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
The books and records of Good Luck Manufacturing Co. present the following data for the month of January 2010:
Direct labour cost: Rs. 32,000 (160% of factory overhead)
Cost of goods sold: Rs. 1,12,000
Inventory accounts showed these opening and closing balances:
|
January 1 |
January 31 |
|
|
Raw material |
16,000 |
17,200 |
|
Work-in-progress |
16,000 |
24,000 |
|
Finished goods |
28,000 |
36,000 |
Other data:
|
Selling expenses |
6,800 |
|
General and administration expenses |
5,200 |
|
Sales for the month |
1,50,000 |
You are required to prepare a statement showing cost of goods manufactured and sold and profit earned.