
⇒ Production = 3,400 – 200 = 3,200 units

2. Profit = 30% on selling Price = 30/100 of selling price = 30/70 of cost

Q.10
Prepare a Cost Sheet from the following data to find out profit and cost per unit:
Rs.
Raw Materials consumed 1,60,000
Direct Wages 80,000
Factory Overhead 16,000
Office Overhead 10% of factory cost
Selling overhead 12,000
Units Produced 4,000
Unit Sold 3,600
Selling Price Rs.100 per unit

Cost Sheet
Particulars Rs.
Raw Materials consumed 1,60,000
Direct Wages 80,000
Prime Cost 2,40,000
Add: Factory Overhead 16,000
Factory Cost 2,56,000
Add: Office Overhead (10% of Factory Cost) 25,600
Cost of Production of 4,000 units 2,81,600
𝟐,𝟖𝟏,𝟔𝟎𝟎
Less: Closing Stock of Finished Goods ( × 400) 28,160
𝟒,𝟎𝟎𝟎
Cost of Goods Sold 2,53,440
Add: Selling Overhead 12,000
Total Cost 2,65,440
Add: Profit (Balancing Figure) 94,560
Sales ( 3,600 units @ Rs. 100 per unit) 3,60,000

Calculation of Closing Stock:-

Opening Stock + Production = Closing Stock + Sales
⇒ 0 + 4,000 = Closing Stock + 3,600
⇒ Closing Stock = 4,000 – 3,600 = 400 units

Cost Accounting 26 By – Dheeraj Kr. Singh

Innovative Institute (9717168088) B.Com.

Q.11
Vijay industries manufactures a product X. On 1st January, 2014 there were 5,000 units of finished product
in Stock. Other Stock on 1st January, 2014 were as follows:
Rs.
Work-in-Progress 57,400
Raw Materials 1,16,200

The Information available from Cost records for the year ended 31st December, 2014 was as follows:

Direct Materials 9,06,900

Direct Labour 3,26,400
Freight on Raw Materials Purchased 55,700
Indirect Labour 1,21,600
Other Factory Overheads 3,17,300
Stock of Raw Materials on 31-12-2014 96,400
Work-in-Progress on 31-12-2014 78,200
Sales (1,50,000 units) 30,00,000
Indirect Materials 2,13,900
There are 15,000 units of finished Stock in hand on 31st December, 2014. You are required to prepare:
A statement of cost and profit for 2014 assuming that opening Stock of finished goods is to be
valued at the same cost per unit as the finished Stock at the end of the period.

B.Com (P)
Statement of Cost and Profit
Particulars Rs. Rs.
Raw Materials Consumed
Opening Stock of Raw Materials 1,16,200
Add: Direct Materials Purchased 9,06,900
Add: Freight on Purchases 55,700
10,78,800
Less: Closing Stock of Raw Materials 96,400 9,82,400
Direct Wages 3,26,400
Prime Cost 13,08,800
Add: Factory Overheads:
Indirect Wages 2,13,900
Indirect Materials 1,21,600
Other Overheads 3,17,300 6,52,800
Gross Factory Cost 19,61,600
Add: Opening Stock of WIP 57,400
Less: Closing Stock of WIP (78,200)
Factory Cost /Cost of Production 19,40,800
Add: Opening Stock of Finished Goods 60,650
(5,000 × Rs.12.13)
Less: Closing Stock of Finished Goods (1,81,950)
(15,000 × Rs.12.13) 18,19,500
Cost of goods sold / Total Cost 11,80,500
Profit 30,00,000
Sales

Working Notes:-

Opening Stock + Production = Closing Stock + Sales

⇒ 5,000 + Production = 15,000 + 1,50,000
⇒ Production = 1,65,000 – 5,000 = 1,60,000 units
𝐓𝐨𝐭𝐚𝐥 𝐂𝐨𝐬𝐭 𝐨𝐟 𝐏𝐫𝐨𝐝𝐮𝐜𝐭𝐢𝐨𝐧 𝟏𝟗,𝟒𝟎,𝟖𝟎𝟎
Cost of Production per unit = = = Rs. 12.13 per unit
𝐓𝐨𝐭𝐚𝐥 𝐎𝐮𝐭𝐩𝐮𝐭 𝟏𝟔,𝟎𝟎𝟎

Cost Accounting 27 By – Dheeraj Kr. Singh

Innovative Institute (9717168088) B.Com.

Q.12
A Factory Produce a Statement Products. The following information is given to you from which you are
required to Prepare “Cost Sheet” for the ended 31st July 2014.
Particulars Rs.
Consumable Materials :
Opening Stock 10,000
Purchases 85,000
Closing Stock 4,000
Direct Wages 20,000
Other Direct Expenses 10,000
Factory Overheads 100% of direct labour
Office Overheads 10% of work Cost
Selling and Distribution Expenses Rs. 2 per units sold
Units of Finished products:
In hand at the beginning of the period Units 1,000 (value of Rs. 16,000)
Produced during the period 10,000 units
In Hand at the end the period 2,000 units
Also, find out the selling price per unit on the basis that profit – mark up is uniformly made, to yield a
profit of 20% of the selling price. There was no work –in progress either at the beginning or at the end of
the period.

B.Com (P) 2012-13 Internal Khalsa College [10 Marks]

Cost Sheet for the period ended on 31-3-2014

Output 10,000 Units

Particulars Rs. Rs.

Consumable Materials :
Opening Stock 10,000
Add: Purchases 85,000
95,000
Less: Closing Stock 4,000
Cost of Raw Materials Consumed 91,000
Direct wages 20,000
Other Direct Expenses 10,000
Prime Cost 1,21,000
Factory Overheads – 100 of Direct Labour 20,000
Factory Cost 1,41,000
Office overheads – 10% of works Cost 14,100
Cost of Production 1,55,100
Add: Opening Stock of finished products 16,000
Less: Closing of finished products @ Rs. 15.51 per unit (31,020)
Cost of goods sold 1,40,080
Add: Selling and Distribution Overheads @ Rs. 2 per unit sold 18,000
Cost of Sales 1,58,080
Profit (20% on selling price) 39,520
Selling Price 1,97,600

Cost Accounting 28 By – Dheeraj Kr. Singh

Innovative Institute (9717168088) B.Com.

Q.13
Calculate the Prime Cost, Factory Cost, Total Cost of Production and Cost of Sales from the
following particulars.

Particulars Rs. Rs.

Raw Materials 45,000
Materials Used in Packing 1,000
Purchased of Partly Produced Goods 2,000
Freight on Materials 500
Sale of Wastage of Materials 300
Wages Paid to Labour 1,000
Directly chargeable expenses 1,500
Oil & Waste 300
Wages of Foreman 2,000
Store Keeper’s wages 1,500
Electric Power 800
Lighting :
Factory 800
Office 1,100
Warehouse 600 2,500
Rent :
Factory 6,000
Office 12,000
Warehouse 9,000 27,000
Repairs & Renewals:
Factory Plant & Machinery 2,200
Office Premise 1,800
Warehouse 2,600
Delivery Van 3,000 9,600
Depreciation:
Office Premises 3,000
Plant & Machinery 4,500
Warehouse 6,500
Delivery Van 2,500 14,500
Consumable Stores 3,000
Manager’s Salary 10,000
Director’s Fees 5,100
Drawing officer Salary 2,100
Office Printing & Stationary 500
Designing Expenses 600
Telephone Charges, Postage & Telegram 2,500
Salesman’s Commission & Salary 1,500
Travelling Expenses 2,000
Advertising 1,500
Carried Outwards 500

Cost Sheet

Particulars Rs. Rs.

Raw Materials 45,000
Raw Materials used in Packing 1,000
Purchase of partially Produced goods 2,000
Freight on Materials 500
48,500
Less: Sale of Wastage of Materials 300 48,200
Wages paid to labour 1,000
Directly Chargeable expenses 1,500

Cost Accounting 29 By – Dheeraj Kr. Singh

Innovative Institute (9717168088) B.Com.

Prime Cost 50,700

Add: Factory Overheads
Oil and Waste
Wages of foreman 300
Stores keeper’s wages 2,000
Electric Power 1,500
Factory Lighting 800
Factory Rent 800
Repairs & Renewals of Factory Plant and Machinery 6,000
Depreciation on Plant & Machinery 2,200
Consumable Stores 4,500
Drawing officer’s salary 3,000
Designing Expenses 2,100 23,800
Factory or Work Cost 600
Add: Office and Administration Overheads:- 74,500
Office Printing and Stationary
Manager’s Salary 500
Director Fees 10,000
Office lighting 5,100
Office Rent 1,100
Repairs and renewals of office premises 12,000
Depreciation on office Premise 1,800
Telephone Charges , Postage & Telegrams 3,000
Total Cost of Production 2,500 36,000
Add: Selling & Distribution Overheads:- 1,10,500
Salesman’s commission and salary
Advertisement 1,500
Travelling expenses 1,500
Carriage outward 2,000
Lighting of Warehouse 500
Rent of Warehouse 600
Repairs and Renewals of Warehouse 9,000
Repairs and renewal of Delivery Van 2,600
Depreciation on warehouse 3,000
Depreciation on Delivery Van 6,500
Cost of Sales 2,500 29,700
1,40,200

Cost Accounting 30 By – Dheeraj Kr. Singh

Innovative Institute (9717168088) B.Com.

Q.14
Calculate the Prime Cost, Factory Cost, Total Cost of Production and Cost of Sales from the following
particulars:

Particulars Rs. Rs.

Raw Materials Consumed 12,000
Directly Chargeable Expenses 500
Wages paid to Labourers 2,500
Grease, oil cotton waste etc. 25
Salary of Factory Manager and Clerk 1,750
Insurance of Stock of Raw Materials 300
Consumable Stores 400
Printing and Stationary:
Factory 50
Office 200
Sales Department 100 350
Rent of Office Building 150
Depreciation:
Factory Premises 200
Office Furniture 50
Delivery Vans 75 325
Power and Fuel 500
Contribution to provident fund of factory employee 1,000
Salaries of administrative directors 100
Bank charges 75
Cost of samples 250
Salaries of sales manager 300
Advertising 500
Packing Materials 350
Shortage in Stock of finished goods 20

Cost Sheet
Particulars Rs. Rs.
Raw Materials consumed 12,000
Wages paid to labour 2,500
Directly Chargeable Expenses 500
Prime Cost 15,000
Add: Factory Overheads
Grease, Oil, Cotton waste etc. 25
Salary of Factory Manager and Clerk 1,750
Insurance of Stock of Raw Materials 300
Consumable Stores 400
Printing Stationary – Factory 50
Depreciation of Factory Premises 200
Power and fuel 500
Contribution to Provident Fund of Factory Employees 1,000 4,225
Factory or Work Cost 19,225
Add: Office and Administration Overheads:-
Printing and Stationary – Office 200
Rent of Office Building 150
Depreciation on Office Furniture 50
Salaries of Administrative Directors 100
Bank Charges 75 575
Cost of Production 19,800
Add: Selling & Distribution Overheads:-
Printing and Stationary – Sales Department 100
Depreciation on Delivery Van 75
Salary of Sales Manager 300
Advertising 500
Shortage in Stock of Finished goods 20
Cost of Samples 250
Packing Materials 350 1,595
Cost of Sales 21,395

Cost Accounting 31 By – Dheeraj Kr. Singh

Innovative Institute (9717168088) B.Com.

Q.15
From the understated particulars, you are required to prepare a monthly Cost Sheet of soap manufactures
Ltd. showing therein:
(i) Prime Cost (ii) Works Cost (iii) Cost of Production (iv) Cost of Sales and, (v) Profit
per unit
Opening Inventory ( 1-1-2014 )
Raw Materials 6,000
Work in Progress 9,620
Finished goods (1,000 units) 13,680
Closing inventory (31-1-2014 ):
Raw Materials 7,000
Work-in-progress 8,020
Finished goods ?
Donations to home for destitute 2,100
Raw Materials purchased 72,000
Import duty on raw Materials purchased 14,400
Productive wages 18,000
Machine hours worked 21,600 hours
Machine hours rate Rs. 1.50
Chargeable expenses Rs. 2000
Office and administration Expenses Re. 1 per unit
Selling Expenses Re.0.90 per unit
Units sold 8,000 units
Units produced 8,200 unit
Profit on sales 10%

B.Com (P) 2005 (External) [9 Marks]

Cost Sheet for January 2004

Particulars Rs. Rs.
Raw Materials consumed
Opening Stock of Raw Materials 6,000
Add: Purchases 72,000
Add: Import duty on purchase 14,400
92,400
Less: Closing Stock of Raw Materials 7,000 85,400
Productive wages 18,000
Chargeable Expenses 2,000
Prime Cost 1,05,400
Add: Factory Overheads
Machinery Expenses (21,600 hours @ Rs. 1.50) 32,400
Gross Work Cost 1,37,800
Add: Opening WIP 9,620
1,47,420
Less: Closing WIP 8,020
Work Cost 1,39,400
Add: Office and administrative expenses (8,200 units) @ Re. 1 8,200
Cost of Production 1,47,600
Add: Opening Stock of finished goods (1,000 units) 13,680
1,61,280
Less: Closing Stock of finished goods (1,200 units) 21,600
Cost of goods sold 1,39,680
Add: Selling Expenses (8,000 units @ Re. 0.90) 7200
Cost of sales 1,46,880
𝟏
Profit (10% on sales or on cost (i.e. 1/9 × 1,46,880) 16,320
𝟗
Sales 1,63,200
𝟏𝟔,𝟑𝟐𝟎
Profit per unit = = Rs. 2.04.
𝟖,𝟎𝟎𝟎

Cost Accounting 32 By – Dheeraj Kr. Singh

Innovative Institute (9717168088) B.Com.

Working Note:
No of unit sold = Opening Stock (in units) + Production – Closing Stock (in units)
= 8,000 + 1,200 – 1,000
Closing Stock = 9,200 – 8,000 = 1,200 units
𝟏,𝟒𝟕,𝟔𝟎𝟎
Value of Closing Stock = × 1,200 units = Rs. 21,600
𝟖,𝟐𝟎𝟎

Q.16
From the books of account of ABC Co. Ltd., the following details have been extracted for the year ending
31st March 2014.
Particulars Rs.
Stock – 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
Freight – Inward 32,000
Outward 20,000
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
Travelling Expenses 12,400
Salesman’s Salary and Commission 33,600
Depreciation written off: Plant and Machinery 28,900
Furniture 2,400
Director’s Fees 24,000
Electricity Charges (Factory) 48,000
Fuel (for boiler) 64,000
Sale of Scrap 500
General Charges 24,800
Manager’s Salary 48,000
Sales 16,00,000
The manager’s time is shared between the factory and the office in the ratio 20:80
From the following details, you are required to prepare a Cost Sheet to show:
(i)Prime Cost (ii) Factory Cost (iii) Cost of Production (iv) Total Cost (v) Profit.

Cost Accounting 33 By – Dheeraj Kr. Singh

Innovative Institute (9717168088) B.Com.

Cost Sheet
For the ending 31st March 2014
Particulars Rs. Rs.
Raw Materials Consumed
Opening Stock of Materials 1,88,000
Add: Purchases 8,32,000
Freight inwards 32,000
10,52,000
Less: Closing Stock of Materials 2,00,000 8,52,000
Direct wages 2,38,400
Prime Cost 10,90,400
Factory Overheads:
Indirect wages 16,000
Repairs of Plant and Machinery 42,400
Factory Rent , Rates, and Taxes 12,000
Depreciation of Plant and Machinery 28,900
Electricity charges 48,000
Fuel 64,000
𝟐𝟎
Manager’s Salary (48,000 × ) 9,600
𝟏𝟎𝟎
Less: Sale of Scrap (500) 2,20,400
Factory Cost 13,10,800
Administration Overheads:
Salary to Administrative staff 40,000
Office Rent, Rates, and Taxes 6,400
Depreciation of Furniture 2,400
Director’s Fees 24,000
General Charges 24,800
𝟖𝟎 38,400 1,36,000
Manager’s Salary ( 48,000 × )
𝟏𝟎𝟎 14,46,800
Cost of Production
Selling and Distribution Overheads: 20,000
Freight Outwards 12,400
Travelling Expenses 33,600
Salesman’s Salaries and Commission 18,800 84,800
Bad debts 15,31,600
Cost of Sales / Total Cost 68,400
Profit 16,00,000
Sales

Cost Accounting 34 By – Dheeraj Kr. Singh

Innovative Institute (9717168088) B.Com.

Type 2:- Complex Questions 10

Q.17
In respect of a Factory, the following particulars have been extract for the year 2013:
Particulars Rs.
Cost of Materials 6,00,000
Wages 5,00,000
Factory Overheads 3,00,000
Administrative charges 3,36,000
Selling Charges 2,24,000
Distribution charges 1,40,000
Profit 4,20,000
A work order has to be executed in 2014 and the estimated expenses are Materials Rs. 8,000; Wages Rs.
5,000.
Assuming that in 2014 the rate of factory overheads has gone up by 20% Distribution charges have gone
down by 10% and selling and administration charges have gone each up 15%. At what price should the
product be sold so as to earn the same rate of profit on the selling price as in 2013.
Factory Overheads are based on Wages and Administration, Selling and Distribution overheads on Factory Cost.

B.Com (P) 2007(External) [15 Marks]

Cost Sheet for the year 2013

Particulars Rs.
Materials 6,00,000
Wages 5,00,000
Prime Cost 11,00,000
Add: Factory Overheads 3,00,000
Factory Cost 14,00,000
Add: Office & Administration Overhead
Administrative Charges 3,36,000
Cost of Production 17,36,000
Add: Selling &Distribution Overhead
Selling Charges 2,24,000
Distribution Charges 1,40,000
Cost of sales / Total Cost 21,00,000
Profit 4,20,000
Sales 25,20,000
Computation of Overheads:
1. Factory Overheads as a % of Wages
𝟑,𝟎𝟎,𝟎𝟎𝟎
(In 2013) = × 100 = 60%
𝟓,𝟎𝟎,𝟎𝟎𝟎
(In 2014) = 60 + 20% of 60 = 60 + 12 = 72%
2. Administration Charges as a % of Factory Cost
𝟑,𝟑𝟔,𝟎𝟎𝟎
(In 2013) = × 100 = 24%
𝟏𝟒,𝟎𝟎,𝟎𝟎𝟎
(In 2014) = 24 + 15 % of 24 = 24 + 3.60 = 27.60%
3. Selling charges as a % of Factory Cost
𝟐,𝟐𝟒,𝟎𝟎𝟎
(In 2013) = × 100 = 16 %
𝟏𝟒,𝟎𝟎,𝟎𝟎𝟎
(In 2014) = 16% + 15 % of 16 = 16 + 2.40 = 18.40 %
4. Distribution charges as a % of Factory Cost
𝟏,𝟒𝟎,𝟎𝟎𝟎
(In 2013) = × 100 = 10%
𝟏𝟒,𝟎𝟎,𝟎𝟎𝟎
(In 2014) = 10% – 10% of 10 = 10 – 1 = 9%
5. Profit as a % Total Cost of Sales
𝟒,𝟐𝟎,𝟎𝟎𝟎
(In 2013) = × 100 = 20%
𝟐𝟏,𝟎𝟎,𝟎𝟎𝟎

Cost Accounting 35 By – Dheeraj Kr. Singh

Innovative Institute (9717168088) B.Com.

Statement of Estimated Price for 2014

Particulars Rs.
Materials 8,000
Wages 5,000
Prime Cost 13,000
Add: Factory Overheads (72% of wages) 3,600
Factory Cost 16,600
Add: Office & Administration Overhead
Administration Charges (27.60 % of Factory Cost) 4,581
Cost of Production 21,181
Add: Selling &Distribution Overhead
Selling Charges (18.40 % of Factory Cost) 3,054
Distribution Charges (9% of Factory Cost) 1,494
Cost of sales / Total Cost 25,729
Profit 5,146
Selling Price 30,875

Q.18
The Particulars obtained from the record of M/s Jain Industries for the year 2014 are given below, from which you are
required to prepare a Cost Sheet and a statement showing estimated cost for 1000 unit in future:
Particulars Rs.
Opening Stock :
Raw Materials 1,40,000
Finished products 20,000
Purchases 2,10,000
Direct Wages 3,80,000
Factory Overheads 70,000
Office overheads 40,000
Closing Stock :
Raw Materials 19,600
Finished Goods 1,60,000
Sales 7,56,000
At the end of the year, the number of unit produced including the closing Stock and the number of unit sold was 4,000.
On the Basis of the above the Industry wanted to supply 1,000 units in future. It is estimated that the prices of
raw materials and labour may rise by 15% and 10% respectively. Assume that the same percentages of
profits on sales will be made.

B.Com (P) 2008(Regular) [7 Marks]

Cost Sheet

Particulars Rs. Rs.

Raw Materials Consumed :
Opening Stock 1,40,000
Add: Purchases 2,10,000
3,50,000
Less: Closing Stock 19,600 3,30,400
Direct Wages 3,80,000
Prime Cost 7,10,400
Factory Overheads 70,000
Factory Cost 7,80,400
Office Overheads 40,000
Cost of Production 8,20,400
Add: Opening Stock of Finished Goods 20,000
8,40,000
Less: Closing Stock of Finished Goods 1,60,000
Total Cost 6,80,400
Profit 75,600
Sales 7,56,000

Cost Accounting 36 By – Dheeraj Kr. Singh

Innovative Institute (9717168088) B.Com.
𝟑,𝟑𝟎,𝟒𝟎𝟎 𝟏𝟏𝟓
New Materials cost per unit = × = Rs. 94.99 per unit
𝟒,𝟎𝟎𝟎 𝟏𝟎𝟎
𝟑,𝟖𝟎,𝟎𝟎𝟎 𝟏𝟏𝟎
New Wages per unit = × = Rs. 104.50 per unit
𝟒,𝟎𝟎𝟎 𝟏𝟎𝟎
𝟕𝟎,𝟎𝟎𝟎
Factory Overheads per units = = Rs.17.5 per unit
𝟒,𝟎𝟎𝟎
𝟒𝟎,𝟎𝟎𝟎
Office Overheads per units = = Rs.10 per unit
𝟒,𝟎𝟎𝟎
𝟕𝟔,𝟔𝟎𝟎
Profit on Sales % = × 100 = 10%
𝟕,𝟓𝟔,𝟎𝟎𝟎

Profit on Cost = 1/9 of Cost (10% on Selling Price = 10/100 of Selling Price = 1/9 of cost)
Statement of Quotation of Price for 1,000 units
Particulars Rs.
Materials Cost @ Rs. 94.99 p. u. 94,990
Factory wages @ Rs. 104.50 p. u. 1,04,500
Prime Cost 1,99,490
Factory Overheads @ Rs. 17.50 p. u. 17,500
Factory Cost 2,16,990
Office Overheads @ Rs. 10 p. u. 10,000
Total Cost 2,26,990
Profit 10% of Sales (1/9 of Cost) 25,221
Selling Price 2,52,211

Q.19
The Particulars obtained from the records of M/s Jeevan Industries for the year 2014 are given below:

Particulars Rs.
Opening Stock :
Raw Materials 1,40,000
Finished Goods ( 1,000 Units) 20,000
Purchases 2,10,000
Factory Wages 3,80,000
Factory Overheads 70,000
Office Overheads 40,000
Selling Overheads 9,600
Sales ( 3,200 units) 9,28,000
Closing Stock 19,600
Raw Materials 1,64,080
Finished Goods ( 900 Units)

Prepare a Cost Sheet showing Prime Cost, Factory Cost, Cost of Production, Total Cost and
Sales per unit.
During 2015 the industry expects to receive an order for 5,000 units. It is estimated that:
(i) The prices of raw Materials and factory wages will rise by 15% and 10% respectively.
(ii) There will be no change in the total factory overheads and office overheads.
(iii) Selling overheads per unit will remain the same.
Prepare an estimated Cost Sheet. The factory intends to earn the same rate of profit on cost.

B.Com (H) 2010

Cost Accounting 37 By – Dheeraj Kr. Singh

Innovative Institute (9717168088) B.Com.

Cost Sheet of the year 2014

Particulars Rs. Rs.

Raw Materials Consumed
Opening Stock of Raw Materials 1,40,000
Add: Purchases 2,10,000
Less: Closing Stock of Raw Materials 19,600 3,30,400
Factory Wages 3,80,000
Prime Cost 7,10,400
Factory Overheads 70,000
Factory Cost 7,80,400
Office Overheads 40,000
Cost of Production 8,20,400
Add: Opening Stock of Finished Goods ( 1,000 units) 20,000
8,40,400
Less: Closing Stock of Finished Goods ( 900 units) 1,64,080
Cost of Goods sold
6,76,320
Selling Overheads
9,600
Total Cost
6,85,920
Profit (Balancing Figure)
2,42,080
Sales (3,200 units)
9,28,000

𝟗,𝟐𝟖,𝟎𝟎𝟎
Sales per unit = = Rs. 290
𝟑,𝟐𝟎𝟎

Estimated Cost Sheet for the year 2015

Output = 5000 Unit:

Particulars Rs.
Raw Materials @ Rs. 122.57 per unit 6,12,850
Factory Wages @ Rs. 134.84 per unit 6,74,200
Prime Cost 12,87,050
Factory Overheads 70,000
Factory Cost 13,57,050
Office Overheads 40,000
Cost of Production 13,97,050
Selling and Overheads @ Rs. 3 per unit 15,000
Total Cost 14,12,050
Profit @ 35.29% on Total cost 4,98,350
Sales 19,10,400
𝟏𝟗,𝟏𝟎,𝟒𝟎𝟎
Sales per unit = = Rs.382.08
𝟓,𝟎𝟎𝟎

Working Note: -
Calculation of Units Produced:-
Opening Stock + Production = Closing Stock + Sales
⇒ 1,000 + Production = 900 + 3,200
⇒ Production = 4,100 – 1,000 = 3,100 units

𝟑,𝟑𝟎,𝟒𝟎𝟎 𝟏𝟏𝟓
New Materials cost per unit = × = Rs. 122.57 per unit
𝟑,𝟏𝟎𝟎 𝟏𝟎𝟎
𝟑,𝟖𝟎,𝟎𝟎𝟎 𝟏𝟏𝟎
New Factory wages per unit = × = Rs. 134.84 per unit
𝟑,𝟏𝟎𝟎 𝟏𝟎𝟎
𝟗,𝟔𝟎𝟎
Selling Overheads per unit = = Rs.3 per unit
𝟑,𝟐𝟎𝟎
𝟐,𝟒𝟐,𝟎𝟖𝟎
Profit on Cost (%) = ×100 = 35.29%
𝟔,𝟖𝟓,𝟗𝟐𝟎

Cost Accounting 38 By – Dheeraj Kr. Singh

Innovative Institute (9717168088) B.Com.

Q.20
With Foot Cold Limited Manufactured and sold 1,000 Refrigerators in the year ending 31st March 2013.
The Summarized Trading, Profit and Loss Account is set out below:
Particulars Rs. Particulars Rs.
To Cost of Materials 80,000 By Sales 4,00,000
To Direct Wages 1,20,000
To Manufacturing Expenses 50,000
To Gross Profit c/d 1,50,000
4,00,000 4,00,000
To Management and Staff Salaries 60,000 By Gross Profit b/d 1,50,000
To Rent, Rates, Insurance 10,000
To Selling Expenses 30,000
To General Expenses 20,000
To Net Profit 30,000
1,50,000 1,50,000
For the year ended 31st March 2014 it is estimated that:
(1) Output and Sales will be 1,200 Refrigerators.
(2) Prices of Raw Materials will rise by 20% on the previous year’s level.
(3) Wages rates will rise by 5%
(4) Manufacturing cost will rise in proportion to the combined cost of materials and wages
(5) Selling cost per unit will remain unchanged.
(6) Other expenses will remain unaffected by the rise in output.
You are required to submit a statement for the board of directors showing the price at which the
Refrigerator should be marketed so as to show a profit of 10% on selling price.

B.Com (P) 2011 (Regular) [7 Marks]

Statement Showing the Price at which Refrigerator should be market in 2013-14

Particulars Rs.
Materials 96.00
Direct Wages 126.00
Prime Cost 222.00
Manufacturing Expenses (1/4 of Combined cost of Materials & Wages) 55.50
Work Cost 277.50
Management and Staff salary (Rs. 60,000 / 1,200) 50.00
Rent ,Rates and Insurance (Rs. 10,000 / 12,000) 8.33
General Expenses (Rs. 20,000 / 1200) 16.67
Cost of Production 352.50
Selling Expenses (Rs. 30,000 /1,000) 30.00
Cost of Sales 382.50
Profit 10% on selling Price or (1/9 on cost) 42.50
Selling Price 425.00
New Materials cost per unit = (80,000 / 1,000) × (120 /100) = Rs. 96 per unit
New Factory Wages per unit = (1,20,000 / 1,000 ) × (105 /100) =Rs. 126 per unit
During the year ending on 31st March 2013 the combined cost of Materials and wages was Rs. 200 per unit
manufacturing expenses were Rs. 50 per unit.

Manufacturing Expenses in proportion of combined cost of Materials and wages = 50 / 200 =1/4

Cost Accounting 39 By – Dheeraj Kr. Singh

Innovative Institute (9717168088) B.Com.

Q.21
Walson Ltd. produced and sold 1,000 Washing machine during the year ending 31st March 2013, the
summarized trading and Profit & Loss Account is given below.
Particulars Rs. Particulars Rs.
To Cost of Materials consumed 2,00,000 By Sales 8,00,000
To Direct Wages 2,00,000
To Works Expenses 1,00,000
To Gross Profit c/d 3,00,000
8,00,000 8,00,000
To Selling and Distribution Expenses 1,00,000 By Gross Profit b/d 3,00,000
To Net Profit 2,00,000
3,00,000 3,00,000
st
The management estimated the following for the year ending 31 March 2014
(i) Output and sales will be of 2000 Washing machines
(ii) Price of Materials and Wages will go up by 25% on the previous year’s level.
(iii) Work expenses will rise in proportion to the combined cost of Materials and wages.
(iv) Selling and distribution expenses per unit is estimated at Rs. 50.
Prepare a cost statement showing the price at which washing machines would be marketed so as to yield a
profit of 10% on selling price.

B.Com (P) 1986

Cost Statement
For the year ending 31st March 1987

Per Machine 2,000 Machine

Direct Materials 250 5,00,000
Direct Wages 250 5,00,000
Prime Cost 500 10,00,000
Work expenses 125 2,50,000
Work Cost 625 12,50,000
Selling and distribution expenses 50 1,00,000
Total Cost 675 13,50,000
Profit ( 10% on selling price) 75 1,50,000
Sales 750 15,00,000

Q.22
The Following Inventory Data related to XYZ Ltd.
Inventory
Beginning Ending
Finished Goods Rs. 1,10,000 95,000
Work in Progress Rs. 70,000 80,000
Raw Materials Rs. 90,000 95,000
Additional information:
Cost of good available Rs. 6,84,000
Total goods Processed during the period Rs. 6,54,000
Factory Overheads Rs. 1,67,000
Direct Materials used Rs. 1,93,000
Requirement:
(i) Determine the raw Materials Purchase.
(ii) Determine the Direct Labour Cost incurred.
(iii) Determine the Cost of goods sold.

B.Com (H) 1999

Cost Accounting 40 By – Dheeraj Kr. Singh

Innovative Institute (9717168088) B.Com.

(i) Computation of Raw Materials Purchase

Raw Materials Used = Opening Stock + Purchases – Closing Stock

⇒ 1,93,000 = 90,000 + Purchases – 95,000
⇒ Purchases = 1,93,000 – 90,000 + 95,000 = Rs.1,98,000

(ii) Computation of Direct Labour Cost incurred

Particulars Rs.
Cost of goods Processed during the year 6,54,000
Less: Opening work in progress 70,000
Gross Factory Cost 5,84,000
Less: Factory Overheads 1,67,000
Prime Cost 4,17,000
Less: Raw Materials Used 1,93,000
Direct Labour Cost 2,24,000

(iii) Computation of Cost of goods Sold

Cost of goods Sold = Cost of goods available for Sales – Closing Stock of Finished Goods
= 6,84,000 – 95,000 = Rs. 5,89,000

Q.23
The books and records of the Anand Manufacturing Co. Present the following data for the month of
August 2014:
Direct Labour cost (160% of factory overheads) Rs. 16,000
Cost of goods sold Rs. 56,000
Inventory account showed these opening and closing balance: August 1 August 31
Raw Materials 8,000 8,600
Work-in-Progress 8,000 12,000
Finished goods 14,000 18,000
Other data
Selling expenses 3,400
General and Administration expenses 2,600
Sales for the month 75,000
You are required to prepare a statement sowing cost of goods Manufactured and sold and profit earned.

B.Com (H) 1993

Anand Manufacturing Company
Statement of cost of goods Manufactured and Sold and profit earned
For the month of August 2015
Rs. Rs.
Direct Raw Material Consumed
Opening Stock of Raw Material 8,000
Add: Purchases of Raw Material 36,000
44,000
Less: Closing Stock of Raw Material 8,600 35,400
Direct Labour 16,000
Prime Cost 51,400
Factory overheads 10,000
Gross work cost 61,400
Add: Opening work-in-progress 8,000
69,400
Less: Closing Work-in-progress 12,000
Work Cost 57,400
Add: General & Administration Expenses 2,600
Cost of Production (of goods manufactured) 60,000
Add: Opening Stock of Finished Goods 14,000

Cost Accounting 41 By – Dheeraj Kr. Singh

Innovative Institute (9717168088) B.Com.

74,000
Less: Closing Stock of Finished Goods 18,000
Cost of Production of goods sold 56,000
Add: Selling expenses 3,400
Cost of Sales 59,400
Profit 15,600
Sales 75,000

Working Note:-

The Value of Raw Materials Consume has been calculated as follows:

Particulars Rs. Rs.

Cost of goods Sold 56,000
Add: Closing Stock of Finished Goods 18,000
74,000
Less: Opening Stock of Finished Goods (14,000)
Cost of Production 60,000
Less: Administration overheads (2,600)
Factory Cost 57,400
Add: Closing Stock of Work-in-progress 12,000
69,400
Less: Opening Stock of Work-in-progress 8,000
Gross Factory Cost 61,400
Less: Factory Overheads 10,000
Prime Cost 51,400
Less: Direct Labour Cost 16,000
Direct Raw Material Consumed 35,400
Add: Closing Stock of Raw Material 8,600
44,000
Less: Opening Stock of Raw Material 8,000
Cost of Raw Materials Purchased 36,000

Q.24
On June 30, 2014 a flash flood damaged the warehouse and factory of ABC Corporation completely
destroying the work in progress inventory. There was no damage to either the raw materials or
finished goods inventories. A physical verification taken after the flood revealed the following valuations.
Raw Materials Rs. 62,000
Work-in-progress Rs.0
Finished Goods Rs.1,19,000
The inventory on January 1, 2014 consisted of the following:
Raw Materials Rs. 30,000
Work-in-progress Rs. 1,00,000
Finished goods Rs. 1,40,000
Rs. 2,70,000
A review of the books and records disclosed that the gross profit margin historically approximated 25% of
sales. The sales for the first six month of 2014 were Rs. 3,40,000. Raw Materials purchases were Rs.
1,15,000. Direct Labour Cost for this period were Rs. 80,000 and manufacturing overhead has historically
been 50% of direct labour.
Compute the cost of work-in-progress inventory lost on June 30, 2014 by preparing statement of cost and
profit.

B.Com (H) 1998

Cost Accounting 42 By – Dheeraj Kr. Singh

Innovative Institute (9717168088) B.Com.

Cost Sheet if ABC Corporation

Particulars Rs. Rs.

Raw Materials Consumed
Opening Stock of Raw Materials 30,000
Add: Purchases 1,15,000
1,45,000
Less: Closing Stock of Raw Materials 62,000 83,000
Direct labour 80,000
Prime cost 1,63,000
Factory overheads ( 50% of Rs. 80,000) 40,000
2,03,000
Add: Opening work-in- Progress 1,00,000
3,03,000
Less: Closing work in Progress (Lost) 69,000
Factory cost 2,34,000
Add: Opening Finished Stock 1,40,000
3,74,000
Less: Closing Finished Stock 1,19,000
Total cost
2,55,000
Profit (1/3rd of Cost)
85,000
Sales
3,40,000

Profit = 25% on selling price = 25 / 100 of selling price = 25 / 75 of cost or 1/3 on cost

Working Note: -
Calculation of Work in Progress (Closing)
Particulars Rs.
Sales 3,40,000
Less: Profit 85,000
Total Cost 2,55,000
Add: Finished Stock (Closing) 1,19,000
3,74,000
Less: Finished Stock (Opening) 1,40,000
Factory Cost 2,34,000
Less: Cost Before Closing WIP 3,03,000
Closing WIP 69,000

Q.25
The managing director of a company producing consumer durable seeks your assistance in the matter of
fixation of selling price for one of its products called X . The cost structure of products X the unit-selling
price of which is Rs. 45,000 is as under.
Direct Materials 50%
Direct labour 20%
Overheads 30%
An increase of 15% in the cost of materials and 25% in the cost of labour is anticipated. These increased
cost in relation to the present selling price would cause a 25% decrease in the amount of present profit per
unit of X.
(i) Prepare a statement of profit per unit as at present.
(ii) Find out the revised selling price to produce the same percentage of profit to sale as before.

B.Com (H) 2002

Cost Accounting 43 By – Dheeraj Kr. Singh

Innovative Institute (9717168088) B.Com.

Suppose total cost of product X is = Rs. 𝒙

Present cost Increased cost
Direct Materials 0.5𝒙 0.575𝒙
Direct labour 0.2𝒙 0.250𝒙
Overheads 0.3𝒙 0.300𝒙
Total cost 𝒙 1.125𝒙
Selling cost 45,000 45,000
Profit 45,000 – 𝒙 45,000 – 1,125𝒙

As the increased cost in relation to the present selling price would cause a 25% decrease in the present
profit per unit of the product the following equation can be made.
(45,000 – 𝒙) – (45,000 – 1.125𝒙) = 11,250 – 0.25 𝒙
⇒ 45,000 – 𝒙 – 45,000 + 1.125𝒙 = 11,250 – 0.25𝒙
⇒ 0.125𝒙 = 11,250 – 0.25𝒙
⇒ 0.125𝒙 + 0.250 𝒙 = 11,250
⇒ 0.375𝒙 = 11,250
𝟏𝟏,𝟐𝟓𝟎
⇒ 𝒙 = = 30,000
𝟎.𝟑𝟕𝟓
The Total Cost = Rs. 30,000

Profit = Rs. 45,000 – 30,000 = Rs. 15,000

So profit is 50% of the total cost

Calculation of Revised selling price

Particulars Rs.
Materials (Rs. 15,000 + 15%) 17,250
Labour (Rs. 6,000 + 25%) 7,500
Prime Cost 24,750
Overheads (30% of Rs. 30,000) 9,000
Total 33,750
Profit ( 50% of Total Cost ) 16,875
Selling Price 50,625

Q.26
In a factory, two types of articles are manufactured No. 1 and No. 2. From the following particulars,
prepare a statement of cost showing total cost of production of each variety and ascertain the total profit.
There are no opening and closing stock and no selling and distribution overheads:

No.1 No.2
Materials (Rs.) 30,000 50,000
Labour (Rs.) 60,000 70,000
Selling price (Rs. / article) 1,200 1,500
Articles sold (units) 180 200

Works overheads are charged as 40% of works cost and office overheads are charged as 20% of cost of
production.

B.Com (H) 2014 External (10Marks)

[ Cost of Production No. 1 and No. 2 Rs. 1,87,500 and Rs. 2,50,000 ; Profit No. 1 and No. 2
Rs.28,500 and Rs. 50,000]

Cost Accounting 44 By – Dheeraj Kr. Singh