RR Cost Sheet

Topic 6 Cost Sheet
Topic
Cost Sheet
Format of Cost Sheet

Particulars Amount
Direct Material Consumed
Direct Employee Cost (Labour Cost)
Direct Expenses
PRIME COST
Add: Factory Overheads
GROSS FACTORY / WORKS COST
Add: Opening stock of Work-in-process
Less: Closing stock of Work-in-process
NET FACTORY / WORKS COST
Add: Quality Control Cost
Add: Research & Development cost (Process related)
Add: Administrative Overheads related with production
Less: Credit for recoveries (by product sale, scrap, miscellaneous income)
Add: Packing Cost (Primary packing)
COST OF PRODUCTION
Add: Opening Stock of Finished Goods
Less: Closing stock of Finished Goods
COST OF GOODS SOLD
Add: Administration Overheads (General)
Add: Selling and Distribution Overheads
COST OF SALES
Add: Profit
SALES
42
Topic 6 Cost Sheet
Important Adjustments
1. Production Quantity
Sales Quantity
Add: Closing Stock of Finished Goods
Less: Opening Stock of Finished Goods
Production Quantity
2. Material Consumed
Opening Stock
Add: Purchases
Less: Closing Stock
Add: Carriage / Freight Inwards
Less: Sale Of Scrap Material
Material Consumed
3. Direct Employee (labour) Cost:

It includes:
a. Wages and salary
b. Allowances and incentives
c. Overtime payment
d. Employers contribution to PF and Other fund
e. Other benefits (leave with pay, leave travel concession etc.)
4. Direct Expenses: it includes

(a) Royalty paid/ payable for production or provision of service;
(b) Hire charges paid for hiring specific equipment;
(c) Cost for product/ service specific design or drawing;
(d) Cost of product/ service specific software;
(e) Other expenses which are directly related with the production of goods or provision of
service.
(f) Cost of utilities such as power & fuel, steam etc.
(g) Fee for technical assistance and know-how;
(h) Amortized cost of molds, patterns, patents etc.
43
Topic 6 Cost Sheet
5. Factory Overheads:
a. Consumable stores and spares.
b. Factory rent
c. Depreciation of plant and machinery, factory building etc.
d. Lease rent of production assets.
e. Repair and maintenance of plant and machinery, factory building etc.
f. Indirect employees cost connected with production activities.
g. Drawing and Designing department cost.
h. Insurance of plant and machinery, factory building, stock of raw material & WIP etc.
i. Amortized cost of jigs, fixtures, tooling etc.
j. Service department cost such as Tool Room, Engineering & Maintenance, Pollution
Control etc.
6. Administration Overheads:
a. Depreciation and maintenance of machines, building, furniture etc. of corporate or
general management.
b. Salary of administrative employees, accountants, directors, secretaries etc.
c. Rent, insurance, lighting, office expenses etc.
7. Administration Overheads related to production will be added before cost of production.

But General Administration Overheads will be added after cost of goods sold along with
Selling and Distribution Overheads.
8. Valuation Of Closing Stock Of Finished Goods

= Production Cost X Closing Stock Quantity
Production Quantity
9. Selling and distribution Overheads:

a. Salary and wages related with sales department and employees directly related with
selling of goods.
b. Rent, depreciation, maintenance and other cost related with sales department.
c. Cost of advertisement, maintenance of website for online sales, market research etc.
d. Salary and wages of employees engaged in distribution of goods.
44
Topic 6 Cost Sheet
e. Transportation and insurance costs related with distribution.

f. Depreciation, hire charges, maintenance and other operating costs related with
distribution vehicles etc.
10. If production cost i.e. material cost, labour cost, factory overheads are given per unit.
Then we will multiply production cost per unit by production quantity.
11. If selling OH are given per unit then we will multiply selling OH per unit by Sales
Quantity
12. While calculating cost per unit:

a. Production cost – consider production quantity
b. After production cost – consider sales quantity
c. Opening stock and closing stock per unit - nil
13. Sale of Scrap (production wastage) will be adjusted before Cost of Production.
14. Packing Cost (primary): Packing material which is essential to hold and preserve the
product for its use by the customer.
15. Packing cost (secondary): Packing material that enables to store, transport, inform the
customer, promote and otherwise make the product marketable.
16. Interest and other finance costs- Not considered in cost sheet
17. Cost of rectification of defective will be treated as production overheads cost.
18. GST paid under Composition scheme, GST paid by unregistered dealer – credit not
allowed, hence GST paid will be added in cost of material.
19. Fee paid to legal advisors – General Administration OH
20. Payment for maintenance of website for online sales – Selling OH
21. Carriage on return – factory OH
22. Expenses for participation in Industrial exhibition – selling OH
45

RR Cost Sheet

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Topic 6 Cost Sheet

Format of Cost Sheet

3. Direct Employee (labour) Cost:

4. Direct Expenses: it includes

7. Administration Overheads related to production will be added before cost of production.

8. Valuation Of Closing Stock Of Finished Goods

9. Selling and distribution Overheads:

e. Transportation and insurance costs related with distribution.

12. While calculating cost per unit:

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