3

Cost Sheet/Statement of Cost

CHAPTER OUTLINE
LEARNING OBJECTIVES

After reading this chapter, you will be able to understand:

  • The meaning of cost sheet
  • The features of cost sheet
  • Items that are not considered in the cost sheet
  • Format of a simple cost sheet
  • Format of an advanced cost sheet
3.1 INTRODUCTION

Cost sheet is a statement prepared to show the various elements of costs, like prime cost, factory cost of production and total cost. It is prepared at regular intervals, for example, weekly, monthly quarterly, yearly, etc. In some cases comparative figures of various periods are also shown in the cost sheet so that assessment can be made about the progress of a business.

Cost sheet is a statement of cost showing cost per unit of any product at every level of production. It is important to know at what stage of production we are and what price the particular production stage has.

Cost sheet is a statement of cost. In other words, when costing information is set out in the form of a statement it is called a cost sheet. It is usually adopted when only one product is produced and all costs are incurred for that product only. Cost sheet may be prepared for a week, for a month, quarterly or yearly indicating various components of cost such as prime cost, works cost, cost of production, cost of goods sold, total cost and also profitability of production.

 

Cost sheet is a statement containing the detailed costs of output during a period.

Cost sheet is a statement of total costs under different headings.

Cost sheet is a tabulated statement of total costs under various classifications.

3.2 FEATURES OF A COST SHEET

The major features of a cost sheet are as follows:

  1. Cost sheet reveals total costs and the cost per unit of units produced.
  2. Cost sheet reveals total costs under different classifications.
  3. Cost sheet helps in the preparation of tender and quotation.
  4. Cost sheet helps in fixing the selling price.

The advantages of cost sheet are as follows:

  1. It discloses the total cost and the cost per unit of the units produced during a given period.
  2. It enables a manufacturer to keep a close watch on and control over the cost of production.
  3. It helps in eliminating costs that go towards increasing the cost of a product.
  4. It acts as a guide to the manufacturer and helps him or her in formulating a definite, useful production policy.
  5. It helps in fixing the selling price more accurately.
  6. It helps businesses to minimize the cost of production when there is cut-throat competition.
3.3 ITEMS NOT INCLUDED IN TOTAL COSTS (NON-COST ITEMS)

Following are the expenses that should not be included in a cost sheet:

  • Income tax
  • Reserves
  • Dividends
  • Bonus
  • Cash discount
  • Rents received
  • Donations
  • Charity
  • Commission
  • Abnormal losses
  • Purchases of assets
  • Loss on account of sale of fixed assets
  • Preliminary expenses that are written off

The preparation of cost sheets depends on the cost data provided by cost accounting. Due to differences in the nature of cost data, different cost sheet formats may be used.

3.4 FORMAT OF A SIMPLE COST SHEET

The format of a simple cost sheet is as follows:

 

Table 3.1

Cost sheet Amount
Direct material —
Direct labour —
Direct expenses —
Prime cost —
(+) Factory overheads —
* Factory cost —
(+) Administration overheads —
* Cost of production —
(+) Selling and distribution overheads —
Cost of sales —
(+) Profit —
Sales —

* Factory overheads are otherwise known as works overheads.

* Factory cost is otherwise known as works cost.

* Cost of production is known as the stage of finished goods.

 

Table 3.2

 

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Format of a cost sheet with stocks of raw material WIP and finished goods:

 

Table 3.3

Opening stock of raw material —
(+) Purchases of raw material —
—
(−) Closing stock of raw material —
Direct material consumed —
Direct labour —
Direct expenses —
Prime cost —
(+) Factory overheads —
(+) Opening WIP —
—
(−) Closing WIP — —
Factory cost —
(+) Administration overheads —
Cost of production/finished goods —
Finished goods —
(+) Opening stock of finished goods —
(−) Closing stock of finished goods — —
Cost of goods sold —
(+) Selling and distribution overheads —
Cost of sales —
Profit —
Sales —

 

Illustration 1

Calculate prime cost from the following information:

 

Particulars Rs Rs
Direct material 20,000
Direct labour 12,000
Direct expenses 6,000
Indirect materials 10,000
Indirect expenses 3,000
Indirect labour 6,000
Carriage inwards 1,000
Carriage outwards 500

 

Solution: Calculation of prime cost

Particulars Rs
Direct material 20,000
Direct labour 12,000
Direct expenses   6,000
Carriage inwards   1,000
Prime cost 39,000

 

Problem 1. Calculate prime cost from the following information

Particulars Rs Rs
Direct material 40,000
Direct labour 24,000
Direct expenses 12,000
Indirect materials 15,000
Indirect expenses 4,500
Indirect labour 9,000
Carriage inwards 1,500
Carriage outwards 750

 

Illustration 2

Prepare a cost sheet from the following information:

Rs Rs
Direct materials 80,000
Direct expenses 20,000
Direct labour 30,000
Factory overheads 10,000
Office overheads 5,000
Selling overheads 3,000
Sales 1,60,000

 

Solution: Statement of cost and profit

Particulars Rs
Direct materials    80,000
Direct labour    30,000
Direct expenses    20,000
Prime cost 1,30,000
Add: Factory overheads:    10,000
Factory cost 1,40,000
Add: Office overheads:      5,000
Cost of production 1,45,000
Add: Selling overheads:      3,000
Cost of sales 1,48,000
Profit (b/f)    12,000
Sales 1,60,000

 

Problem 2. Prepare a cost sheet from the following information

Rs Rs
Direct materials 80,000
Direct expenses 40,000
Direct labour 60,000
Factory overheads 15,000
Office overheads 7,500
Selling overheads 4,500
Sales 3,20,000

 

Illustration 3

Prepare a cost sheet from the following information:

Rs
Prime cost 40,000
Factory cost 60,000
Cost of production 80,000
Cost of sales 1,00,000
Sales 2,00,000

 

Solution: Statement of cost and profit

Particulars Rs
Prime cost   40,000
Add: Factory overheads (b/f)   20,000
Factory cost   60,000
Add: Administration overheads (b/f)   20,000
Cost of production   80,000
Add: Selling and distribution overheads (b/f)   20,000
Cost of sales 1,00,000
Profit (b/f) 1,00,000
Sales 2,00,000

 

Problem 3. Prepare a cost sheet from the following information

Rs
Prime cost 80,000
Factory cost 1,20,000
Cost of production 1,60,000
Cost of sales 1,50,000
Sales 4,00,000

 

Illustration 4

A factory produces 100 units of a commodity. The cost of production is as follows:

Rs Rs
Direct material 80,000
Direct wages 30,000
Direct expenses 15,000
Factory overheads 120% on wages
Office overheads 40% on works cost
Expected profit: 20% on sales

Prepare a cost sheet and the price to be fixed per unit.

Note: Profit is 1/3 on cost.

 

Solution: Statement of cost and profit

Particulars Rs
Direct material    80,000
Direct wages    30,000
Direct expenses    15,000
Prime cost 1,25,000
Add: Factory overheads (120% on wages)    36,000
Works cost 1,61,000
Add: Office overheads (40% on works cost)    64,400
Cost of sales 2,25,400
Profit (1/4 on cost or 1/5 on sales)    56,350
Sales (b/f) 2,81,750

Price to be fixed per unit= Rs 2,817.50

 

Problem 4. A factory produces 100 units of a commodity. The cost of production is as follows

Rs Rs
Direct material 1,60,000
Direct wages 60,000
Direct expenses 15,000
Factory overheads 120% on wages
Office overheads 40% on works cost
Expected profit: 20% on sales

Prepare a cost sheet and the price to be fixed per unit.

Note: Profit is 1/3 on cost.

 

Illustration 5

A factory produces 100 units of a commodity. The cost of production is as follows:

Rs Rs
Direct material 60,000
Direct labour 40,000
Direct expenses 20,000
Factory overheads 7,500
Administrative overheads 2,500

Profit margin is 20% on sales.

Prepare a cost sheet and the price per unit.

 

Solution: Statement of cost and profit

Particulars Rs
Direct material    60,000
Direct labour    40,000
Direct expenses    20,000
Prime cost 1,20,000
Add: Factory overheads     7,500
Works cost 1,27,500
Add: Administration overheads     2,500
Cost of sales 1,30,000
Profit (25% on cost (or) 20% on sales)    32,500
Sales 1,62,500

Price per unit = 90,000/100 = Rs 900

 

Problem 5.

Rs Rs
Direct material 1,20,000
Direct labour 49,000
Direct expenses 25,000
Factory overheads 9,500
Administrative overheads 4,500

Profit margin is 25% on sales.

Prepare a cost sheet and the price per unit.

 

Illustration 6

Calculate the raw material consumed for the period ending on 31 March 2005:

Rs Rs
Materials purchased 2,45,000
Opening stock of material 80,000
Carriage inwards 8,000
Closing stock of material 2,600
Realization from sale of scrap 11,000
Excise duty on material purchased 7,500

Note: Realization from scrap is deducted.

 

Solution: Calculation of raw materials consumed:

 

image

 

Problem 6. Calculate the raw material consumed for the period ending on 31 March 2005

Rs Rs
Materials purchased 4,50,000
Opening stock of material 1,00,000
Carriage inwards 16,000
Closing stock of material 4,600
Realization from sale of scrap 15,000
Excise duty on material purchased 10,000

Note: Realization from scrap is deducted.

 

Illustration 7

The following details have been obtained from the cost records of Comet Paints Limited:

Rs Rs
Material purchased 40,000
Opening stock of material 10,000
Closing stock of material 8,000
Customs duty on purchase 2,000
Excise duty on purchase 1,500
Import duty on purchase 1,200
Sale of scrap 800
Carriage inwards 600
Carriage outwards 400

Note: Scrap and carriage outwards deducted.

 

Solution: Calculation of raw materials consumed:

 

image

 

Problem 7. The following details have been obtained from the cost records of Comet Paints Limited

Rs Rs
Material purchased 80,000
Opening stock of material 20,000
Closing stock of material 16,000
Customs duty on purchase 4,000
Excise duty on purchase 3,000
Import duty on purchase 2,000
Sale of scrap 1,000
Carriage inwards 800
Carriage outwards 600

Note: Scrap and carriage outwards deducted.

 

Illustration 8

Prepare a cost sheet.

Rs Rs
Opening stock of material 42,000
Purchase 96,000
Closing stock of material 18,200
Direct labour 26,000
Direct expenses 18,000
Unproductive wages 14,600
Factory overheads 12,900
Office overheads 8,700
Selling overheads 6,750
Sales 3,46,000

Note: Unproductive wages is put under factory overheads.

 

Solution: Statement of cost and profit

 

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Problem 8. Prepare a cost sheet

Rs Rs
Opening stock of material 84,000
Closing stock of material 36,200
Direct labour 46,000
Direct expenses 28,000
Unproductive wages 28,600
Factory overheads 24,900
Office overheads 16,700
Selling overheads 16,750
Sales 6,92,000

Note: Unproductive wages is put under factory overheads.

 

Illustration 9

Prepare a cost sheet.

Rs Rs
Opening stock of material 62,000
Closing stock of material 14,600
Opening stock of WIP 8,000
Closing stock of WIP 2,900
Opening stock of finished goods 4,800
Closing stock of finished goods 3,900
Direct material purchases 46,000
Direct labour 12,000
Works overheads 8,600
Office overheads 4,700
Selling overheads 3,900
Sales 2,10,000

 

Solution: Statement of cost and profit

 

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Problem 9. Prepare a cost sheet

Rs Rs
Opening stock of material 92,000
Closing stock of material 28,600
Opening stock of WIP 16,000
Closing stock of WIP 4,900
Opening stock of finished goods 8,800
Closing stock of finished goods 5,900
Direct material purchased 50,000
Direct labour 24,000
Works overheads 9,800
Office overheads 7,700
Selling overheads 5,900
Sales 4,20,000

 

Illustration 10

Prepare a cost sheet from the following information:

Rs Rs
Raw material consumed 20,000
Direct wages 20,000
Machine hours worked 1,800 hours
Machine hour rate Rs 2
Selling overheads 6,000
Office overheads 9,500
Units produced 26,550
Units sold 21,225
Selling price per unit Rs 3

Note: Closing stock is missing. We have to calculate it.

 

Solution: Statement of cost and profit:

Particulars Rs
Raw materials consumed 20,000
Direct wages 20,000
Prime cost 40,000
Add: Factory overheads (machine hours × rate per unit)   3,600
Factory cost 43,600
Add: Office overheads   9,500
Cost of production at Rs 2 53,100
Less: Closing stock of finished goods 10,650
Cost of goods sold 42,450
Add: Selling overheads   6,000
Cost of sales 48,450
Profit (b/f) 15,225
Sales 63,675

Hint: Closing stock = units produced – units sold = 26,550 – 21,225 = 5,325

 

Problem 10. Prepare a cost sheet from the following information

Rs Rs
Raw material consumed 40,000
Direct wages 50,000
Machine hours worked 1,800 hours
Machine hour rate Rs 4
Selling overheads 9,000
Office overheads 38,500
Units produced 46,550
Units sold 41,225
Selling price per unit Rs 6

Note: Closing stock is missing. We have to calculate it.

 

Illustration 11

A manufacturer presents the following details about the various expenses incurred in manufacturing:

Rs
Raw materials consumed 70,000
Carriage inwards 2,000
Factory rent 2,400
Bad debts 440
Printing and stationery 620
Legal expenses 350
Carriage outwards 1,540
Indirect material 560
Power 4,600
Depreciation on furniture 160
Postage expenses 465
Repairs to plant and machinery 1,200
Salesmen's expense 3,400
Advertising 500
Direct wages 85,000
General manager's salary 36,000
Factory manager's salary 18,000
Depreciation on plant and machinery 1,240
Audit fees 350

Classify the aforementioned expenses under the various elements of cost showing separately the total expenditure under each element.

 

Solution: Statement of cost sheet:

 

image

 

Problem 11. A manufacturer presents the following details about the various expenses incurred

Rs
Raw materials consumed 1,40,000
Carriage inwards 4,000
Factory rent 4,400
Bad debts 840
Printing and stationery 820
Legal expenses 550
Carriage outwards 2,540
Indirect material 960
Power 5,600
Depreciation on furniture 560
Postage expenses 865
Repairs to plant and machinery 2,200
Salespeople's expenses 5,400
Advertising 900
Direct wages 95,000
General manager's salary 56,000
Factory manager's salary 38,000
Depreciation on plant and machinery 2,240
Audit fees 650

Classify the aforementioned expenses under the various elements of cost showing separately the total expenditure under each element.

 

Illustration 12

From the following information, prepare a cost sheet for the month of January:

Rs Rs
Stock of raw materials on 1 January 25,000
Stock of raw materials on 31 January 26,200
Purchase of raw materials 21,900
Carriage on purchases 1,100
Sale of finished goods 72,300
Direct wages 17,200
Non-productive wages 800
Direct expenses 1,200
Factory overheads 8,300
Administrative overheads 3,200
Selling overheads 4,200

 

Solution: Statement of cost and profit:

 

image

 

Problem 12. From the following information, prepare a cost sheet for the month of January

Rs Rs
Stock of raw materials on 1 January 45,000
Stock of raw materials on 31 January 46,200
Purchase of raw materials 41,900
Carriage on purchases 3,100
Sale of finished goods 1,44,600
Direct wages 27,200
Non-productive wages 900
Direct expenses 3,200
Factory overheads 9,300
Administrative overheads 5,200
Selling overheads 4,900

 

Illustration 13

The following information has been obtained from the records of a factory for the period from 1 June to 30 June:

Rs
Opening balance of raw materials on 1 June 15,000
Purchases of raw materials during the month of June 2,25,000
Wages paid 1,15,000
Factory overheads 46,000
Opening balance of WIP on 1 June 6,000
Closing balance of WIP on 30 June 7,500
Closing balance of raw materials on 30 June 12,500
Opening balance of finished goods manufactured on 1 June 30,000
Closing balance of finished goods manufactured on 30 June 27,500
Selling and distribution overheads 10,000
Administration overheads 15,000
Sales 4,50,000

Prepare

  1. Statement of cost of production of goods manufactured
  2. Statement of cost of production of goods sold and
  3. Statement of profit on sales.

 

Solution: Statement of cost and profit:

 

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Problem 13. The following information has been obtained from the records of a factory for the period from 1 June to 30 June

Rs
Opening balance of raw materials on 1 June 25,000
Purchase of raw materials during the month of June 2,45,000
Wages paid 1,35,000
Factory overheads 86,000
Opening balance of WIP on 1 June 9,000
Closing balance of WIP on 30 June 9,500
Closing balance of raw materials on 30 June 15,500
Opening balance of finished goods manufactured on 1 June 50,000
Closing balance of finished goods manufactured on 30 June 47,500
Selling and distribution overheads 20,000
Administration overheads 35,000
Sales 9,00,000

Prepare

  1. Statement of cost of production of goods manufactured
  2. Statement of cost of production of goods sold
  3. Statement of profit on sales

 

Illustration 14

A modern manufacturing company submits the following information on 31 March 1993

Rs
Sales for the year 2,75,000
Inventories at the beginning of the year:
Finished goods 7,000
WIP 4,000
Purchase of materials 1,10,000
Materials inventory:
At the beginning of the year 3,000
At the end of the year 4,000
Direct labour 65,000
Factory overheads were 60% of direct labour cost
Inventories at the end of the year:
WIP 6,000
Finished goods 8,000
Other expenses for the year:
Selling expenses
Administration expenses 10% of sales
Prepare a statement of cost 5% of sales

 

Solution: Statement of cost and profit:

 

image

 

Problem 14. A modern manufacturing company submits the following information on 31 March 1993

Rs
Sales for the year 5,50,000
Inventories at the beginning of the year:
   Finished goods 9,000
   WIP 8,000
Purchase of materials 2,10,000
Materials inventory: At the beginning of the year 6,000
At the end of the year 6,000
Direct labour 85,000
Factory overheads were 60% of direct labour cost
Inventories at the end of the year:
   WIP 8,000
   Finished goods 9,000
Other expenses for the year:
Selling expenses
Administration expenses 10% of sales
Prepare a statement of cost 5% of sales

 

Illustration 15

The following extracts of costing information related to commodity A for the half-year ending on 31 December 1993:

Rs
Purchase of raw materials 1,20,000
Works overheads 48,000
Direct wages 1,00,000
Carriage on purchases Stock (1 July 1993): 1,440
Raw materials 20,000
Finished products (1,000 tons) 16,000
Stock (31 December 1993)
Raw materials 22,240
Finished products (2,000 tons) 32,000
WIP (1 July 1993) 4,800
WIP (31 December 1993) 16,000
Sales—finished products 3,00,000

Selling and distribution overheads are Re 1 per ton sold. During the period, 16,000 tons of commodities were produced.

You are to ascertain (a) cost of raw materials used, (b) cost of output for the period, (c) cost of sales, (d) net profit for the period and (e) net profit per ton of the commodity.

 

Solution: Statement of cost and profit:

 

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Problem 15. The following extracts of costing information related to commodity A for the half-year ending on 31 December 1993:

Rs
Purchase of raw materials 2,20,000
Works overheads 88,000
Direct wages 2,00,000
Carriage on purchases 2,440
Stock (1 July 1993)
Raw materials 40,000
Finished products (1,000 tons) 26,000
Stock (31 December 1993):
Raw materials 32,240
Finished products (2,000 tons) 42,000
WIP (1 July 1993) 6,800
WIP (31 December 1993) 26,000
Sales—finished products 6,00,000

 

Illustration 16

The following data were collected related to the manufacture of a standard product during the month of April 1984:

Raw material Rs 80,000
Direct wages Rs 48,000
Machine hours worked 8,000 hours
Machine hour rate Rs 4
Administration overheads 10% of works cost
Selling overheads Rs 1.50 per unit
Units produced 4,000
Units sold 3,000
Selling price Rs 50 per unit

You are required to prepare a cost sheet in respect of the aforementioned data showing (a) cost per unit and (b) profit for the month of April 1984.

 

Solution: Statement of cost and profit:

 

image

 

Hint: Closing stock = produced – sold = 4,000 – 3,000 = 1,000

 

Problem 16. The following data were collected related to the manufacture of a standard product during the month of April 1984

Raw material Rs 90,000
Direct wages Rs 68,000
Machine hours worked 8,000 hours
Machine hour rate Rs 8
Administration overheads 10% of works cost
Selling overheads Rs 3.50 per unit
Units produced 5,000
Units sold 7,000
Selling price Rs 100 per unit

 

Illustration 17

The directors of a manufacturing business require a statement showing the production results of a business for the month of March 1994. The cost accounts reveal the following information:

Rs
Stock on hand, 1 March 1994:
   Raw materials 25,000
   Finished goods 17,360
Stock on hand, 31 March 1994:
   Raw materials 26,250
   Finished goods 15,750
Purchase of raw materials 21,900
WIP, 1March 1994 8,220
WIP, 31 March 1994 9,100
Sale of finished goods 72,310
Direct wages 17,150
Non-productive wages 830
Works expenses 8,340
Office and administrative expenses 3,160
Selling and distributive expenses 4,210

You are required to construct the statement so as to show (a) the value of material consumed, (b) total cost of production, (c) cost of goods sold, (d) profit on goods sold and (e) net profit for the month of March 1994.

 

Solution: Statement of cost and profit:

 

image

 

Problem 17. The directors of a manufacturing business require a statement showing the production results of the business for the month of March 1994. The cost accounts reveal the following information

Rs
Stock on hand, 1 March 1994:
   Raw materials 45,000
   Finished goods 27,360
Stock on hand, 31 March 1994
   Raw materials 46,250
   Finished goods 25,750
Purchase of raw materials 31,900
WIP, 1 March 1994 9,320
WIP, 31 March 1994 9,900
Sale of finished goods 92,310
Direct wages 37,150
Non-productive wages 950
Works expenses 9,640
Office and administrative expenses 5,160
Selling and distributive expenses 7,210

You are required to construct the statement so as to show (a) the value of material consumed, (b) total cost of production, (c) cost of goods sold, (d) profit on the goods sold and (e) net profit for the month.

 

Illustration 18

From the following particulars for product X, compile the cost sheet for the month of March 1991

Rs
Raw material:
   Opening stock 20,000
   Purchases 1,50,000
   Closing stock 10,000
Direct labour 60,000
Factory overheads 22,500
Office and administrative overheads 27,500
Finished stock:
Opening stock: 500 units at Rs 11.20 per unit
Closing stock: 1,500 units at the current cost price
Profit on sales: 20%
Selling and distribution overheads: 20,000
Units produced: 25,000 units

 

Solution: Statement of cost and profit:

 

image

 

Problem 18. From the following particulars of product X, compile cost sheet for the month of March 1991

Rs
Raw material:
   Opening stock 40,000
   Purchases 2,50,000
   Closing stock 30,000
Direct labour 90,000
Factory overheads 42,500
Office and administrative overheads 47,500
Finished stock:
Opening stock: 500 units at Rs 21.20 per unit
Closing stock: 1,500 units at the current cost price
Profit on sales: 20%
Selling and distribution overheads: 40,000
Units produced: 45,000 units

 

Illustration 19

From the following data relating to the manufacture of a standard product during the month of September 1983, prepare a statement showing the cost and profit per unit:

Raw material used Rs 40,000
Direct wages Rs 24,000
Manhours worked 9,500 (hours)
Manhour rate Rs 4 per hour
Office overheads 20% on works cost
Selling overheads Re 1 per unit
Units produced 20,000 units
Units sold 18,000 at Rs 10 per unit

 

Solution: Statement of cost and profit

Particulars Rs
Raw materials consumed:    40,000
Direct wages    24,000
Prime cost    64,000
Add: Factory overheads (Machine hours worked × rate)    38,000
Works cost 1,02,000
Add: Office overheads    20,400
Cost of production at Rs 6.12 1,22,400
Less: Closing stock of finished goods (20,000 − 18,000) × Rs 6.12    12,240
Cost of goods sold 1,10,160
Add: Selling overheads    18,000
Cost of sales 1,28,160
Profit    51,840
Sales 1,80,000

 

Problem 19. From the following data relating to the manufacture of a standard product during the month of September 1983, prepare a statement showing the cost and profit per unit

Raw material used Rs 80,000
Direct wages Rs 44,000
Manhours worked 9,500 (hours)
Manhour rate Rs 8 per hour
Office overheads 20% on works cost
Selling overheads Rs 2 per unit
Units produced 30,000 units
Units sold 38,000 at Rs 10 per unit

 

Illustration 20

Prepare cost sheet for the year 1986 from the following showing the total cost and cost per unit. Number of units produced is 2,000.

Rs
Opening stock of raw materials 10,000
Purchases 1,80,000
Direct wages 56,000
Indirect wages 48,000
Closing stock of raw materials 12,000
WIP on 1 January 1986 5,000
WIP on 31 December 1986 6,000
Factory overheads 26,000
Office overheads 45,000
Selling overheads 16,000
Opening stock of finished goods (100 units) 20,000

The closing stock of finished goods is 120 units. Profit is 10% on sales.

During the year 1987, it was decided to increase the production to 2,400 units. It was anticipated that

  1. Material prices would increase by 10%.
  2. Wages would reduce by 20%.
  3. Other expenses would remain constant per unit.
  4. Expected profit would become 20% of sales.

Prepare cost sheet and ascertain selling price to be fixed per unit.

 

Solution: Cost sheet for the year 1986 (output 2,000 units):

 

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Estimated cost statement for the year and 1987 [output is 2,400 units]:

 

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Problem 20. Prepare cost sheet for the year 1986 from the following data showing the total cost and cost per unit. The number of units produced is 2,000

Rs
Opening stock of raw materials 30,000
Purchases 2,80,000
Direct wages 76,000
Indirect wages 68,000
Closing stock of raw materials 32,000
WIP on 1 January 1986 9,000
WIP on 31 December 1986 8,000
Factory overheads 36,000
Office overheads 55,000
Selling overheads 26,000
Opening stock of finished goods (100 units) 30,000

The closing stock of finished goods is 120 units. Profit is 10% of sales.

During the year 1987, it was decided to increase the production to 2,400 units. It was anticipated that

  1. Material prices would increase by 10%.
  2. Wages would reduce by 20%.
  3. Other expenses would remain constant per unit.
  4. Expected profit would become 20% on sales.

Ascertain the selling price to be fixed per unit.

3.5 ADVANCED-TYPE SOLVED PROBLEMS
  1. The following figures are extracted from the trial balance of Gogetter company on 30 September 1998:
    1. Inventories:
      Finished stock 40,000
      Raw materials 70,000
      WIP 1,00,000
      Office appliances 8,700
      Plant and machinery 2,30,250
      Buildings 1,00,000
      Sales 3,84,000
      Sales return and rebates 7,000
      Material purchased 1,60,000
      Freight incurred on materials 8,000
      Purchase returns 2,400
      Direct labour 80,000
      Indirect labour 9,000
      Factory supervision 5,000
      Repairs and upkeep of factory 7,000
      Heat, light and power 32,500
      Rates and taxes 3,150
      Sales travelling 5,500
      Miscellaneous factory expenses 9,350
      Sales commission 16,800
      Sales promotion 11,250
      Distribution department salaries and expenses 9,000

    2. Office salaries and expenses:
      Office salaries and expenses 4,300
      Interest on borrowed funds 1,000

    Further details are available as follows:

    1. Closing inventories:
      Finished goods 57,500
      Raw materials 90,000
      Work-in-process 96,000
    2. Accrued expenses on
      Direct labour 4,000
      Indirect labour 600
      Interest on borrowed funds 1,000
    3. Depreciation to be provided on
      Office appliances 5%
      Plant and machinery 10%
      Buildings 4%
    4. Distribution of the following costs:

      Heat, light and power to factory, office and selling in the ratio 8:1:1.

      Rates and taxes two thirds of factory and one third of office.

      Depreciation on buildings to factory, office and selling in the ratio 8:1:1.

    Prepare

    1. Administration ratio
    2. Selling and distribution expenses
    3. Cost of sales
    4. Profit and sales statement

     

    Solution: Office overheads

    Heat, light and power 3,250
    Rates and taxes 1,050
    Office salaries and expenses 4,300
    Depreciation on building    400
    Depreciation on office appliances    435
    Total 9,435

    Selling and distribution overheads:

    Heat, light and power   3,250
    Sales commission 16,800
    Sales travelling   5,500
    Sales promotion 11,250
    Distribution department salaries and expenses   9,000
    Depreciation on building      400
    46,200

    Cost of sales:

    Opening stock of raw materials    70,000
    (+) Purchase of raw materials 1,60,000
    2,30,000
    (−) Closing stock of raw materials    90,000
    1,40,000
    (+) Freight incurred on materials      8,000
    1,48,000
    (−) Purchase returns      2,400
    Raw materials consumed 1,45,600
    (+) Direct labour    84,000
    Prime cost 2,29,600
    (+) Factory overheads:
    Indirect labour      9,600
    Factory supervision      5,000
    Repairs and upkeep      7,000
    Heat, light and power    26,000
    Rates and taxes      2,100
    Miscellaneous factory expenses      9,350
    Depreciation on plant and machinery    23,025
    Depreciation on building      3,200
    Gross works cost 3,14,875
    (+) Opening WIP 1,00,000
    4,14,875
    (−) Closing WIP    96,000
    Factory cost 3,18,875
    (+) Office expenses      9,435
    Cost of production 3,28,310
    (+) Opening stock of finished goods    40,000
    3,68,310
    (−) Closing stock of finished goods    57,500
    Cost of goods sold 3,10,810
    (+) Selling and distribution overheads    46,200
    Cost of sales 3,57,010

    Profit and loss statement:

    Sales 3,84,000
    (−) Sales return and rebates      7,000
    3,77,000
    Cost of sales 3,57,010
    Operating profit    19,990
    (−) Interest on borrowed funds      2,000
    Profit    17,990
  2. The books of Adarsh manufacturing company present the following data for the month of June 2005:

    Direct labour cost is Rs 35,000 being 17.5% of works overheads.

    Cost of goods sold excluding administration expenses is Rs 1,12,000.

    Inventory account showed the following opening and closing balances:

    1 June 30 June
    Raw materials 16,000 21,200
    WIP 21,000 29,000
    Finished goods 35,200 38,000
    Other data:
       Selling expenses 7,000
       General and administration expenses 5,000
    Sales for the month 1,50,000

    You are required to compute the value of materials purchased.

     

    Solution:

    Rs
    Opening stock of raw material    16,000
    (+) Purchase of raw materials    73,000
       89,000
    (−) Closing stock of raw material    21,200
    Raw material consumed    67,800
    (+) Direct labour    35,000
    Prime cost 1,02,800
    (+) Works overheads    20,000
    Gross works cost 1,22,800
    (+) Opening WIP    21,000
    1,43,800
    (−) Closing WIP    29,000
    Works cost 1,14,800
    (+) Opening stock of finished goods    35,200
    1,55,000
    (−) Closing stock of finished goods    38,000
    Cost of goods sold 1,17,000
    (+) Selling expenses       7,000
    Cost of sales 1,24,000
    Sales 1,50,000
    Profit    26,000

    Note: Cost of goods sold also includes administrative overheads. So we should include administration overheads to the given cost of goods sold because it excludes administrative overheads.

     

  3. Meera Industries Ltd. is a single-product organization having a manufacturing capacity of 6,000 units per week at 48 hours. The output data vis-a-vis different elements of cost for three consecutive weeks are given as follows:

     

    image

     

    As a cost accountant, you are asked by the company management to work out the selling price assuming an activity level of 4,000 units per week and a profit of 20% on selling price.

     

    Solution:

     

    image

     

  4. Ravi manufacturing company submits the following information on 31 March 1999:
    Sales for the year 1,37,500
    Inventories at beginning of the year:
       Finished goods 3,500
       WIP 2,000
    Purchase of material 55,000
    Material inventory:
       At the beginning f the year 1,500
       At the end of the year 2,000
    Direct labour 32,500
    Factory overheads were 60% of direct labour cost
    Inventories at the end of the year:
       WIP 3,000
       Finished goods 4,000
    Other expenses for the year:
       Selling expenses: 10% of sales
       Administrative expenses: 5% of sales

    Prepare a statement of cost.

     

    Solution:

    Rs
    Opening stock of raw material       1,500
    (+) Purchase of raw materials    55,000
       56,500
    (−) Closing stock of raw material       2,000
    Raw material used    54,500
    (+) Direct labour    32,500
    Prime cost    87,000
    (+) Factory overheads    19,500
    Gross works cost 1,06,500
    (+) Opening stock of WIP      2,000
    1,08,500
    (−) Closing stock of WIP      3,000
    Works cost 1,05,500
    (+) Administration overheads      6,875
    Cost of production 1,12,375

    Profit or loss statement

    Rs
    Cost of production 1,12,375
    (+) Opening stock of finished goods      3,500
    1,15,875
    (−) Closing stock of finished goods      4,000
    Cost of goods sold 1,18,875
    (+) Selling overheads    13,750
    Cost of sales 1,25,625
    Sales 1,37,500
    Profit    11,875
  5. The following is the manufacturing and profit and loss accounts of Ramya Ltd. for the year ending on 30 June 2004:

     

    image

     

     

    You are required to prepare a statement showing the classification of cost under different components from the aforementioned information after giving due consideration to the following facts:

    1. 60% of telephone expenses relate to office and 40% to sales department.
    2. 25% of salaries relate to factory, 50% to office and 25% to sales department
    3. 50% of the establishment expenses relate to office and 50% to sales department.

    Statement of cost:

    Rs
    Opening stock of raw material      1,000
    (+) Purchase of raw materials    75,000
       76,000
    (−) Closing stock of raw material      9,250
       66,750
    (+) Carriage on material      1,000
    Materials consumed    67,750
    (+) Direct wages    60,000
    Royalty    12,000
    Cost of a special design      2,500
    Prime costs 1,42,250
    (+) Factory overheads:
    Power      7,750
    Rent and rates      3,500
    Electricity      2,250
    Depreciation on plant and machinery      3,000
    Salaries      3,125
    Depreciation on furniture      1,000
    1,62,875
    (−) Sale of scrap         375
    Works costs 1,62,500
    (+) Administration overheads:
    Rent and taxes      2,500
    Telephone         900
    Electricity—office      1,500
    Salaries      6,250
    Establishment      2,500
    Depreciation on furniture      1,250
    Cost of production 1,77,400
    (+) Opening stock of finished goods      1,500
    1,78,900
    (−) Closing stock of finished goods      1,500
    Cost of goods sold 1,77,400
    (+) Selling and administration overheads:
    Telephone         600
    Advertisement      3,750
    Depreciation on delivery vans      1,000
    Salaries      3,125
    Rent of warehouse      3,250
    Establishment      2,500
    Cost of sales 1,91,625
    Sales 2,50,000
    Profit    58,375

  6. The books and records of Ajith manufacturing company present the following data for the month of January 2000:
    Direct labour 32,000 (160% of factory overheads)
    Cost of goods sold 1,12,000
    Administration overhead 5,200
    Selling overhead 6,800
    Sales 1,50,000

    Inventory accounts showed the following opening and closing balances:

    1 January 31 January
    Raw materials 16,000 17,200
    WIP 16,000 24,000
    Finished goods 28,000 36,000

    You are required to prepare a statement showing the cost of goods manufactured and sold and the profit earned.

    Raw materials consumed:

    Rs
    Cost of goods sold 1,12,000
    (+) Closing stock of finished goods    36,000
    1,48,000
    (−) Opening stock of finished goods    28,000
    Cost of production 1,20,000
    (−) Administration overheads      5,200
    Works costs 1,14,800
    (−) Closing WIP    24,000
    1,38,800
    (−) Opening WIP    16,000
    Gross work costs 1,22,800
    (−) Factory overheads    20,000
    Prime costs 1,02,800
    (−) Direct labour    32,000
    Raw materials consumed    70,800

    Raw material consumed: = Opening stock + Raw material purchase – Closing stock raw material

                                 77,800 = 16,000 + Purchase – 17,200

                              Purchase = 72,000

    Rs
    Opening stock of raw material    16,000
    (+) Purchase of raw materials    72,000
       88,000
    (−) Closing stock of raw material    17,200
    Raw materials consumed    70,800
    (+) Direct labour    32,000
    Prime costs 1,02,800
    (+) Factory overheads    20,000
    Gross works costs 1,22,800
    (+) Opening stock of WIP    16,000
    1,38,800
    (−) Closing stock of WIP    24,000
    Works costs 1,14,800
    (+) Administration overheads      5,200
    Cost of production 1,20,000
    (+) Opening stock of finished goods    28,000
    1,48,000
    (−) Closing stock of finished goods    36,000
    1,12,000
    (+) Selling overheads      6,800
    Cost of sales 1,18,800
    Sales 1,50,000
    Profit    31,200

  7. From the account books of M/s. Aryan Enterprises, the following details are extracted for the year ending on 31 March 2006:
    Stock of material—opening 94,000
    Stock of material—closing 1,00,000
    Direct wages 1,19,200
    Material purchases during the year 4,16,000
    Indirect wages 8,000
    Salaries to administrative staff 20,000
    Freights inwards 16,000
    Freights outwards 10,000
    Cash discounts allowed 7,000
    Bad debts written off 9,400
    Repairs to plant and machinery 21,200
    Rent rates and taxes—factory 6,000
    Rent rates and taxes—office 3,200
    Travelling expenses 6,200
    Salespeople's salaries and commissions 16,800
    Depreciation written off—plant and machinery 14,200
    Depreciation written off—furniture 1,200
    Directors' fees 12,000
    Electricity charges (factory) 24,000
    Fuel (for boiler) 32,000
    General chargers 12,400
    Manager's salary 24,000

    The manager's time is shared between the factory and the office in the ratio 20:80. For the aforementioned details, you are required to prepare (a) prime cost, (b) factory cost, (c) factory overheads, (d) general overheads and (e) total cost.

    Cost statement:

    Rs
    Opening stock of raw material    94,000
    (+) Purchase of raw materials 4,16,000
    5,10,000
    (+) Freight inwards    16,000
    5,26,000
    (−) Closing stock of raw material 1,00,000
    Raw material consumed 4,26,000
    (+) Direct wages 1,19,200
    Prime costs 5,45,200
    (+) Factory overheads:
    Indirect wages      8,000
    Repairs to plant and machinery    21,200
    Rent, rates and taxes      6,000
    Depreciation—plant and machinery    14,200
    Electricity    24,000
    Fuel    32,000
    Manager's salary      4,800
    Factory overheads 1,10,200
    Factory cost 6,55,400
    (+) General overheads:
    Salaries to administrative staff    20,000
    Freight outwards    10,000
    Bad debts written off      9,400
    Rent, rates and taxes      3,200
    Travelling expenses      6,200
    Salespeople's salaries and commissions    16,800
    Depreciation on furniture    1,200
    Directors' fees    12,000
    General charges    12,400
    Manager's salary    19,200
    General overheads 1,10,400
    Total 7,65,800
CHAPTER SUMMARY

After reading this chapter, you should be able to understand the concept of cost sheet and its break-up of costs. You should also understand that cost sheet is only a memorandum statement and does not involve standard accounting principles. Further, you should understand the advantages and disadvantages of a cost sheet along with its various related adjustments.

EXERCISE FOR YOUR PRACTICE

Objective-Type Questions

I. State whether the following statements are true or false:

  1. Prime cost = direct wages + direct material + production overheads.
  2. Cost of production stage can be called as finished goods stage.
  3. Cost of sales and cost of goods sold are the same.
  4. Secondary packing is a part of direct material.
  5. Cost sheet is also known as statement of cost.
  6. Cost of goods sold is a stage between cost of production and cost of sales.
  7. Works cost is otherwise known as factory cost.
  8. Cost sheet is a memorandum statement.
  9. Income tax is included in the cost sheet.
  10. Reserve is an example of non-cost items.

[Ans: 1—false, 2—true, 3—false, 4—false, 5—true, 6—true, 7—true, 8—true, 9—false, 10—true]

II. Choose the correct answer:

  1. _____ is not included in cost sheet.
    1. Research expenses
    2. Security
    3. Stores supervision expenses
    4. Commission
  2. Premises comes under
    1. Factory overheads
    2. Administrative overheads
    3. Selling and distribution
    4. None of the above
  3. Depreciation of factory plant is a
    1. Factory overhead
    2. Administrative overhead
    3. Selling overhead
    4. None of the above
  4. Twenty per cent of profit on a cost of Rs 25,350 is
    1. 5,070
    2. 8,607
    3. 5,860
    4. 2,060
  5. The cost of production stage can be called as
    1. Semi-finished goods stage
    2. Finished goods stage
    3. Both a and b
    4. None of above
  6. Cost sheet is also known as
    1. Statement of production
    2. Statement of selling
    3. Statement of cost
    4. None of the above
  7. Reserve is an example of
    1. Cost item
    2. Non-cost item
    3. Selling item
    4. None of the above

  8. Cost of goods sold is the stage between
    1. Cost of production and sales
    2. Factory cost and cost of production
    3. Prime cost and factory cost
    4. None of above
  9. Works cost is otherwise known as
    1. Prime cost
    2. Production cost
    3. Factory cost
    4. None of the above
  10. WIP comes under
    1. Factory overheads
    2. Prime cost
    3. Administrative overheads
    4. None of the above

    [Ans: 1—(d), 2—(b), 3—(a), 4—(a), 5—(b), 6—(c), 7—(b), 8—(a), 9—(c), 10—(a)]

DISCUSSION QUESTIONS

Short Answer-Type Questions

  1. What is cost sheet?
  2. What are the important features of a cost sheet?
  3. What is the formula for computing cost per unit?
  4. Give a few examples for items of appropriation of profit.

Essay-Type Questions

  1. Mention the non-cost items.
  2. Write a note on the various overheads.
  3. Explain the purposes of a cost sheet.
  4. Explain the difference between works overhead and works cost.
  5. Explain the terms cost of goods sold and cost of sales.
  6. Explain the term prime cost with examples.
PROBLEMS
  1. Ascertain prime cost from the following data:
    Rs
    Direct wages 50,000
    Chargeable expenses 5,000
    Opening stock of raw materials 10,000
    Raw materials bought during the period 60,000
    Closing stock of raw materials 20,000
    Carriage inwards 1,500
    Carriage outwards 2,000
    Raw materials returned to the supplier 1,500

    (Osmania, 1995)

    [Ans: prime cost = Rs 1,05,000]

  2. The following cost data are available for a firm from its books for the year ending on 31 December 1995:
    Rs
    Direct material 9,00,000
    Direct wages 7,50,000
    Profit 6,09,000
    Selling and distribution overheads 5,25,000
    Administrative overheads 4,20,000
    Factory overheads 4,50,000

    Prepare a cost sheet indicating the prime cost, works cost, production cost, cost of sales and sales value.

    (Madras, 1997)

    [Ans: prime cost = Rs 16,50,000; works cost = Rs 21,00,000; production cost = Rs 25,20,000; cost of sales = Rs 30,45,000; and sales value = Rs 36,54,000]

  3. Calculate (a) prime cost, (b) factory cost, (c) cost of production, (d) cost of sales and (e) profit from the following particulars:
    Rs
    Direct materials 1,00,000
    Direct wages 25,000
    Direct expenses 5,000
    Wages of foremen 2,500
    Electric power 500
    Lighting:
    Factory 1,500
    Office 500
    Rent:
    Factory 5,000
    Office 500
    Salaries to salespeople 1,250
    Advertising 1,250
    Income tax 10,000
    Sales 1,89,500

    (Bharathidasan, 1993)

    [Ans: (a) Rs 1,30,000; (b) Rs 1,39,500; (c) Rs 1,40,500; (d) Rs 1,43,000; (e) Rs 46,500]

  4. A manufacturing company submits to you the following details about the various expenses incurred by it during the year ending on 31 December 1985:
    Rs
    Cost of raw materials consumed 25,000
    Advertising 1,000
    Depreciation on plant and machinery 1,500
    Factory office salaries 6,000
    Legal expenses 300
    Supervisor's salary 5,500
    Factory rates and insurance 1,000
    Carriage outwards 1,500
    Direct labour 20,000
    Bad debts 300
    Office stationery 200
    Rent of factory buildings 2,500
    Office salary 10,000
    Commission on sales 4,000
    Audit fees 300
    Income tax 1,500
    Donation to charitable institutions 500
    Purchase of new plant 10,000

    Classify the aforementioned expenses under various heads of cost, showing separately the total expenditure under each head. Also show separately the expenses that shall not be included in calculating the cost.

    (Madras, 1987)

    [Ans: prime cost = Rs 45,000; factory overhead = Rs 16,500; works cost = Rs 61,500; administrative overhead = Rs 10,800; cost of production = Rs 72,300; selling and distribution overheads = Rs 6,800; total cost = Rs 79,100; expenses that shall not be included = (1) income tax, (2) donation and (3) purchase of plant]

  5. A manufacturer presents the following details about the various expenses incurred by him:
    Rs
    Raw materials consumed 70,000
    Carriage inwards 2,000
    Factory rent 2,400
    Bad debts 440
    Printing and stationery 620
    Legal expenses 350
    Carriage outwards 1,540
    Indirect material 560
    Power 4,600
    Depreciation on furniture 160
    Postage expenses 465
    Repairs to plant and machinery 1,200
    Salespeople's expenses 3,400
    Advertising 500
    Direct wages 85,000
    General manager's salary 36,000
    Factory manager's salary 18,000
    Depreciation on plant and machinery 1,240
    Audit fees 350

    Classify the aforementioned expenses under the various elements of cost, showing separately the total expenditure under each element.

    (Madras, 1998)

    [Ans: prime cost = Rs 1,57,000; factory cost = Rs 1,85,000; cost of production = Rs 2,22,945; total cost = Rs 2,28,825; factory overheads = Rs 28,000; administrative overheads = Rs 37,945; Selling and distribution overheads = Rs 5,880]

  6. The following particulars relating to the year 1994 have been taken from the books of a chemical works, manufacturing and selling a chemical mixture:
    Stock on 1 January 1994 Kg Rs
    Raw materials 2,000 2,000
    Finished mixture 500 1,750
    Factory stores 7,250
    Purchases
    Raw materials 1,60,000 1,80,000
    Factory stores 24,250
    Sales
    Finished mixture 1,53,050 9,18,000
    Factory scrap 8,170
    Factory wages 178,650
    Power 30,400
    Depreciation of machinery 18,000
    Salaries
    Factory 72,220
    Office 37,220
    Selling 41,500
    Expenses
    Direct 18,500
    Office 18,200
    Selling 18,000
    Stock on 31 December 1994
    Raw materials 1,200
    Finished mixture 450
    Factory stores 5,550

    The stock of finished mixture at the end of 1994 is to be valued at the factory cost of the mixture for that year. The purchase price of raw materials remained unchanged throughout 1994.

    Prepare a statement giving the maximum possible information on cost and its break-up for 1994.

    (B.Com., Delhi)

    image

    Rs 3,77,800; sales of factory scrap (7,800 kg); works cost (15,300 kg) =Rs 8,170, Rs 5,16,200; cost of sales (1,53,050 kg) = Rs 6,31,189; profit = Rs 2,86,811]

  7. The following data are extracted from the books of M/s. Moonshine Industries Ltd. for the calendar year 1994:
    Rs
    Opening stock of raw material 25,000
    Purchases of raw material 85,000
    Closing stock of raw material 40,000
    Carriage inwards 5,000
    Wages—direct 75,000
    Wages—indirect 10,000
    Other direct charges 15,000
    Rent and rates—factory 5,000
    Rent and rates—office 500
    Indirect consumption of material 500
    Depreciation—plant, etc. 1,500
    Depreciation—office furniture 100
    Salary—office 2,500
    Salary—salespeople 2,000
    Other factory expenses 5,700
    Other office expenses 900
    Managing director's remuneration 12,000
    Other selling expenses 1,000
    Travelling expenses of salespeople 1,100
    Carriage and freight outwards 1,000
    Sales 2,50,000
    Advance income tax paid 15,000
    Advertisement 2,000

    Managing director's remuneration is to be allocated as follows: Rs 4,000 to factory, Rs 2,000 to office and Rs 6,000 to selling departments. From the aforementioned information, prepare (a) prime cost, (b) works cost, (c) cost of production, (d) cost of sales and (e) net profit.

    (B.Com., Delhi)

    [Ans: (a) Rs 1,65,000; (b) Rs 1,91,700; (c) Rs 1,97,700; (d) Rs 2,10,800; (e) Rs 39,200]

  8. The following particulars are extracted from the books of a manufacturing company:
    Rs
    Stock of material on 1 January 1994 47,000
    Stock of material on 31 December 1994 50,000
    Materials purchased 2,08,000
    Office salaries (drawing) 9,600
    Counting house salaries 14,000
    Carriage inwards 8,200
    Carriage outwards 5,100
    Cash discount allowed 3,400
    Bad debts written off 4,700
    Repairs to plant and machinery 10,600
    Rent, rates, etc.—factory 3,000
    Rent, rates, etc.—office 1,600
    Travelling expenses 3,100
    Travelling commission 8,400
    Production wages 1,40,000
    Depreciation on plant and machinery 7,100
    Depreciation on office furniture 600
    Directors' fees 6,000
    Gas and water charges—factory 1,500
    Gas and water charges—office 300
    General charges 5,000
    Manager's salary 12,000

    Out of 48 hours in a week, time devoted by the manager to the factory and the office was on average 40 hours and 8 hours, respectively, throughout the accounting year. Prepare a statement giving the following information: (a) prime cost, (b) factory cost as a percentage of production wages, (c) factory cost, (d) general on cost as a percentage factory cost and (e) total cost.

    (B.Com., Delhi)

    [Ans: (a) Rs 3,53,200; (b) 33%; (c) 3,99,400; (d) 13.42%; (e) Rs 4,49,200]

  9. The following details are obtained from the cost records of Comet Paints Limited:
    Rs
    Stock of raw materials on 1 December 1994 75,000
    Stock of raw materials on 31 December 1994 91,500
    Direct wages 52,500
    Indirect wages 2,750
    Sales 2,11,000
    WIP, 1 December 1994 28,000
    WIP, 31 December 1994 35,000
    Purchases of raw materials 66,000
    Factory rent, rates and powers 15,000
    Depreciation of plant and machinery 3,500
    Expenses on purchases 1,500
    Carriage outwards 2,500
    Advertising 3,500
    Office rent and taxes 2,500
    Travellers' wages and commission 6,500
    Stock of finished goods, 1 December 1994 54,000
    Stock of finished goods, 31 December 1994 31,000

    Prepare a production account giving the maximum possible break-up of costs and profit.

    (B.Com., Delhi)

    [Ans: prime cost = Rs 1,03,500; works cost = Rs 1,17,750; cost of production = Rs 1,20,250; cost of goods sold = Rs 1,43,250; cost of sales = Rs 1,55,750; profit = Rs 55,250]

  10. Prepare a statement showing cost and profit from the following details, clearly showing (a) prime cost, (b) works cost, (c) cost of production, (d) cost of sales and (e) profit:

     

    image

     

    [Ans: (a) Rs 6,50,000; (b) Rs 7,37,500 – factory OH = Rs 87,500; (c) cost of production =Rs 7,96,875; administrative OH = Rs 59,375; (d) cost of sales = Rs 8,14,375; selling and distribution overheads = Rs 17,500; (e) profit = Rs 1,33,125]

  11. The following data are extracted from Pavan Kishore for the year 1991:
    Rs
    Opening stock of raw materials 25,000
    Closing stock of raw materials 40,000
    Purchase of raw materials 85,000
    Carriage inwards 5,000
    Wages direct 75,000
    Wages indirect 10,000
    Other direct charges 15,000
    Rent and rates:
    Factory 5,000
    Office 500
    Indirect consumption of material 500
    Depreciation on plant 1,500
    Depreciation on office furniture 100
    Salary—office 2,500
    Salary—salesmen 2,000
    Other office expenses 900
    Other factory expenses 5,700
    Managing director's remuneration 12,000
    Other selling expenses 1,000
    Travelling expenses 1,100
    Carriage outwards 1,000
    Sales 2,50,000
    Advance income tax paid 15,000
    Advertisement 2,000

    Managing director's remuneration is allocated as follows: Rs 4,000 to the factory, Rs 2,000 to the office and Rs 6,000 to the selling departments.

    From the aforementioned information, calculate (a) prime cost, (b) works cost, (c) cost of production (d) cost of sales and (e) net profit.

    (Andhra, 1992)

    [Ans: (a) Rs 1,65,000; (b) Rs 1,91,700; (c) Rs 1,97,700; (d) Rs 2,10,800; (e) Rs 39,200]

  12. The following details relating to a factory are available for the month of March 1999:

     

    image

     

    It is customary to fix the selling price by adding 20% to the total cost. Prepare a cost sheet showing the profit for the month.

     

    [Ans: prime cost = Rs 1,27,000; works cost = Rs 1,44,000; cost of production = Rs 1,61,000; cost of sales = Rs 1,89,000; profit = Rs 37,800]

  13. From the following particulars of a manufacturing company, prepare a statement showing (a) cost of materials used, (b) prime cost, (c) works cost, (d) percentage of works overheads to productive wages, (e) cost of production, (f) percentage of general overheads to works cost and (g) net profit:
    Rs
    Stock of materials on 1 January 1985 20,000
    Purchase of materials in January 5,50,000
    Stock of finished goods on 1 January 1985 25,000
    Productive wages 2,50,000
    Finished goods sold 12,00,000
    Works overhead charges 75,000
    Office and general expenses 50,000
    Stock of materials on 31 January 1985 70,000
    Stock of finished goods on 31 January 1985 30,000

    (Madras, 1985)

    [Ans: (a) Rs 5,00,000; (b) Rs 7,50,000; (c) Rs 8,25,000; (d) 30%; (e) Rs 8,75,000; (f) 6.06%; (g) Rs 3,30,000]

  14. Draw a statement of cost from the following particulars:
    Rs
    Opening stock:
    Materials 2,00,000
    Work-in-progress 60,000
    Finished goods 5,000
    Closing stock:
    Materials 1,80,000
    WIP 50,000
    Finished goods 15,000
    Materials purchased 5,00,000
    Direct wages 1,50,000
    Manufacturing expenses 1,00,000
    Sales 8,00,000
    Selling and distribution expenses 20,000

    (Madras, 2001; Madras,)

    [Ans: materials consumed = Rs 5,20,000; prime cost: Rs 6,70,000; works cost = Rs 7,80,000; cost of production of goods sold = Rs 7,70,000; cost of sales = Rs 7,90,000; profit = Rs 10,000]

  15. From the following particulars, prepare a cost sheet showing the components of total cost and profit for the year ended 31 December 1994.
    Rs
    Stocks on 1 January 1994:
    Raw materials 2,500
    WIP 822
    Finished goods 1,736
    Stock on 31 December 1994:
    Raw materials 2,625
    WIP 910
    Finished goods 1,575
    Purchase of raw materials 2,190
    Direct wages 1,715
    Non-productive wages 83
    Office expenses 316
    Works expenses 834
    Selling and distribution expenses 421
    Sale of finished goods 7,331

    (Bangalore, 1995)

    [Ans: raw materials consumed = Rs 2,065; prime cost = Rs 3,780; works cost = Rs 4,609; cost of production = Rs 4,921; cost of production of goods sold = Rs 5,086; cost of sales = Rs 5,507; profit = Rs 1,824]

  16. From the trading account of a concern, prepare a cost sheet showing the cost of materials, used prime cost, cost of goods sold and profit per unit.

    Trading account for the year ending on 31 December 1994:

     

    image

     

    (Bangalore, 1995)

    [Ans: cost of materials used = Rs 1,28,000; prime cost = Rs 3,28,000; cost of goods sold = Rs 3,33,000; profit per unit sold = Rs 29]

  17. From the following information, prepare a cost sheet for the month of December 1989:
    Rs
    Stock on hand—1 December 1989:
    Raw materials 25,000
    Finished goods 17,300
    Stock on hand—31 December 1989:
    Raw materials 26,200
    Finished goods 15,700
    Purchase of raw materials 21,900
    Carriage on purchases 1,100
    WIP, 1 December 1989 at works cost 8,200
    WIP, 31 December 1989 at works cost 9,100
    Sale of finished goods 72,300
    Direct wages 17,200
    Non-productive wages 800
    Direct expenses 1,200
    Factory overheads 8,300
    Administration overheads 3,200
    Selling and distribution overheads 4,200

    (Madurai Kamaraj, 1991)

    [Ans: raw materials consumed = Rs 21,800; prime cost = Rs 40,200; works cost = Rs 48,400; cost of production of goods produced = Rs 51,600; cost of production of goods sold = Rs 53,200; cost of sales = Rs 57,400; profit = Rs 14,900]

  18. From the following particulars, prepare a statement showing (a) prime cost, (b) works cost, (c) cost of production and (d) cost of sales:
    Rs
    Opening stock of finished goods 9,750
    Closing stock of finished goods 11,100
    Raw materials purchased 35,250
    Carriage on materials purchased 850
    Direct wages 18,450
    Factory expenses 2,750
    Selling expenses 2,450
    Office cost 1,850
    Sales 75,000
    Sales of scrap 250

    Also show by what percentage the average selling price in the aforementioned case should be increased in order to double the net profit.

    (Kerala, B.Com.)

    [Ans: (a) Rs 54,550; (b) Rs 57,050; (c) Rs 58,900; (d) Rs 60,000; present profit = Rs 15,000; doubled profit = Rs 30,000; required sales = 60,000 + 30,000 = Rs 90,000;

    image

    Sale of scrap is taken as indirect material scrap and is reduced from factory expenses.

  19. From the following details relating to Kannan Ltd. for the quarter ending on 31 March 1999, prepare a cost sheet showing profit or loss for the quarter:

     

    image

     

    [Ans: prime cost = Rs 1,67,500; works cost = Rs 1,90,000; cost of production of goods produced = Rs 1,95,000; closing stock of finished goods = Rs 26,000; cost of production of goods sold =Rs 1,83,000; cost of sales = Rs 2,00,000; profit = Rs 50,000]

    (Exclude income tax and loss on sale of plant.)

  20. From the following particulars, prepare a statement showing the components of total sales and the profit for the year ending on 31 December.
    Rs
    Stock of finished goods (1 January) 6,000
    Stock of raw materials (1 January) 40,000
    WIP (1 January) 15,000
    Purchase of raw materials 4,75,000
    Carriage inwards 12,500
    Factory rent, taxes 7,250
    Other production expenses 43,000
    Stock of finished goods (31 December) 15,000
    Wages 1,75,000
    Works manager's salary 30,000
    Factory employees' salary 60,000
    Power expenses 9,500
    General expenses 32,500
    Sales for the year 8,60,000
    Stock of raw materials (31 December) 50,000
    WIP (31 December) 10,000

    (Andhra, B.Com.)

    [Ans: material consumed = Rs 4,77,500; prime cost = Rs 6,52,500; works cost = Rs 8,07,250; cost of production = Rs 8,39,750; cost of production of goods sold = Rs 8,30,750; profit = Rs 29,250]

  21. A company received an enquiry for the supply of 10,000 steel folding chairs. The costs are estimated as follows:
    Raw materials 1,00,000 kg at Re 1 per kg
    Direct wages 10,000 hours at Rs 4 per hour
    Variable overheads:
    Factory Rs 2.40 per labour hour
    Selling and distribution Rs 16,000
    Fixed overheads:
    Factory Rs 6,000
    Selling and distribution Rs 14,000

    Prepare a statement showing the price to be fixed that will result in a profit of 20% on the selling price.

    (C.A. Inter)

    [Ans: total cost = Rs 2,00,000; profit = Rs 50,000; price to be fixed = Rs 2,50,000]

  22. The following information was obtained from the cost records of Aditya Chemicals Ltd. for 1998:
    Rs
    Finished goods on 1 January 1998 50,000
    Raw materials, 1 January 1988 10,000
    WIP, 1 January 1988 14,000
    Direct labour 1,60,000
    Purchase of raw materials 98,000
    Indirect labour 40,000
    Heat, light and power 20,000
    Factory insurance and taxes 5,000
    Repairs to plant 3,000
    Factory supplies 5,000
    Depreciation—factory building 6,000
    Depreciation—plant 10,000
    Other information made available is
    Factory cost of goods produced in 1988 2,80,000
    Raw materials consumed in 1988 95,000
    Cost of goods sold in 1988 1,60,000

    No office and administration expenses were incurred during 1988. Prepare a statement of cost for the year ending on 1988 giving the maximum possible information and the detailed break-up of cost.

    (Madras, 1989)

    [Ans: closing stock of raw material = Rs 13,000; prime cost = Rs 2,55,000; works cost excluding WIP = Rs 3,44,000; closing WIP = Rs 78,000; closing stock of finished goods = Rs 1,70,000]

EXAMINATION PROBLEMS
  1. From the following information, prepare a cost sheet for the month of January:
    Rs Rs
    Stock of raw materials on 1 January 25,000
    Stock of raw materials on 31 January 26,200
    Purchase of raw materials 21,900
    Carriage on purchases 1,100
    Sale of finished goods 72,300
    Direct wages 17,200
    Non-productive wages 800
    Direct expenses 1,200
    Factory overheads 8,300
    Administrative overheads 3,200
    Selling overheads 4,200

    (Madras, 1998)

    [Ans: raw materials consumed = Rs 21,800; prime cost = Rs 40,200; works cost = Rs 49,300; cost of production = Rs 52,500; cost of sales = Rs 56,700; profit = Rs 15,600]

  2. A manufacturer presents the following details about the various expenses incurred by him:
    Rs
    Raw materials consumed 70,000
    Carriage inwards 2,000
    Factory rent 2,400
    Bad debts 440
    Printing and stationery 620
    Legal expenses 350
    Carriage outwards 1,540
    Indirect material 560
    Power 4,600
    Depreciation on furniture 160
    Postage expenses 465
    Repairs to plant and machinery 1,200
    Salespeople's expense 3,400
    Advertising 500
    Direct wages 85,000
    General manager's salary 36,000
    Factory manager's salary 18,000
    Depreciation on plant and machinery 1,240
    Audit fees 350

    Classify the aforementioned expenses under the various elements of cost, showing separately the total expenditure under each element.

    (B.Com., Delhi)

    [Ans: prime cost = Rs 1,57,000; factory cost = Rs 1,85,000; cost of production = Rs 2,22,945; total cost = Rs 2,28,825]

  3. Gopal furnishes the following data relating to the manufacture of a standard product during the month of April:
    Rs
    Raw materials consumed 15,000
    Direct labour charges 9,000
    Machine hours worked 900
    Machine hour rate Rs 5
    Administrative overheads 20% on works cost
    Selling overheads Rs 0.50 per unit
    Units produced: 17,100
    Units sold: 18,000 at Rs 4 per unit

    You are required to prepare a cost sheet from the aforementioned data showing(a) the cost per unit and (b) profit per unit sold and profit for the period.

    [Ans: (a) Rs 2; (b) Rs 1.50; profit = Rs 27,000]

    4a. A factory produces 100 units of a commodity. The cost of production is as follows:

    Rs
    Materials 10,000
    Wages 5,000
    Direct expenses 1,000

    Factory overheads are 125% on wages, and office overheads are 20% on works cost. Expected profit is 25% on sales.

    Calculate the price to be fixed per unit.

    (Madras1987)

    [Ans: Price to be fixed per unit = Rs 356; prime cost = Rs 16,000; profit = Rs 8,900; sales = Rs 35,600; profit is 25% on sales or 1/3 on cost]

  4. A factory produces 100 units of a commodity. The cost of production is as follows:
    Rs
    Direct materials 10,000
    Direct wages 5,000
    Direct expenses 1,000
    Factory overheads 6,500
    Administrative overheads 3,480

    If a profit of 25% on sales is to be realized, what would be the selling price of each unit of the commodity? Prepare the cost sheet.

    (Madras, 1997)

    [Ans: selling price per unit = Rs 346.40; prime cost = Rs 16,000; works cost = Rs 22,500; cost of production = Rs 25,980; sales = Rs 34,640; profit = Rs 8,660; profit is 25% on sales or image on cost]

  5. The following information is obtained from the records of a factory for the period from 1 June to 30 June:
    Rs
    Opening balance of raw materials on 1 June 15,000
    Purchases of raw materials during the month 2,25,000
    Wages paid 1,15,000
    Factory overheads 46,000
    Opening balance of WIP on 1 June 6,000
    Opening balance of WIP on 30 June 7,500
    Closing balance of raw materials on 30 June 12,500
    Opening balance of finished goods manufactured on 1 June 30,000
    Closing balance of finished goods manufactured on 30 June 27,500
    Selling and distribution overheads 10,000
    Administration overheads 15,000
    Sales 4,50,000

    Prepare statement on cost of production of goods manufactured, statement of cost of production of goods sold and statement of profit on sales.

    (B.Com., Karnataka)

    [Ans: cost of production of goods manufactured = Rs 4,02,000; cost of goods sold = Rs 4,04,500; gross profit = Rs 45,500; net profit = Rs 35,500]

  6. The Modern manufacturing company submitted the following information on 31 March 1993:
    Rs
    Sales for the year 2,75,000
    Inventories at the beginning of the year:
    Finished goods 7,000
    WIP 4,000
    Purchase of materials 1,10,000
    Materials inventory:
    At the beginning of the year 3,000
    At the end of the year 4,000
    Direct labour 65,000
    Factory overheads were 60% of direct labour cost
    Inventories at the end of the year:
    WIP 6,000
    Finished goods 8,000
    Other expenses for the year:
    Selling expenses
    Administration expenses 10% of sales
    Prepare a statement of cost 5% of sales

    (Calicut, 1994)

    [Ans: material consumed = Rs 1,09,000; prime cost = Rs 1,74,000; works cost = Rs 2,11,000; cost of production of goods produced = Rs 2,24,750; cost of production of goods sold = Rs 2,23,750; cost of sales = Rs 2,51,250; profit = Rs 23,750]

  7. The following extracts of costing information related to commodity A for the half-year ending on 31 December 1993:
    Rs
    Purchase of raw materials 1,20,000
    Works overheads 48,000
    Direct wages 1,00,000
    Carriage on purchases 1,440
    Stock (1 July 1993)
    Raw materials 20,000
    Finished products (1,000 tons) 16,000
    Stock (31 December 1993)
    Raw materials 22,240
    Finished products (2,000 tons) 32,000
    WIP (1 July 1993) 4,800
    WIP (31 December 1993) 16,000
    Sales—finished products 3,00,000

    Selling and distribution overheads are Re 1 per ton sold. A total of 16,000 tons of commodities were produced during the period.

    You are to ascertain (a) cost of raw materials used, (b) cost of output for the period, (c) cost of sales, (d) net profit for the period and (e) net profit per ton of the commodity.

    (Madras, 1995)

    [Ans: (a) Rs 1,19,200; (b) Rs 2,56,000; (c) Rs 2,55,000; (d) Rs 45,000; (e) Rs 3 per ton sold; selling overheads = Rs 15,000]

  8. From the following particulars, you are required to prepare a statement showing (a) the cost of materials consumed, (b) prime cost, (c) works cost, (d) total cost and (e) cost of sales and profit
    Rs
    Stock of finished goods on 31 December 1993 73,000
    Stock of raw materials on 31 December 1993 35,000
    Purchase of raw materials 7,60,000
    Productive wages 5,20,000
    Stock of finished goods on 31 December 1994 82,500
    Stock of raw materials on 31 December 1994 37,500
    Sales of finished goods 15,45,800
    Works overhead charges 1,30,200
    Office and general charges 69,700

    (B.Com., Karnataka)

    [Ans: (a) Rs 7,57,500; (b) Rs 12,77,500; (c) Rs 14,07,700; (d) 14,77,400;(e) cost of sales = Rs 14,67,900 and profit = Rs 77,900]

  9. The following data are related to the manufacture of a standard product during the month of April 1984:
    Raw material Rs 80,000
    Direct wages Rs 48,000
    Machine hours worked 8,000 hours
    Machine hour rate Rs 4
    Administration overheads 10% of works cost
    Selling overheads Rs 1.50 per unit
    Units produced 4,000
    Units sold 3,000
    Selling price Rs 50 per unit

    You are required to prepare a cost sheet with respect to the preceding data showing (a) cost per unit and (b) profit for the month.

    (Madras, 1986)

    [Ans: (a) prime cost = Rs 1,28,000; Rs 32 per unit; works cost = Rs 1,60,000; Rs 40 per unit; cost of production = Rs 1,76,000; Rs 44 per unit; closing stock of finished goods = Rs 44,000; cost of sales = Rs 1,36,500 at Rs 45.5 per unit; profit = Rs 13,500 at Rs 4.5 per unit; sales = Rs 1,50,000]

  10. The directors of a manufacturing business require a statement showing the production results of the business for the month of March 1994. The cost accounts reveal the following information:
    Rs
    Stock on hand, 1 March 1994:
       Raw materials 25,000
       Finished goods 17,360
    Stock on hand, 31 March 1994
       Raw materials 26,250
       Finished goods 15,750
    Purchase of raw materials 21,900
    WIP, 1 March 1994 8,220
    WIP, 31 March 1994 9,100
    Sale of finished goods 72,310
    Direct wages 17,150
    Non-productive wages 830
    Works expenses 8,340
    Office and administrative expenses 3,160
    Selling and distributive expenses 4,210

    You are required to construct the statement so as to show (a) value of the material consumed, (b) total cost of production, (c) cost of goods sold, (d) profit on goods sold and (e) net profit for the month.

    (M.Com., Sugar)

    [Ans: (a) Rs 20,650; (b) Rs 49,250; (c) Rs 50,860; (d) Rs 21,450; (e) 17,240]

  11. From the following particulars of product X, compile the cost sheet for the month of March 1991:
    Rs
    Raw material:
       Opening stock 20,000
       Purchases 1,50,000
       Closing stock 10,000
    Direct labour 60,000
    Factory overheads 22,500
    Office and administrative overheads 27,500
    Finished stock:
    Opening stock: 500 units at Rs 11.20 per unit
    Closing stock: 1,500 units at current cost price
    Profit on sales: 20%
    Selling and distribution overheads: 20,000
    Units produced: 25,000 units

    (Madras, 1991)

    [Ans: prime cost = Rs 2,20,000; works cost = Rs 2,42,500; cost of production = Rs 2,70,000; closing stock of finished goods = Rs 16,200 at Rs 10.8 per unit; cost of production of goods sold = Rs 2,59,400; cost of sales = Rs 2,79,400; profit = Rs 69,850]

  12. From the following data relating to the manufacture of a standard product during the month of September 1983, prepare a statement showing the cost and profit per unit:
    Raw material used Rs 40,000
    Direct wages Rs 24,000
    Manhours worked 9,500 (hours)
    Manhour rate Rs 4 per hour
    Office overheads 20% on works cost
    Selling overheads Re 1 per unit
    Units produced 20,000 units
    Units sold 18,000 at Rs 10 per unit

    (Madras, 1984)

    [Ans: prime cost = Rs 64,000; works cost = Rs 1,02,000; cost of production = Rs 1,22,400 at Rs 6.12 per unit; closing stock of finished goods = Rs 12,240; cost of production of goods sold = Rs 1,10,160; cost of sales = Rs 1,28,160 at Rs 7.12 per unit; profit = Rs 51,840 at Rs 2.88 per unit; sales = Rs 1,80,000]

  13. Gopal furnishes the following data relating to the manufacture of a standard product during the month of April 1984:
    Raw materials consumed Rs 15,000
    Direct labour charges Rs 9,000
    Machine hours worked 900
    Machine hour rate Rs 5
    Administrative overheads 20% on works cost
    Selling overheads Re 0.50 per unit
    Units produced 17,100
    Units sold 16,000 at Rs 4 per unit

    You are required to prepare a cost sheet from the aforementioned data showing (a) the cost per unit and (b) profit per unit sold and profit for the period.

    (Madras, 1989)

    [Ans: prime cost = Rs 24,000, Rs 1.40 per unit; works cost: Rs 26,833 per unit; cost of production = Rs 34,200 at Rs 2 per unit; closing stock of finished goods = Rs 2,200; cost of production of goods sold = Rs 32,000; cost of sales = Rs 40,000 at Rs 2.5 per unit; profit = Rs 24,000 at Rs 1.5 per unit; sales: Rs 64,000]

  14. Prepare a cost sheet for 1986 from the following details showing the total cost and cost per unit. The number of units produced is 2,000:
    Rs
    Opening stock of raw materials 10,000
    Purchases 1,80,000
    Direct wages 56,000
    Indirect wages 48,000
    Closing stock of raw materials 12,000
    WIP on 1 January 1986 5,000
    WIP on 31 December 1986 6,000
    Factory overheads 26,000
    Office overheads 45,000
    Selling overheads 16,000
    Opening stock of finished goods (100 units) 20,000

    The closing stock of finished goods is 120 units. Profit is 10% on sales. During 1987, it was decided to increase the production to 2,400 units. It was anticipated that

     

    (a) Material prices would increase by 10%. (b) Wages would reduce by 20%. (c) Other expenses would remain constant per unit. (d) Expected profit would become 20% of sales.

     

    Ascertain the selling price to be fixed per unit.

    (Madras, 1987)

    [Ans: For 1986, prime cost = Rs 2,34,000; works cost = Rs 3,07,000; cost of production = Rs 3,52,000; closing stock of finished goods = Rs 21,120; cost of production of goods sold = Rs 3,50,880; cost of sales = Rs 3,66,880; profit = Rs 40,764; sales = Rs 4,07,644. For 1987, prime cost = Rs 2,88,720; works cost = Rs 3,77,520; cost of production = Rs 4,31,520; cost of sales = Rs 4,50,912; profit = Rs 1,12,728; sales = Rs 5,63,640]

  15. The company Cooling Limited manufactured and sold 1,000 refrigerators in the year ending on 31 December 1997. The summarized trading, profit and loss account is as follows:

     

    image

     

    For the year ending on 31 December 1998, it was estimated that

    1. Output and sales would be 1,200 refrigerators.
    2. Prices of materials would go up by 20% on the level of the previous year.
    3. Wages would increase by 5%.
    4. Manufacturing cost would rise in proportion to the combined cost of materials and wages.
    5. Selling costs per unit would remain unchanged.
    6. Other expenses would also remain constant.

    You are required to submit a statement to the board of directors showing the price at which the refrigerators should be sold so as to show a profit of 10% on selling price.

    (Madras, 1998)

    [Ans: For 1998, estimated cost – prime cost = Rs 2,66,400; factory cost = Rs 3,33,000; cost of production = Rs 4,23,000; cost of sales = Rs 4,59,000; profit = Rs 51,000; sales = Rs 5,10,000]

  16. For a factory, the following figures have been obtained for 1989:
    Rs
    Cost of materials 3,00,000
    Direct wages 2,50,000
    Factory overheads 1,50,000
    Administration overheads 1,68,000
    Selling overheads 1,12,000
    Distribution overheads 70,000
    Profit 2,10,000

    A work order was executed in 1990 and the following expenses were incurred: materials—Rs 16,000 and wages—Rs 10,000.

    Assuming that in 1990 the rate of factory overheads increased by 20%, distribution overheads went down by 10%, and selling and administration overheads each went up by 12 ½%, at what price should the product be sold so as to earn the same rate of profit on the selling price as in 1989?

    Factory overheads are based on direct wages, whereas all other overheads are based on factory cost.

    (Calicut, B.Com., April 1991)

    [Ans: For 1989, prime cost = Rs 5,50,000; works cost = Rs 7,00,000; cost of production = Rs 8,68,000; cost of sales = Rs 10,50,000; profit = Rs 2,10,000; works overheads to wages = 60%; administrative overheads to works cost = 24%; selling overheads to works cost = 16%; distribution overheads to works cost = 10%. For 1990, prime cost of work order = Rs 26,000; works cost = Rs 33,200; cost of production = Rs 42,164; cost of sales = Rs 51,792; profit = Rs 10,358; sales price = Rs 62,150; profit per cent to sales = 16.67% or 1/6 in both years]

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