Chapter 3
COST SHEET
INTRODUCTION
When the concern produces only single item the costing method is called
single or output costing which is form or type of UNIT COSTING. Unit
costing is employed when the manufacturing is continuous and the units
produced are identical. It is a method of costing used to ascertain the
cost per unit produced. Unit costing is applicable to many industries
where the output is expressed in natural units such as Numbers, Tones,
Kilograms, Liters, Meters and so on. Thus, Unit Costing Methods are
applicable to industries such as Steel, Mines, Quarries, Collieries, Brick
Making & so on.
Units Used in Different Industries
UNIT INDUSTRIES PRODUCT
Tonne Steel Steel Bars
Collieries Coal
Quarries Stone
Mines Mineral Ore
Kilns Lime Stones
Sugar Mills Sugar
Cement Cement
K.G. Paper Mill Paper
Spinning mills Yarn
Sacks Flour Mills Flour
Barrels Breweries Beer, Wines
1000 No. Brick Making Bricks
Metre/ Yards Textile Mills Cloth
Cost Sheet
A statement indicating the aggregate of all the costs is known as cost
statement or Cost Sheet. In case of cost Sheet all the costs are aggregated
first and then profit is added to it or loss is subtracted from it, in order to
derive at the selling price. The cost sheet starts with all the items of
direct cost to which the indirect costs are added starting from Factory
Costs, then Administration Costs and then selling and Distribution costs.
Items Excluded from Cost Sheet
Financial Income
These items are credited only in the Financial Accounts and not in Cost
Accounts, since these are not directly related to the product;
- Interest Received on Loans/ Fixed Deposits/ Bank Deposits/
Debentures etc.
- Dividend Received on Investments made in shares
- Premium on Issue of Shares/ Debentures credited to the Profit
and Loss Account
- Rent Received
- Transfer Fees Received in respect of Share Transfers
- Capital Gains such as Profit on sales of Fixed Assets, profit on
sale of Investment
- Penalties and Fines or Discounts Received from Customers etc.
Financial Expenses / Losses / Appropriations
These items are debited only in the Financial Accounts and not in Cost
Accounts, since these are not connected with any cost unit or product
Financial Expenses
- Interest paid on Loans, Fixed Deposits, Debentures.
- Expenses on issue of Shares, Debentures etc.
- Discount on issue of Shares, Debentures etc.
- Underwriting Commission on Issue of Shares.
Financial Losses
- Capital Losses such as Loss on sale of Fixed assets, Loss on sales
of Investment, Loss of assets by fire or flood, Machinery
Scrapped etc.
- Penalties and Fines
- Damages paid as ordered by Court
Appropriations out of Profits
- Donations
- Writing off Fictitious Assets e.g. Goodwill, Preliminary Expenses
etc.
- Income Tax
- Transfers to sinking Funds
- Dividends- both Preference and Equity
- Transfer to Reserves
Uses / Purposes / Advantages of Cost Sheet
The main advantages of a cost sheet are:
(i) It indicates the break-up of the total cost by elements, i.e.
material, labour, overheads, etc.
(ii) It discloses the total cost and cost per unit of the units
produced.
(iii) It facilitates comparison.
(iv) It helps the management in fixing selling prices.
(v) It acts as a guide to the management and helps in formulating
production policy.
(vi) It enables to keep control over cost of production.
(vii) It helps the management in submitting quotations or preparing
estimates for tenders.
(viii) It is a simple and useful medium of communication of costs to
various levels of management.
Proforma Cost Sheet
Units Produced….
Step Elements Of Cost / Particulars Total Cost Per
Cost Unit
A Direct materials XXX
Op. Stock Of Raw materials XXX
Add: Purchases Of Raw Materials XXX
Less : Closing Stock Of raw Materials XXX
Cost of Direct materials Consumed XXXX
B Direct wages XX
C Direct expenses
Freight Inward XX
Carriage Inward XX
Octroi Paid XX
Custom Duty Paid XX
Royalty XX
Total Direct Expenses XXX
D PRIME COST ( A + B + C ) XXXX
E Works Overheads / Factory Overheads
Indirect factory material XX
Less : Sale of Scrap / Waste / recoveries (XX)
Indirect factory Wages XX
Indirect Factory Expenses XX
Gross Factory Cost XXX
F Work In Progress :
Add : Opening Stock of WIP XX
Less : Closing Stock of WIP (XX)
Net Work in Progress XXX
G WORKS COST / FACTORY COST ( D + XXXX
E+F)
H Quality Control Costs XX
I R & D Costs XX
J Office & Administration Overheads XX
K COST OF PRODUCTION ( G + H + I + J XXXX
)
L Finished Goods
Add: Opening Stock of Finished Goods XX
Less: Closing Stock of Finished Goods (XX)
Net Finished Goods XXX
M COST OF GOODS SOLD ( L + M ) XXXX
N Selling and Distribution Overheads XXX
O COST OF SALES ( M + N ) XXXX
P (+) PROFIT / (-) LOSS ( Bal . Fig) XXX
Q SALES ( P + /- Q ) XXXXX
COST ❑
Per unit Cost
No of Units Produced
COST ❑
Per unit Cost
No of Opening Stock Units∨Cl . Stock Units
COST ❑
Per unit Cost
No of Units Sold
Cost (+/-) Profit/ Loss = Selling Price
Profit Table
Percentage on Cost Percentage on Selling
Price Price
100% (1/1) 50% (1/2)
50% (1/2) 33.33% (1/3)
33.33% (1/3) 25% (1/4)
25% (1/4) 20% (1/5)
20% (1/5) 16.66% (1/6)
11.11 (1/9) 10% (1/10)
*** For Practical Question Refer Excel sheet
