Cost Ascertainment

Cost

Amount of Expenditure (actual or notional) incurred or attributable

to a given thing- material purchased
Cost Object

Anything for which a measurement of cost

is desired

It could be a product, Service, Customer,

Brand, Activity, Department
Cost Assignment

Tracing Accumulated Costs that have direct

relationship to a cost object & allocating
accumulated costs that have an indirect
relationship to a cost object

Allocation & Apportionment

Cost Accumulation

Collection of Cost Data in some organized

way by means of an accounting system

 Keeping Cost Accounts

Cost Unit

 A unit of Quantity of product, service or time

in relation to which costs may be expressed

 It is unit of Measurement of Cost

Automobile -number
Cloth -metre
Sugar -Quintal
Tele-call -minute/seconds
Power -KW/H
Transport T/KM
Cost Centre

•A Location, person ,or item of equipment or

group of these for which costs may be ascertained
and used the purpose of Cost Control

Personal or Impersonal Cost Centre

Production And Service Cost Centre
Operation and Process Cost Centre
 Components Of Total Cost

Prime Cost –Total Of DMC,DLC & DE

Factory Cost or
Works Cost - Prime Cost +Factory Overheads

Office Or COP- Factory Cost +AOH

Total Cost - COP+ Selling & Distribution OH

Cost Accumulation sales
PROFIT

cos
SD overhead

COP
A.Overhead

F Cost
Prime
F. Overhead COP
cos
Prime Cost
Cost
D. Expenses
F Cost

Prime Cost
D .Labour

D Materials
 Components Of Total Cost

Direct Materials+ Direct Labor+ Prime Cost Or

Direct Expenses Direct Cost

Prime Cost+ Factory Or Works Or

Factory Over Heads Manufacturing Cost
Factory Cost
Office Cost Or
+Administration
Cost Of Production
Overheads

COP Total Cost Or

+SD Overheads Cost Of Sales

Cost Of Sales Selling Price

+Profit Or Sales
 Cost Sheet

Reveals Total Cost Of Production Per Unit

Discloses Break Up Of Total Cost

Helps in Preparation Of Estimate

Helps in Fixing Sales Price

Comparison Of Costs
Few Instructions for Preparation
Of Cost Sheet
 COST SHEET
Name of the Company ----------------------------
Cost Sheet of (Name of the Product) -----------------
For the period ending ------------------------------ Units--
Particulars Total Per Unit
(Rs.) (Rs.)
Opening Stock of Raw Materials
Add : Purchases
Expenses on Purchases
Less: Closing Stock of Raw Materials
Value of raw materials consumed
Director Labour
Direct Expenses
Prime Cost
Factory Overheads :
Add OP stock OF WIP
Less Cl. Stock of WIP
Factory Cost
Office & Administration Overheads
+ Opening Stock Of FG
-Cl Stock Of FG
Cost of Production
Selling and distribution Overheads
Cost of Sales
Profit
Sales
 Production Account/Statement

Amount Amount
Particulars Rs Particulars Rs

To Direct Materials Cons. By Cost Of Production C/d ------------

To Direct Lab our
To Direct Expenses
Prime Cost ------------

To Factory Overheads
Factory Cost ----------
To O A Overheads

To Cost Of Prod b/d ----------- By CL Stock Of FG

To Opening Stock Of FG By Cost Of Goods Sold C/d

To Cost Of Goods Sold b/d ---------

By Cost Of Sales Sales c/d
To SD Overheads
To Cost Of Sales b/d By Sales
To Profit ---------
 Preparation Of Cost Sheet

1 Computation Raw Materials Consumed

2 Computation Of Value of Work In Progress
3 Computation Of Value Of Finished Materials
4 Computation Of Profit
5 Estimation Of Overheads
6 Treatment Of Scrap/By Product
7 Treatment Of Shortage of FG
8 Treatment Of Subsidy
 Preparation Of Cost Sheet

1 Computation Of Raw Materials Consumed

Opening Stock Of Raw Materials ---------

Add Purchases Of Raw Materials ---------
Expenses On Purchase --------

------------
Less Closing Stock Of Raw Materials-----
Defective Materials Returned -----
Abnormal Wastage Of RM ------ ----------

Cost Of Raw Materials Consumed ------------

 Preparation Of Cost Sheet

2 Computation Of Value Work In Progress

Consists of

• Cost Of Materials To date

• Cost Of Labor to date
• Factory Overheads to date
Value At Prime Cost
Valued At Factory Cost
Direct Materials
Prime Cost Direct Labour
Add Opening Stock Of WIP Direct Expenses
+OP Stock Of WIP
Less Closing Stock Of WIP -CL Stock Of WIP
Factory Cost Prime Cost
 Preparation Of Cost Sheet

3 Computation Of Value Of Finished Materials

Cost Of Production ---

Add Opening Stock Of FG---
Less Closing Stock Of FG----
Cost Of Goods Sold
 Preparation Of Cost Sheet

4 Computation Of Profit

1 Profit As % of Cost( Total Cost Given)

Profit=Cost x Profit%
100
2 Profit as a percentage of Selling Price (Total Cost is given)

Profit=Cost X Profit%
100-profit%
3 Profit as percentage Of Cost ( Selling Price is given)

Profit =Selling Price x Profit %

100+profit%
 Preparation Of Cost Sheet

5 Estimation Of Overheads

1 As % Of Prime Cost
2 As % Of Direct Wages
3 As % of Labor Cost
4 As % of Administration Cost
5 As Cost Of Direct Materials
 Preparation Of Cost Sheet

6 Treatment Of Scrap/By Product-

Reliable Value deducted from FOH

7 Treatment Of Shortage of FG
Normal Shortage added to Cost Of Production

8 Treatment Of Subsidy
To be deducted from profit
 Items Excluded From Cost

1 Purely Financial Incomes

2 Purely Financial Charges
3 Appropriation Of Profit
4 Abnormal Expenses
 Items Excluded From Cost

Purely Financial Incomes

 Interest On Investments
 Interest on Bank Deposits
 Share Transfer fee
 Rent Receivable
 Capital Profit
 Dividend Received
 Cash Commission or Discount
 Items Excluded From Cost

2 Purely Financial Charges

Capital Losses
Damages Payable
Penalties and Fines
Expenses On Transfer Of Company Office
Interest On Bank Loan, Debentures
Discount On Bonds etc
Losses on investment
Cash Discount
 Items Excluded From Cost

3 Appropriation Of Profit
Appropriation Of Sinking Fund
Dividend Paid
Taxes On Income & Profits
Charitable Donations
Transfer To Reserves
 Items Excluded From Cost

4 Abnormal Expenses & Losses

Cost Of Abnormal Wastage of Materials
Loss by theft
Loss by fire
Cost of Abnormal Idle Time
Exceptional Bad Debts
Factory Overhead

Operating Supplies- lubricating Oil, detergent, Welding Materials, paints,

nuts, bolts, dyes, nondurable tools
Repairs & Maintenance-gears, pulleys, belts, washers
Labour cost of Set up, Inspection, Rearranging of Machinery & Equipments
Unproductive Wages or Indirect Wages
Factory Rent
Internal Transport, Overhead Crane
Factory Rates & Insurance
Power & Fuel
Salaries of Foremen ,Supervisor ,technical Directors & Staff
Wages of –gateman, time keeper, factory Clerk, Tool Room Staff store keeper
Lighting & Heating Of Factory
Depreciation Of PM, Factory building, tools
Waste Disposal
Training Factory Staff
Canteen
Drawing Office Cost,
Dispensary
Administration Overheads

Rent, Rates & Insurance of Gen Office

Lighting Heating Of Office
Office Salaries
Depreciation of office building, furniture, equipments
Bank Charges,
Audit Fee,
Counting House,
Legal Expenses
Office Telephone & Postage,
Printing & Stationery
Superannuation
etc
Selling & Distribution Overheads

•Salaries, commission, traveling of sales Staff

•Advertising,
•Catalogues, price lists
•Rent & Rates,
•Maintenance & Insurance of Sales Office, Show
Rooms
•Selling Department Salaries & Stationery
•Bad Debts, Collection Charges
•Telephones & Postage for Selling
•Trade Discount
•Market Research
•Carriage Out and transport
• Normal Wastage of finished Goods
•Samples
•Warehousing Expenses
•Packing,
•Rent, Rates & Insurance Of Warehouse
•Dep & Running Cost Of Delivery Vans
•Wages of Packers ,Van Drivers
 Cost Sheet Of Jay Engineering Ltd
For the period Ending 31st March,2004
Amount
Particulars in Rs
Direct Materials
80,000
Direct Labour 40,000
Direct Expenses 12,000
Prime Cost 1,32,000
Question No Factory Overheads:
1 Indirect Wages 10,000
Electric Power 1,000
Depreciation On P&M 2,000
Oil & Waste 200
Lubricants 300
Consumable Stores 1,000
Lighting –Factory 1,200
Store Keeper’ Wages 2,000
Rent-Factory 2,000
Gn. Factory Expenses 500
 Cost Sheet Of Jay Engineering Ltd
For the period Ending 31st March,2004
Amount
Particulars in Rs
Factory Cost C/F 1,51,000
Office & Administration OH:
Depreciation Of Office Building 1,000
Director’s Fee 2,000
Postage & Telegraph 500
Question No Lighting-Office
Printing & Stationery
400
500
1 Telephone Charges 800
Rent-Office 1,000
Manager’s Salary 3,000
Cost Of Production 1,60,400
Selling & Distribution OH
Bad Debts 2,000
Carriage Outwards 300
Gn. Selling Expenses 2,000
Traveling Expenses 1,000
Cost Of Sales 1,65,700
 COST SHEET
Particulars Amount Amount
in Rs in Rs
Raw Materials 2,00,000
Add Carriage Inwards 1,200
Value Of Materials Consumed 2,01,200
Manufacturing Wages 1,80,000
Chargeable Expenses 3,800
PRIME COST 3,85,000
Ques No Factory Overheads:
2 Depreciation-P &M 10,000
Oil & Waste 500
Motive Power 5,000
Lighting & Heating 800
Rent: Factory 2,000
Gas & Water-factory 1,500
Repairs-factory 7,200

Unproductive Wages 14,000

Stationery Works 1,200

Manager’s Salary 18,000

 COST SHEET
Particulars Amount Amount
in Rs in Rs
Factory Cost C/F 4,45,200
OA Overheads
Depreciation 800
Salaries 15,000
Rent 1,000
Gas & Water 600
Ques No
Director’s Fee 7,000
2 Gn. Administration Expenses 5,000
Stationery 800
Manager’s Salary (40%0 12,000 42,200
COST OF PRODUCTION 4,87,400
SD Overheads:
Traveler's Commission 4,000
Bad Debt 6,200
Rent-Warehouse 1,500
Carriage Outwards 3,200
Discount Allowed 2,100

Packing Expenses 2,100

Advertising 5,000
COST OF SALES 5,11,500
 Cost Sheet Of A Product OutPut 17,200units
Total Cost Per Qtl Cost
Particulars Rs Rs

Raw Materials 28,000 1.63

Process & General Wages 63,000 3.69
Prime Cost 91,500 5.32

Factory Overheads :
Fuel 6,900 0.40
Ques No Electric Power 1,340 0.08
3 Repairs
Haulage
2.400
1,060
0.14
0.06
Light & Water 400 0.02

Rent 2,000 0.11

Rates and Insurance 2,500 0.15
Depreciation On Machinery
Factory Cost 1,08,400 6.30

O &A Overheads
Office Salaries 7,000 0.41
Administration Exp 5,000 0.29

Cost Of Production 1,20,000 7.00

 Cost Sheet for the Half Year Ended
30th September,2004 Units-25,600
Amount
Particulars in Rs
Raw Materials Purchased 1,32,000
Add Opening Stock 22,000
Carriage Inward 1,584
1,55,584
Less Closing Stock 24,464

Question No a) Value Of Materials Consumed 1,31,120

Direct Wages 1,10,000
4 PRIME COST 2,41,120
Works Overheads
Rent, Taxes, Insurance & Others 44,000
Cost Of Supervision 8,800
Opening WIP 5,280
2,99,200
Less Closing Stock Of WIP 17,600
b) Cost Of Manufacturing 2,81,000

Add Opening Stock Of Finished Goods 17,600

2,99,000
Less Closing Stock Of Finished Stock 35,200
Cost Of Production 2,64,000
 Cost Sheet for the Half Year Ended
30th September,2004 Units-25,600
Amount
Particulars in Rs
Cost Of Production C/F
2,64,000
Add Selling & Distribution Expenses 18,000
24000 tons@ 75 paise per ton

Question No C) Cost of Sales 2,82,000

d) Net Profit 48,000
4
SALES 3,30,000

Workings

1 Profit Per Ton = 48,000/24000= Rs 2 Per ton

2 Qty Sold= Opening Stock Of finished Goods+ Produced-Cl. Stock Of Finished Goods
1600 tons+25,600-32000=24,000tons