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Assignment no.12 EDP

A cost sheet is a statement detailing the total cost components of a product, aiding in determining the selling price and facilitating cost comparisons. It can be based on historical or estimated costs and is crucial for cost control and decision-making in manufacturing. Key components include prime cost, factory cost, and total cost, with an example illustrating the calculation of costs and profit.

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Harsh Jadhav
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10 views6 pages

Assignment no.12 EDP

A cost sheet is a statement detailing the total cost components of a product, aiding in determining the selling price and facilitating cost comparisons. It can be based on historical or estimated costs and is crucial for cost control and decision-making in manufacturing. Key components include prime cost, factory cost, and total cost, with an example illustrating the calculation of costs and profit.

Uploaded by

Harsh Jadhav
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Assignment no.

12
• Prepare a cost sheet of any product

What is a cost sheet?

A cost sheet is a statement that shows the various components of total


cost for a product and shows previous data for comparison. You can deduce
the ideal selling price of a product based on the cost sheet.

A cost sheet document can be prepared either by using historical


cost or by referring to estimated costs. A historical cost sheet is prepared
based on the actual cost incurred for a product. An estimated cost sheet, on
the other hand, is prepared based on estimated cost just before the
production begins.

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• Importance and objectives of cost sheet

Cost sheets help with a number of essential business processes:

1. Determining cost: 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.

2. Fixing 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.

3. Cost comparison: It helps the management compare the current cost of


a product with a previous per unit cost for the same product. Comparing
the costs helps management take corrective measures if costs have
increased.

4. Cost control: The cost sheet is an important document for a


manufacturing unit, as it helps in controlling production costs. Using an
estimated cost sheet aids in monitoring labour, material and overhead costs
at each step of production.

5. Decision-making: Some of the most important decisions management


makes are based on the cost sheet. Whenever a business needs to produce
or buy a component, or quote prices for its goods on a tender, managers
refer to the cost sheet.

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• Components & elements of total costs

Components of total cost are constituted mainly of prime cost, factory cost,
office cost and cost of sales. Let us take a detailed look at each of these
elements.

1.Prime cost:
Prime cost = Direct material + Direct wages + Direct expenses

2. Factory cost:
Factory cost = Prime cost + Factory overhead

3. Total cost or cost of sales:


Total cost = Cost of goods sold + Selling and distribution overhead

4. Direct material consumed:


Opening stock of direct material + Purchases of direct material –
Closing stock of direct

5. Works cost:
Gross works cost + Opening work in progress – Closing work in
progress

6. Cost of production of goods sold:


Cost of production + Opening stock of finished goods – closing stock
of finished goods

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• Cost sheet example:

1.Direct material consumed – $12,000

2.Opening stock of raw materials – $130,000

3.Closing stock of raw materials – $8,000

4.Direct wages – $50,000

5.Direct expenses – $10,000

6.Factory overhead is 100% of direct wages

7.Office and administration overhead is 20% of works

8.Selling and distribution overhead – $25,000

9.Cost of opening stock for finished goods – $10,000

10.Cost of closing stock for finished goods – $15,000

Profit on cost is 20%

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