Output Costing and

Cost Sheet Preparation

Learning Obj ectives

After studying this chapt
er you are able to understand:
• Meani ng of Output Costing
• Ascertainment of c
. ost and Profit under Output Costing
• Preparation of Simple Cost Sheet

• Determination of Materials Consumed

• Preparation of Detailed Cost Sheet

• Treatment of Different Items of Stock

• Treatment of Special Items of Cost

• Expenses are Excluded from Computation of Total Cost

• Preparation of Estimated Cost Sheet

• Meaning and Preparation of Production Account

• Distinction Between Production Account and Cost Sheet

• Meaning of Multiple Costing

Meaning of Output Costing

Output Costing is also called as 'single costing' or 'unit costing'. It is applied where the organizations prod uce sino!e
product and the whole production process involve in manufacture of single product. This is done oenerally in hiohlv 0
0 1
mechanized and routine production environments. Most frequently different grades of identical product is
produced. For example, dairy industry, paper industry, cement manufacture, mines, quarries, beverages use this
method of costing. This method is suited for organization producing a single article on mass scale by continuous
manufacture. The cost units are identical with identical costs. In unit costing, cost is collec ted elementwise li.ke direct
materials, direct labour, prime cost, factory overhead, administration overhead, selling and distribut ion overhead
etc. The cost of each element is divided by total production quantity to determine cost per unit of each element. The
cost ascertainment of each unit under Output Costing:
Total Cost for the Period
Cost per unit = Number of Units produced during the Period

·
U n d er O utput C ostmg, al expenditure
. costs is done as in the case of Job Costing. Since, the entire
d e t a1·Jed analysis of • · ·
•
·1s norma11 y mcurre c onIyo ne type of product. If the product differs in grades or sizes, then an ys1s ot costs 1s
d 1or
necessary for ascertainment of cost of each grade or size of the product.
291
292 Cost ,rnd Managem ent Acw11ntinq

Ascertainment of Cost and Profit under Output Costing

. . C t h t is a stateme nt which isCprepared· af gi·,1:r1
C,ost sheet 1s prepared as sta
a tement under ou tput costing. OS s ee ·. <l .
J · · - f ·ti ncurred m pro uct1on . Josts arc d'lc
·
and provide informa tion regardin g the element s o cos . · - ~lhtij
mterva s of time . l - t Cos t sheet gives to tal cost and cor;t p
· · · . er 1Jn11
to ascertam pnme cost, factory cost, cost of production , tota cost e ·tc. f roducts manufa ctured during the
c . . . ·
uni O P PenCJ<l
101 a part1Cular penod. It presents the total cost , as well as, cos t per ·c1 comparative study of actual current·
· . . · I 1 . co~ts
I t al so con tams cost data of prev10us penod for compan so n. t prov es
swtably corrected bi'
with the costs of corresponding periods thus causes of inefficiencies and waSlage can be
management. It gives information to management for cost control.

Simple Cost Sheet

Advantages of Cost Sheet
the manufacturer
It discloses the total cost and cost per unit of the units produced during the given period. It enables
cturer and helps him
to keep a close watch and control over the cost of production. It acts as a guide to the manufa
the cost of prod uction
in formulating a definite and useful production policy. It helps the manufacturer to minimiz e
of previous year for
when there is a cut-throat competition. It helps the manufacturer by providing cost data
ng up the selling price
comparison. Such comparison helps in the detection of inefficiency and wastage. It helps in fixi
r the supply of goods.
more accurately. It helps the businessmen to submit quotations with reasonable accuracy fo
A specimen of simple cost sheet is given below:
Units produced .....
Cost sheet of XYZ Ltd. fo r the period .....
Total cost (~) Cost p.u. (t )
Particulars
XXX xx
Direct material
Direct labour x..u
Direct expenses XXX: xx

Prim e Cost XJC<: xx

Add: Factory or Works overhea d x..xx x.x

Factory o r Wo rks Cost X..X."'X xx

Add: Administration overhead XXX xx

Cost of Producti on X.."'C.'{ xx

Add: Selling and distribution overhead x..u x..-'C

Total Cost or Cost of Sa les X...'C( xx

Profit/Loss x...xx xx
Sales :X.'X.X
- -·
xx

Divisions of Cost and Cost Sheet

A cost sheet or statement of cost can be prepared to present total cost11, bY<lift·
. erent stages. The stages are:

Prime cost It is the sum total of direct materials, direct Jabour and direct expenses.
Works cost · th e sum tota I o f prime cost and factory expenses.
It is
Cost of productio n It is the sum tot al of works cost and administratin: expenses.
Cost of sales , d se11 mg
It is the sum total of cost of pro d uc f10n an . . tion expe.n.st~s.
. and d1stnbu
 Chapter 13 Outp ut Cost ing and Co~ t ':,11,, t>t Pre p,,r,Jth;m 293

Materials Consumed
The metho d of computation of 'material consumed' is explained below:
Opening stock of raw materials XXX
Add: Purchases XXX
Carriage inwards XXX

Octroi and customs duty XXX XXX

XXX

Less: Closing stock of raw material XXX

Cost of material sold XXX

Defective materials returned XXX

Materials waste sold XXX

Scrap of materials or residue XXX

By-products XXX

Abnor mal wastage of materials XXX XXX

XXX
Raw Materi al Consu med

Detailed Cost Sheet

The detailed profor ma cost sheet is given below:
Units produced .....
Cost sheet of XYZ Ltd. for the period .....
Total cost Cost per unit
Particulars (~) (~)

Direct materials
XXX
Openi ng stock of materials
XXX
Add: Purchases of materials
XXX

XX,'{
Less: Closing stock of materials
XXX xx
Materials consum ed xx
XXX
Direct wages X..'X
XXX
Direct expenses X-\:
XXX
(1) Prime Cost
Add: Factory or Works expenses xx
XXX
Fuel, power and water (factory) xx
xx.x
Lighting and heating x...xx xx
Indirec t materials XX.'( xx
Indirec t labour XXX ::'l'. X
Drawing office expenses XXX xx
Depreciation of plant and equipment XXX. xx
Depreciation of factory buildings x.xx xx
Works Manager's salary XXX
x..x
Factory rent, taxes and insurance X),"X
xx
 294 Cost and Management Accounting

------- x.xx xx
Less: Scrap value of defective work XXX xx
XXX xx
Add: Opening work-in-progress
x.xx xx
x.xx xx
Less: Closing work-i n-progress
x.xx xx
(2) Factory or Works Cost
Add: Administrative expenses
x.x.x xx
Office rent, insurance, lighting and deaning
XXX xx
Office salaries
x.x.x xx
Telephone and Internet expenses
XXX xx
Law charges
Audit fees
x.x.x xx

Printing and stationery

XXX xx
Depreciation of office furniture x.x.x xx
Depreciation of office building XXX xx
Directors' remuneration XXX xx
General manager's salary XXX xx
(3) Cost of Production XXX xx
Add: Opening stock of Finished goods XXX xx
XXX xx
Less: Closing stock of Finished goods XXX xx
(4) Cost of Goods Sold XXX xx
Add: Selling and Distribution expenses
Showroom expenses XXX :lC(

Salesmen salaries XXX xx.

Salesmen commission :X..,'Q( xx
Bad debts
:x..,xx: xx
Discounts
:x..,-xx: xx
Sales office rent and other expenses
:x..,xx. xx
Carriage outwards
:X..,'{X xx
Delivery expenses
:X..,'(X xx
Depreciation of sales office furniture
XXX .>uX
Depreciation of delivery vans
x.u .xx
(5) Cost of Sales
Net profit
:X..,'C.,'( xx
(6) Sa les
XX,'( xx
XXX :XX
The cost sheet not only shows the total cost but also the cost . - - - - - - - - - - - -!
management in cost comparison, analysis and control. The ac per ~nit for a particular period and it help nc_ :
cumulation O f
to prepare and simple to understand and it help in ascertainment · e-~ s,
f costs as shown in the cost sheet is c:i_ •
each element of cost in total cost and it is usetu1
0
in fixation of prices of the products.
 Chapte r 13 Out put Costi ng ;ind Cost Shet'!t Pr~p;ir-,11<>11 295 ·

Treatment of Stock
Stock may be stock of raw materials t k .
in cost sheet is explained below: 's oc of work-in-progress and stock of finished goods, the treatm ent of which

Stock of Raw Materials

- Opening stock of raw material .
. s is to be added to raw materials purchased.
- Closmg stock of raw materials is t 0 b d d
e e ucted from raw materials.
Stock of Work-in-Progress (WIP)
WIP is valued at either prime cost bas· .
is or works cost basis. But works cost basis is preferable. Then:
- WIP at the beginning of the peno . d. b
is to e added to prime cost to get works cost.
·
- WIP at the end of the peri 0 d is b d
to e educted from prime cost to get works cost.
Stock of Finished Goods
· to b e add ed to Cost of production to get Cost of goods sold.
- Opening stock of finished go 0 d s 1s
· to b e d ed ucte d from Cost of production to get Cost of goods sold.
- Closing stock of finished good s is

Treatment of Special Items of Cost and Non-cost Expenses

Treatment of Special Items of Cost
The treatment of the following special items in preparation of cost sheet is given below:
• Abnormal wastage of materials - Not to be shown in cost accounts but debited to profit and loss account.
■ Units produced found defective and sold as scrap or wastage - Amount to be deducted from factory expenses or
from works cost if it is normal. If it is abnormal, not to be shown in cost sheet but credited to profit and loss
account.
■ Value of By-products - The realisable value to be deducted from works cost.

■ Sale of defective material - To be deducted from cost of raw materials.

■ Rectification of defective output - The cost of rectification of normal defective output is to be added to factory
' 1 cost. If it is abnormal, it is not to be shown in cost sheet but debited to profit and loss account.
■ Cost of Idle Time - If it is normal, it to be shown in factory expenses. If it is abnormal, it is to be debited to profit
and loss account.
■ Royalty payments- If royalty is paid based on units produced it is treated direct expense. If royalty is paid based
units sold, then it is treated as part of selling and distribution expenses.
■ Carriage inwards - It is incurred on purchase of raw materials, therefo re, it is to be added to the cost of raw
materials.
■ Carriage outwards - It is incurred on delivering the sold goods to the customers, therefore, it is to be added to
the distribution expenses.
■ Insurance of raw material - It is to be added to the cost of raw materials purchased.
■ Hiring of special moulds or special tools - It is treated as direct expense.
■ Cash discount_ Both cash discount received and cash discount allowed are not to be shown in cost sheet but
directly taken to profit and loss account.
■ Cost of free samples - It is to be shown as part of selling expenses.
■ Packing expenses - The cost of primary packing is considered as direct expense, the cost of secondary packi ng
is treated as selling and distribution expenses.
 296 l 0\t .. ,,,d M:tnll( )N))t>f ll Ar1 n unflnq

, arH 1(1·15·t 11-·bution expe nses.

C . II ls trcn lcd ns sellin g
putc r is to be treat ed as admi ni stra1 1<mc:;; Vf;fi~-
• ou ntmg hous e sa laries
, ·
for offi ce - The dcpr ec1atlon on co m
• Cost of comp uter purch ased

Non -cost Expenses

of total coS t:
The following expenses arc excluded from comp utati on
· e tc ·
· ment , b UJ·1d mg
• Capi·tal expe nditu re such as purch ase of plant, equip
abno rmal losses, good will, preli mina ry expe nses
written off
• Capital losses such as loss on sale of fixed assets, '
due to strike and locko uts.
excessive depreciation , abno rmal id le time , losses
iss ue of share s and debe nture s, cost of issue of share
s and
• Expe nses of raising finance such as di sco unt on
ion.
debe nture s, brokerage and underwriting com mi ss
finan ce) such as disco unt, inter est on debe ntures
and bank
• Finan_c ial ex penses and .incomes (matters of pure
on sale of fr<ed asset s etc.
loan, mter cst on investments, rent rece ived, profit
divid ends , bonu s to share hold ers etc.
• Appr opria tion of profi ts like reserves, in come -tax,
ges paid unde r cour t decr ee etc.
• Unco mmo n items like dona tions , chari ty, dama

the books of Prag ati Fash ions Ltd. , for the year ended
~ll~st ration 13-1 The follo wing figur es are extracted from
unde r prim e cos t, facto ry cost and
1 2 show ing clearly th e total cost and the cos t per unit
_., :_.,· 0 l 6. Prep are a cost sheet (?J
office cost. Also calculate the profit or loss made . --
Dire ct mate rials 2~~
D irect labo ur 50,00 0
Depr eciat ion:
Facto ry build ing 1,500
Office build ing 800
Staff cars l,200
Bran ch office expe nses 4,000
Insu ranc e:
Staff cars 150
Office build ing 120
Facto ry build ing 15-0
Deliv ery van:
Runn ing and main tenan ce expenses 1,000
Salary:
Sales mana ger
2,500
Fact ory engin eer
2,500
Prod uctio n depa rtme nt
Finis hed good s - ware hous e expe nses
2,000
e)
Elect ricity (incl udin g t 400 for admi nistr ative offic -!,000
Adve rtise ment
) 00()
Sund ry facto ry expe nses
34,000
Sales prom otion
son
Office admi nistr ation
5,()()()
Expenses for parti cipat ing in an exh'b 't •
1 1 J,()(l!.1
10n
Sales
__±:4.~
__ _________________
~U~n~it;s;pr~o~d~u~ce~d~I;:,o~o~o~._ _ _ _ _ _ __ _
;.
 Output Costing ;ind Co~! Sfw ,:.r l'wpa r,n«,n ]._ f)7
Chapter 13

Cos t sheet for the year ended 31.3.2016 ( output I ,000 units) (~ J

Pa rtiwl ~rs Total Per unit

I)ircct m a te rial s 2,40,000 240.0()
Di rect labour 50,000 50 .00

Prime cost 2,90,000 290.00

Add: Works expenses
Depreciati on of factory building 1,500 1.50
In surance of factory building 150 0.15
Salary of factory e ngineer 2,500 2.50
Salary of productio n departme nt 25,000 25.00
Elec tri c ity 3,600 3.60
Sundry factory expenses 34,000 66,750 34.00

Works cost 3,56,750 356.75

Add: Office expenses
Dep rec iation of office building 800 0.80
Dep rec iation of staff cars 1,200 1.20
Branch office expenses 4,000 4.00
Ins urance of staff cars 150 0.15
Insurance of office building 120 0.12
Electricity 400 0.40
Office administr ation 5,000 11 ,670 5.00

Cost of productio n 3,68,420 368.42

Add: Selling and distributio n expenses

Running and maintenan ce of delivery van 1,000 1.00
Salary of sales manager 2,500 2.50
2,000 2.00
Warehous e expenses
Advertise ment 2,000 2.00
500 0.50
Sales promotio n
1,000 9.000 1.00
Exhibition expenses
3,77,420 377.42
Cost of sales
Profit
42580
-U0,000
Sales

Illustration 13-2 From the following informat ion prepare a cost sheet for the month of April , 2016
2,50,000
Stock (1.4.2016 ) Raw material
l.'." 3,000
Finished goods
Raw material .: .6~.000
Stock (30.4.201 6)
LS:',000
Finished goods
~. l 9,000
Purchase of raw material
ll,OOl)
Carriage on purchase s
~2 ,()0I.)
Work-in- progress On 1.4.2016
,} 1. ()(.'I{)
On 30.4.2016
'.". ~ -~ .()t)()
Sale of finished goods 1.-:,000
Direct wages
S,000
Non-prod uctive wages
 Direc t expe nses
12,(lf}(;
Fac tor y overheads
83,()()()
Admini stration overheads
32,()%
Sel lin g and distribution overh
ead s 42,(){){J
Cos t sheet of .... :. :.:._ fo! ~he_mo
nth of April, 2~0~1~6_ _ _ _
___________
_ _ _ _ _ __ (~ J
Raw ma terial co nsum ed
Op enin g sto ck of raw mater 2,50,000
ial
Add: Purchases of raw mater 2,19,000
ial
Ca rriage on pu rchases 11,000
4,80,000
Less: Closing sto ck of raw ma 2,62,000
ter ial 2,18,000
Direct wages
1,n ,000
Direct expen ses
Pr im e cost
Add: Facto ry overhead
-- 12,000
4,02,000

Facto ry overheads
83,000
No n -pr od uc tiv e wages (indir
ect wages) 8,000 91 ,000

Add: Op en ing wo rk- in- pro 4,93,000

gre ss
82,000

Les s: Closing wo rk- in- pro gre 5,75,000

ss
91 ,000
Fa ctory co st/ wo rks cost
Add: Ad mi nis tra tio n ov erh 4,84,000
ead
32,000
Co st of pro du cti on
Add: Op en ing finished good 5,16,000
s
1,73 ,000

Less: Closing finished good 6,89,000

s
Co st of goods sold
Add: Selling an d dis tri bu tio
n overhead
-
1,57,000
5,32,000

Co st of sales
Pro fit
- 42,000
5,74, 000
Sale of finished goods
----
1,49,000
7,2 3,00o

Esti ~ aated Cost Sheet

In course of business, the ma nu
fac tur er ma y be required to
r for execution of a J. ob. Te nd su bm it a ten de r or qu ota tio
O
ers or qu ota tio ns are to be pr, n for su pp ly of his prod~~:~
str uc tur e an d pro ba ble chan epa red car efu lly tak ing int o co ns ide rat ion of presen t"'
, ges expecte d m · h ·,
in prices of .raw materials, wa t 1e near futun.·. Th e ma nu fac
h d
ge rates, ov er ea co sts an d tur er ha s to fin d ou t the po 1
ssible c --1ani: e.
oth er expenses. Th e est im ati 11
q uotation is to be based on past ex
perience in (:o sts inc urr ed . Re on of co st for ten d·eis J1.. ~tl
taking into consideration the . ms. The preparationasonable profit mu st be ad de d to the estirnated~0~1
ma r ket co n eritlo
she et includes estimated mater of ten de rs takes the for m of
ial cost, waLges, overheads an a 'cost sheet·'The1~-t1eJ•
either as a percentage of cost d ex pe cte d profit. Ge ne ral ly ex
or sales. I n pre11)arat1. on of est pe cte d profit is e..xp_ress
imates or ten de rs, ov erh ead
1
s are generally not givefl•
 Pre pa rati o n 299
Chap ter 13 Out put Cos ting a nd Cost Sh•l e l

.
The y are esti ma ted as per cen t ages as given below·
·
(a) Per cen tag e of Fac tory O verh eads to Direct wages
Fac tory ove rheads
=
Direct wages x 100
d .
(b) Percen tage of Fac toiy ove l.11ea to Pru ne cos t
= Factory ove rh ead
Pri me cos t x 100

(c) Per cen tag e of Ad min istr ative ove nea

1 d to Fac tory cos t
= Adm inis trat ive overhead
Fac tory cost x 100

t ·'b . cost
(d) Per cen tage of Selling and D"is 11 utio n overhead to Factory
= Selling and dist ribu tion ove rhead
Factory cost x 100

· fit b c
I can e iou nd out by
using the follow ing formula s:
In som e cases the am oun t of pro
= Percentage of profit x Cost
Pro fit as a per cen tag e of cos t 100

= Percentage of profit x Cost

Pro fit as a per cen tag e of sales 100 - % of pro fit
t (?)
of a Co. for the year 201 5-l 6:
stration 13-3 Fol low ing figu res are ext rac ted from the records
Illu 60,000
Dir ect ma teri als 50,000
Dir ect wages 30,000
Wo rks ove rhe ad 33,600
Ad min istr ativ e ove rhe ad 22,4 00
14,000
Selling ove rhe ad
52,500
Dis trib utio n ove rhe ad -
Pro fit were inc urre d:
d and sup plie d to Mr. X, in 201 6- 17 fo r whi ch foll ow ing exp enses (<' )
On e ma teri al has bee n ma nuf act ure
-LOOO
2,000
Dir ect ma teri al
Dir ect wag es and sell ing and
s inc rea sed by 20% , dist ribu tion ove rhead had bee n dec reased by l 0%
In 201 6-1 7 Wo rks ove rhe ad wa
e inc rea sed by 12.5 %.
adm inis trat ive ove rhe ad eac h wer X so as to ear n the sa me rate of profit on
sell ing pric t' as c.u ned
ply is to be bill ed to Mr.
At wh at pric e the abo ve sup
in 2015 -16 .
•• e a_r_2_0_l_S_-_l6_ _ _ _ _ _ __
60,000
_ os_t_fi_o_r _th_ e~ y_
_St_a_te_m_ en_t_o_f_C 50,000
Dir ect Ma teri al 1, 10,0 00
Dir ect wages 30,0 00
Pri me Cos t l ,-!0,000
- -- - - - - -- -- - -
Add: Wo rks ove rhe ad
JU2 Co•a and M,, n,1qeme11t Ac counting

Production Account
d on double entry principle. Producti,
t ' It is prepare . . d .d d )n
Production acco un t is also ca ll ed 'manufacturing accoun · d. N figttres of previous perlO are provi e . Hence
accoun t is prepared as an account. Expenses are not c Iassi.
•fie o .
·d artment. ,
no co mpariso n is possible. It is prepared for each production ep

Specimen of Production Account

The spec im en of Production Account is given below:
c
Production Account ior the period •••···- - - -

Pa rti cu la rs ~ Particulars _

To Openi ng stock of raw material s xxx --;- Closing stock of raw materials XXX
y 1
By Net value of norma scrap
of
To Direct mate rials purch ases XXX
raw materials xxx
To Direct labour XXX
To Direc t ex pen ses XXX By Prime cost c/d XXX

XXX XXX

To Prime cos t b/d XXX By Closing stock of work-in-progress XXX

To Openin g stock of work -in -progress XXX By Factory cost c/d XXX

To Production overheads XXX

XXX XXX

To Fac tory cost b/d XXX By Cost of goods produced c/ d XXX

To Administrative overh eads JOG{

XXX XXX

To Opening stock of finished goods xxx By Closing stock of finished goods XXX

To Cost of goods produced xxx By Cost of goods sold c/ d XXX

XXX XXX

To Cost of goods sold b/d xxx By Sales xx.x

To Selling and distribution overheads XXX

To Profit XXX

XXX XXX

Distinction between Production Account and Cost Sheet

T he important distinguishing features of Production Account and Cost Sheet are given below:

Production Account
Cost Sheet
1. It is based on double entry system of book keeping 1. It is not based on double entry system but presente,
and prepared as an account. in a statement form.
2. It co nsists of two parts. The first part of the account
2. In this the elements of costs are classified an,
shows the total production cost. The second part
presented in a manner to give details of prime cos!
gives the details of cost of sales and profit for the
works cost, cost of production, cost of goods sok
period.
cost of sales, total cost and profit.
3. It shows the cost in aggregate and thus facilitates
3. It shows the cost in a detailed and analytical mannc
comparison with other financial accounts.
which facilitates comparison of cost for the purpo~
of control.
---------
------------------- -·-
 --1. I-tis not usefu l for preparing tende; s ai~d quotations: 4. The estimated cost sh eet ca n be prepared whkh <...an
be taken as basi s for pr e p a ring te nder -, and
quotations .
5. rt is based on actual figures. 5. It is based on actual and estimated figur es ofexpem<:'l .
6 _ It is prepared for each production department. 6. It is prepared for each job and som etimes for the
whole factory.

From the following particulars prepare a production account showing (a) Prime cost of goods
Illustratio n 13-S
produced, (b) Works cost of such goods, (c) Total cost of production, (d) Net profit for the months . _ _ _!__~

Raw materials purchased 66,000 Factory rent, rates and power 15,000
Direct wages 52,500 Depreciation on machinery 3,500
Stock of raw materials 1st March, 2016 75,000 Direct expenses 1,500
Stock of raw materials 31st March, 2016 91,500 Sundry factory expenses 10,000
Stock of finished goods 1st March, 2016 54,000 Salesman's salaries and commission 6,500
Stock offinished goods 31st March, 2016 31,000 Office rent, rates etc. 2,500
Work- in-progress 1st March, 2016 28,000 Sundry office expenses 6,500
Work- in-progress 31st March, 2016 35,000 Advertising expenses 3,500
Sales 2,11,000 Carriage outwards 2,500
Indirect wages 2,750
■■

Production Account for the month of March, 2016

Particulars Particulars

To Direct materials By Prime cost c/d 1,03,500

Opening stock 75,000
Add: Purchases 66,000
1,41,000
Less: Closing stock 91,500 49,500

To Direct wages 52,500

1,500
To Direct expenses
1,03,500 t,03.500

1,03,500 By Closing stock of WIP 35,000

To Prime cost b/ d
28,000 By Works cost c/d l..27 ,750
To Opening stock ofWIP
2,750
To Indirect wages
15,000
To Factory rent, rates etc.
3,500
To Depreciation on machinery
10,000
To Factory expenses
1,62,750
1,27,750 By Cost of production d d
To Works cost b/d
2,500
To Rent and rates .
6,500
To Office expenses
l .J,t1,- Sf1
1,36,750
By Closing stock of t1nish eJ go0J s 31,000
1,36,750
To Cost of production b/d J...:,~. -5-0
54,000 By Cos t of goods sold c/ d
To Opening stock of finished goods
1.90,':"50
1,90,750
 1,S9',?SO By Sales 2, I I ,Or}()
To Cost of goods sold b/d
To Salesm an salaries 6,500

To Ad vertising 3,500

To Carriage outwards 2,500

To Net profit 38,750

2,11 ,000

Multiple Costing . .
. 1. tion of more than one method of costmg m respect
Multiple Costing is not a separate method of co st mg but app ICba f nents or parts are assembled into a fin
• · d· · d · h re num er o com po a1
of same product. This method 1s use mm ust nes w_ e . b"l bicycles aeroplanes, electron ·
· I · · d · · dustnes like automo 1 es, , 1cs,
pro d uct . Mu Itip e Costmg 1s useh m m t
d d'f-c
rt processe 1 1eren Y w1
tl ·th different costs identified t ·t
o1 •
· · ·
typewnters etc. In such mdustnes eac componen or pa . ascertained through Batch Costing. For final
For example, in bicycles industry the cost of components will be . .
. . d b
products i.e., bicycles, cost of each bicycle 1s ascertame Y usm · g Output or Single Costing.

Theoretical Review Questions

1. Write short notes on 'Unit or Output Costing'.
2. Draw a proforma cost sheet.
3. Write short notes on 'Unit costing method for ascertaining product cost'.
4. Write short notes on 'Multiple costing'.
5. How does a 'Production account' differ from a 'Cost sheet'?
6. Why is Cost sheet necessary when Production account is prepared ?
7. Your friend, an NRI, has established a small industrial unit in your district to manufacture a consumer durable
which is in great demand. The product is manufactured in three standard sizes and marketed in a highly
competitive market. He wants to know the weekly cost of production with a view to exercise close control over
cost. As management accountant you have been requested to install a simple, cheap and effective costing
system for this purpose. Explain clearly the main points you will examine that you will suggest.