ASSIGNMENT 1 - COST ACCOUNTING
UNIT 1
1. Define cost?
“the amount of expenditure incurred on a given
thing is cost.”
2. Define Costing?
Costing defined as “the techniques and process of
ascertaining costs.”
3. Define Cost Accounting?
“the process of accounting for costs from the point
at which expenditure is incurred to the establishment of
its ultimate relationship with cost centers and cost
units.”
VVIMP
5. Cost Centre –, Cost Centre is a location, person
or item of equipment or group of these for which
costs may be ascertained and used for the purpose of
cost control.
Example: a department, a machine operator etc.,
Cost Unit –Cost Unit is a unit of product or service or
time in relation to which cost may be ascertained or
expressed.
Example: a kilogram, a tone, a meter etc.,
6. State the Elements of Cost? VVIMP
The elements of cost are: Material, Labour and
Overhead.
7. What is Prime Cost? VVIMP
“The aggregate of direct material, direct labour and
direct expenses are known as Prime Cost.”
Prime Cost = Direct Material + Direct Labour +
Direct Expenses.
8. What is Cost sheet? VVIMP
Cost sheet is a statement showing the various
elements of cost like Direct material, labour, prime
cost, factory cost, Cost of production, total cost
and sale price.
1
CASE STUDY: Format of cost sheet with imaginary figures
Particulars Rs. Amount
Opening stock of materials xx
Add: purchases materials xx
Purchase expenses xx
Carriage on purchase xx
TOTAL xxx
Less: Closing stock of materials xx
MATERIALS CONSUMED / USED xxx
Direct wages / productive wages xx
Direct expenses xx xxx
PRIME COST / DIRECT COST xxx
ADD:FACTORY/WORKS O.H. or ON COST:
Indirect wages x
Factory rent, rates, insurance and taxes x
Drawing office salaries x
Motive power x
Haulage x
Loose tools (dep) x
Gas and water x
Dep and repairs on plant and Machinery Works manager x
Forman/supervisor salary x
Estimating exps xx
(x)
Less sale of scrap xxx
Factory on cost xx
Add opening work-in-progress (xx)
Less closing work in progress xxx
FACTORY COST/WORKS COST
Add:OFFICE O H/ADMN O H/OFFICE ON COST:
Directors fee
Staff salaries
Office Rent, rates and taxes- P& S
Legal exps
Depreciation on office Buildings and Furniture
Bank charges
Office lighting and leaning
Counting house salaries
COST OF PRODUCTION
Add: Opening finished goods
Less Closing finished goods
Cost of goods sold
ADD: SELLING AND DISTRIBUTION O.H
Rent of ware house
Dep on delivery van
Advertisement
Traveling exps and salary to agents
Sales department salary
Commission on sales
Bad debts
Up keep of delivery van
Sales on cost
TOTAL COST/ COST OF SALES
Profit (Sales – Total cost)
Sales XXXX 2
Q1. Bharath company manufactured and sold 1,000 machines in 2023. Following
are the particulars obtained from the records of the company:
Cost of material 80,000
Wages 1,20,000
Manufacturing expenses 50,000
Salaries 60,000
Rent, rates and insurance 10,000
Selling expenses 30,000
General expenses 20,000
Sales 4,00,000
The company plans to manufacture 1,200 machines in 2024. 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 supplied to you:
a. the price of material will increase by 20% on the previous year’s level.
b. wage rates will rise by 5%
c. Mfg expenses will rise in proportion to the combined cost of material and wages.
d. selling expenses per unit will remain unchanged.
e. other expenses will remain unaffected by the rise in output.
Statement of cost sheet for 2023 [1000 units]
Particulars Total Cost per unit
cost
Cost of materials 80,000 80
Wages 1,20,000 120
Prime cost 2,00,000 200
Add:- Factory overheads
Manufacturing expenses 50,000 50
Factory cost 2,50,000 250
Add: office and administration overheads
Salaries 60,000
Rent, Rates and Insurance 10,000
,General Expenses 20,000 90,000 90
Cost of Production 3,40,000 340
Add:- Selling and Distribution overheads
Selling expenses 30,000 30
Total cost 370,000 370
Profit[bal fig] 30,000 30
Sales 4,00,000 400
3
Estimated Statement of cost sheet for 2024 [1200 units]
Particulars Total Cost per unit
cost
Cost of materials [80+20%] 1,15200 96.00
Wages [120+5%] [126 X 1200] 1,51200 126.00
Prime cost 2,66,400 222.00
Add:- Factory overheads
[1,15200+151200]=266400 X 25%] [20+5] 66,600 55.50
Manufacturing expenses 3,33,000 277.50
Factory cost
Add: office and administration overheads
Salaries 60,000
Rent, Rates and Insurance 10,000
General Expenses 20,000 75.00
Cost of Production 423,000 352.50
Add:- Selling and Distribution overheads
Selling expenses 36,000 30.00
Total cost 4,59,000 382.50
Profit[459000/90) x 10 51,000 42.50
Sales 5,10,000 425.00
Q. Write any four items which are excluded from cost sheet?
a) Cash discount
b) Interest paid
c) Donations
d) Income-tax paid
e) Preliminary expenses written off
f) Goodwill written off
g) Provision for taxation and
h) Provision for bad debts.
4
DIFFERENCES BETWEEN FINANCIAL ACCOUNTING AND COST ACCOUNTING:
The following are the differences between financial accounting and cost accounting:
Financial Accounting Cost Accounting
1. objective The main objective of FA is to The main objective of CA is to
prepare profit and loss a/c and B/s to provide osting information
report to owners and outsiders. to management for decision making.
2. Financial records are maintained as Cost accounts are maintained to
legal per the provisions of companies fulfil the internal requirement of the
requirement Act and Income tax Act management.
3. Financial accounting classifies, records Cost accounting records and
classification and analyses transactions in subjective analyses expenditure in an objective
of manner i.e. according to nature manner viz. according to purpose
transactions of expenses. for which costs are incurred.
4.Stock Stocks are valued cost or realizable Stocks are valued cost
valuation value, whichever is lesser.
5.Analysis of In FA, the profit or loss of the entire In CA, reveal the profit or loss of
profit and cost enterprise is disclosed in total. different products,
departments separately.
6.Accounting Financial reports are Cost reports are prepared daily,
period prepared annually. weekly, monthly, quarterly etc. as
required by the management.
7.Emphasis Emphasis is laid on the Cost accounting lays emphasis
recording of transactions and control on ascertainment of cost and cost
aspect is not given importance. control.
8.Nature These accounts are maintained These accounts are maintained on
on the basis of historical records. the basis of both historical and
Predetermined costs.
DIFFERENCES BETWEEN COST ACCOUNTING AND MANAGEMENT ACCOUNTING:
Cost accounting and Management accounting both have the same objectives of helping the
management in planning, control, evaluation of performance and decision-making. Both are internal
to the organization and use common tools and techniques like standard costing, variable
costing, budgetary control etc.
The following are the differences between the two:
Cost Accounting Management Accounting
1. Deals It deals with ascertainment, allocation, It deals with the effect and impact of cost on
with apportionment and accounting aspect the business
of costing. 5
2. Base It provides base of for management It is derived both from costing accounting
accounting. and financial accounting.
3. Role It is helpful in collecting costing data It has a greater degree of relevance and
for the management. objectivity as the management
accountant has a clear idea of the various
types of costs.
4. The status of cost accountant comes Management accountant is senior in
Status after the management accountant. position to cost accountant.
5. Cost accountant has a narrow approach. Management accountant reports the effect
Outlook He has to refer to economic and of cost on the business along with cost
statistical data for analysing cost effects. analysis.
6. Tools It has standard costing, variable Along with tools and techniques of
and costing, break even analysis etc. as the cost accounting, the management
techniques. basic tools and techniques. accounting has funds and cash
flow statements, ratio analysis etc.
