MAHATMA EDUCATION SOCIETY’S

PILLAI COLLEGE OF ARTS, COMMERCE

AND SCIENCE, NEW PANVEL
(AUTONOMOUS)
(AFFILIATED TO UNIVERSITY OF MUMBAI)

A PROJECT ON CLASSIFICATION OF COSTS AND COST SHEET

FOR THE SUBJECT COST ACCOUNTING (CA) OF SEM – III
B.COM (ACCOUNTING & FINANCE)

NAME:

T.Y.BAF ‘A’

ROLL NO: 5031

SUBMITTED TO THE SUBJECT TEACHER: ABIDA KHAN MA’AM.

ACADEMIC YEAR: 2020-21

SIGNATURE OF PROFESSOR:
 ACKNOWLEDGEMENT

First and foremost, I would thank God for being able to complete this project
with success.
Secondly, I would like to express my deep and sincere gratitude to my project
supervisor, Mrs. Abida Khan, for giving me the opportunity to do project and
providing invaluable guidance throughout the project. It was a great privilege
and honor to work and study under her guidance. I am extremely grateful for
the guidance she has offered me.

I am extremely grateful to my parents for their love and

constant support for me and preparing me for my future. Also, I
express my thanks to my friends and classmates for their valuable
support.

Finally, my thanks go to all the people who have supported me

to complete the project work directly or indirectly.

-Divyanshi Kushwah
 INDEX
Sr. Particulars Pg.
1) Introduction
2) Component Of Cost sheet
3) Cost Sheet
4) Cost Sheet Analysis
5) Suggestions
6) Conclusion
 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.
For determination of total cost of production a statement showing the various elements of cost is
prepared. The period covered by the cost sheet may be a week, a month or so. Separate columns
are provided to show the total cost and cost per unit. In case of multiple products a separate cost
sheet may be prepared for each product. Alternatively, separate columns of total cost and unit
cost may be provided for each product in the same cost sheet. A cost sheet is prepared under
output or unit costing method.
 COMPONENT OF COST SHEET

1. PRIME COST:

The initial cost made for manufacturing a product, i.e., raw material, labor wages and other
production related expenses is termed as Prime Cost.Following is the equation for computing the
prime cost:

Prime Cost= Direct Material + Direct Labor + Direct Expenses.

Where direct material is calculated with the help of the following formula:

Direct Material=Material Purchased + Opening stock of raw material – closing stock of raw
material.

2. WORK COST OR FACTORY COST:

The work cost is calculated by summing up the prime cost with the factory overheads and
simultaneously adjusting the opening and closing stocks of work in progress. It can be denoted
as:

Work Costs= Prime Cost + Factory Overheads + Opening stock of WIP- Closing Stock of WIP.

Factory Overheads= Indirect Material + Indirect labor + Indirect Expenses.

3. INDIRECT MATERIAL:

The indirect material includes all the additional items used for manufacturing products, but not
directly contribute as a raw material for the finished goods. It can be anything like the oil, fuel,
coal, stationery items and other factory utilities.Also, the items which are though directly used
for making a product, but are inexpensive and small, are considered as indirect material. These
include thread, pins, cello tape, nails, nuts, etc.

4. INDIRECT LABOR:

The labour or human resource engaged in all the activities other than manufacturing of goods or
services which are essential to carry out the business and assist the production operations is
called indirect labour.It includes salary paid to managers, cleaning staff, security staff, drivers,
etc.

5. INDIRECT EXPENSES:

All the other overheads which are neither directly contributing to the production operations, nor
they can be termed as labour or material expense, are called indirect expenses.
These include advertisements, depreciation, rent, electricity, insurance, taxes, repairs and
maintenance, etc.

6. COST OF PRODUCTION:

The cost of production includes all the direct and indirect cost, including the material, labour and
other expenses, i.e., production cost, factory cost and office or administration cost.The following
formula denotes the computation of cost of production:

Cost of Production = Work Costs + Administration Overheads.

After making an adjustment of the opening finished goods and the closing finished goods to the
cost of production, we acquire the cost of production of goods sold.

Therefore, cost of goods Sold= Works Costs + Administration Overheads + Finished

Goods(opening) – Finished Goods(closing).

7. TOTAL COST:

The final value of a product or service can be determined after adding all the selling and
distribution expenses to the cost of production of goods sold. The formula to find out the total
cost or cost of sales is:

Total Cost= Cost of Production of Goods Sold + Selling and Distribution Overheads.

If the sales price of the products or service is known, the following method can be used to
determine the profit:
 ADVANTAGES OF COST SHEET

Cost sheet is an essential statement for the organization engaged in the production of goods or
services. Following are some of the benefits of preparing a cost sheet:

1. A cost sheet provides per unit cost of a product or service which the organization incurs
at every stage of business operation, which helps the management to analyse and control
such overheads.
2. It also helps in deciding the selling price of a product or service based on the cost
incurred and profit expected out of it.
3. The cost managers or production managers can study the past figures of the company’s
cost sheet to ensure the efficiency of business operations and for eliminating the non-
productive expenses.
4. It also acts as a base for comparing the actual cost incurred, with that of the estimated or
budgeted cost, to find out any deviations and take the necessary corrective actions.
5. The preparation of a cost statement is an essential document for the application of kaizen
costing in the business.
6. A cost statement provides for the adjustments of the opening and closing stocks of:

 Raw Material;
 Work in Progress;
 Finished Goods.

PURPOSES OF COST SHEET

Cost sheet serves the following purposes:

1. It gives the break-up of total cost under different elements.
2. It shows total cost as well as cost per unit
3. It helps comparison with previous years.
4. It facilitates preparation of tenders or quotations
5. It enables the management to fix up selling price
6. It controls cost.
 PROFORMA OF COST SHEET

The companies which have their production or manufacturing units along with
office premises and also carry out sales and distribution of goods, require a systematic cost
accounting procedure to determine the cost, profit and sales price.

Cost Sheet Of……… For the Period Of…….

PARTICULARS DETAILS TOTAL COST COST/ UNIT

Direct Material( Raw Material Consumed):
Opening stock of Raw Material X
Add: Material Purchased X
Add: Carriage Inward X
X
Less: Closing Stock of Raw Material. (X) X X
Direct Labor X X
Direct Expenses X X
PRIME COST X X
Add: Factory Overheads:
+ Indirect Material X
+ Indirect Labor(wages) X
+ Factory Rent and Rates X
+ Power and Fuel X
+ Factory Lightning and Supervision X
+ Factory/ Works manager salary X
+ Factory Water Supply X
+ Factory Insurance X
+ Factory Stationery X
+ Factory Cleaning X
+ Drawing office Expenses X
+ Depreciation of Plant and Machinery X
+ Cost of Research and Development X
+ Other Factory Expenses. X
X
Less: Sale of Scrap (X) X X
X X
Add: Opening Stock of work-in-progress X X
X X
Less: Closing Stock of Work-in-progress (X) X
Works Cost X X
Add: Office or Administration Overheads:
+ Office Rent and Rates X
+ Office Lightning X
+ Office Stationery X
+ Depreciation on Repairs of office Furniture X
+ Office Salaries X
+ Management Expenses X
+ Office Telephone and Postage Charges X
+ Legal Charges X
+ Bank charges and Commission X
+ Office Cleaning X
+ Audit Fees X
+ Office Insurance X
+ Other Office Expenses X X X
COST OF PRODUCTION X X
Add: Finished Goods(Opening) X
X X
Less: Finished Goods(Closing) (X)
COST OF GOODS SOLD X X
Add: Selling and Distribution Overheads:
+ Salesman Salaries X
+ Salesman Commission X
+ Showroom Expenses X
+ Showroom Rent and Rates X
+ Advertisement X
+ Sales Office Rent and Rates X
+ Travelling Expenses X
+ Warehouse Rent and Rates X
+ Warehouse Staff Salaries X
+ Depreciation and Repairs of Delivery Van X
+ Carriage Outwards X
+ Debt Collection Charges X
+ Other selling and Distribution Expenses X X X
TOTAL COST/ COST OF GOODS SOLD X X
Profit/ Loss(difference of Sales and COGS) X/(X) X
Sales X X