The purpose of a cost sheet is to obtain an accurate product cost and provide the total cost and cost per unit. It helps determine the selling price of a product. A cost sheet details the production costs of a product. There are four main types of costs: fixed costs which do not change with production quantity, variable costs which change with production quantity, operating costs for day-to-day expenses, and direct costs which are directly associated with production.
The purpose of a cost sheet is to obtain an accurate product cost and provide the total cost and cost per unit. It helps determine the selling price of a product. A cost sheet details the production costs of a product. There are four main types of costs: fixed costs which do not change with production quantity, variable costs which change with production quantity, operating costs for day-to-day expenses, and direct costs which are directly associated with production.
The purpose of a cost sheet is to obtain an accurate product cost and provide the total cost and cost per unit. It helps determine the selling price of a product. A cost sheet details the production costs of a product. There are four main types of costs: fixed costs which do not change with production quantity, variable costs which change with production quantity, operating costs for day-to-day expenses, and direct costs which are directly associated with production.
The purpose of a cost sheet is to obtain an accurate product cost and provide the total cost and cost per unit. It helps determine the selling price of a product. A cost sheet details the production costs of a product. There are four main types of costs: fixed costs which do not change with production quantity, variable costs which change with production quantity, operating costs for day-to-day expenses, and direct costs which are directly associated with production.
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The Purpose of Cost Sheet
The main objective of the cost sheet is to obtain an
accurate product cost. It gives you both the total cost and cost per unit of a product. In also help fixing the selling price, In order to fix the selling price of a product, you need to create a cost sheet so you can see the details of its production cost. Types of costs in cost accounting
Costs are broadly classified into four types: Fixed cost,
Variable cost, Direct cost, and Indirect cost.
1. Fixed cost: These are costs that do not change based on
the number of items produced. For example, the depreciating value of a building or the price of a piece of equipment.
2. Variable cost: These costs are tied to a company’s level of
production. For example, a bakery spends Rs 100 on labor and Rs 50 on raw materials to produce each cake. The variable cost changes based on the number of cakes the company bakes. 3. Operating costs: These are those expenses incurred by an organisation to maintain the product on a day to day basis. Traveling cost, telephone expenses, office supplies are some of things that come under operating costs.
4. Direct costs: These costs can be directly associated
with production. For example, if a furniture manufacturing company takes five days to produce a couch, then the direct cost of the finished product includes the raw material cost and labor charges for five days Elements of Cost
•Prime Cost: It comprises of direct material, direct wages, and
direct expenses. Alternatively, the Prime cost is the cost of material consumed, productive wages, and direct expenses.
Prime cost = Direct material + Direct wages + Direct expenses
•Factory Cost: Factory cost or works cost or manufacturing cost
or production cost includes in addition to the prime cost the cost in indirect material, indirect labor, and indirect expenses. It also includes amount or units of WIP or incomplete units at the end of the period. Factory cost = Prime cost + Factory overhead •Cost of Production: When Office and administration cost at the end of the period are added to the Factory cost, we arrive at the cost of production or cost of goods sold. Here, we make an adjustment for opening and Closing finished goods.
•Total Cost: Total cost or alternatively cost of sales is the cost
of production plus selling and distribution overheads.
Total cost = Cost of goods sold + Selling and distribution overhead
