Analysis of the Components of Total Cost
An analysis of the total cost of production and cost of sales is carried out by preparing “Cost sheet”. A Cost sheet is an important document prepared by the costing department. Cost sheet is prepared to analyse the components of total cost, thereby determining (i) prime cost, (ii) works cost, (iii) cost of production, (iv) cost of sales and (v) profit. All aspects discussed are presented in the format or specimen of a cost sheet which is shown inTable 1.6:
Specimen of Cost Sheet
COST SHEET
For the period ended….
|
Particulars |
Amount (Rs.) |
|
1. Direct Material |
– |
|
2. Direct Labour |
– |
|
*13. Direct Expenses |
– |
|
4. PRIME COST (Add 1 + 2 + 3) |
×× |
|
5. Add: Factory overhead |
– |
|
6. WORKS COST (or) FACTORY COST {Add 4 + 5} |
×× |
|
*27. Add: Administration overhead |
– |
|
8. COST OF PRODUCTION (6 + 7) |
×× |
|
9. Add: Selling and distribution overhead |
– |
|
10. TOTAL COST (or) COST OF SALES |
×× |
|
11. PROFIT |
– |
|
12. SALES |
×× |
Cost Sheet Depicting Components of Total Cost
You are required to calculate (i) prime cost, (ii) works cost, (iii) total cost of production and (iv) cost of sales, from the following particulars:
|
Raw materials consumed |
30,000 |
|
Wages paid to labourers |
12,000 |
|
Chargeable expenses—Direct |
1,000 |
|
Wages of foreman |
2.000 |
|
Wages of store keeper |
1,000 |
|
Electricity : Factory |
2,500 |
|
Office |
500 |
|
Rent : Factory |
1,500 |
|
Office |
500 |
|
Depreciation: Plant and machinery |
600 |
|
Office furniture |
200 |
|
Consumable stores |
1,000 |
|
Manager’s salary |
3,000 |
|
Office printing and stationery |
500 |
|
Telephone expenses |
500 |
|
Salesmen’s salary and commission |
1,500 |
|
Travelling expenses |
300 |
|
Carriage outward |
100 |
|
Advertising |
300 |
|
Warehouse charges |