Cost & Management Accounting

By Gourav Kabra

COST SHEET
Illustration 1
From the following particulars, you are required to PREPARE monthly cost sheet of Aditya
Industries:
Amount (₹)
Opening Inventories:
- Raw materials 12,00,000
- Work-in-process 18,00,000
- Finished goods (10,000 units) 9,60,000
Closing Inventories:
- Raw materials 14,00,000
- Work-in-process 16,04,000
- Finished goods ?
Raw materials purchased 1,44,00,000
GST paid on raw materials purchased (ITC available) 7,20,000
Wages paid to production workers 36,64,000
Expenses paid for utilities 1,45,600
Office and administration expenses paid 26,52,000
Travelling allowance paid to office staffs 1,21,000
Selling expenses 6,46,000

Machine hours worked- 21,600 hours

Machine hour rate- ₹ 8.00 per hour
Units sold- 1,60,000
Units produced- 1,94,000
Desired profit- 15% on sales

[Answer: Profit: ₹ 32,80,461]

Illustration 2
Arnav Inspat Udyog Ltd. has the following expenditures for the year ended 31st March, 2021:
Sl. No. Amount (₹) Amount (₹)
(i) Raw materials purchased 10,00,00,000
(ii) GST paid on the above purchases @18%
(eligible for input tax credit) 1,80,00,000
(iii) Freight inwards 11,20,600
(iv) Wages paid to factory workers 29,20,000
(v) Contribution made towards employees’ PF & ESIS 3,60,000
(vi) Production bonus paid to factory workers 2,90,000
(vii) Royalty paid for production 1,72,600
(viii) Amount paid for power & fuel 4,62,000
(ix) Amount paid for purchase of moulds and patterns
(life is equivalent to two years production) 8,96,000
(x) Job charges paid to job workers 8,12,000
(xi) Stores and spares consumed 1,12,000
(xii) Depreciation on:
 Cost & Management Accounting
By Gourav Kabra

Factory building 84,000

Office building 56,000
Plant & Machinery 1,26,000
Delivery vehicles 86,000 3,52,000
(xiii) Salary paid to supervisors 1,26,000
(xiv) Repairs & Maintenance paid for:
Plant & Machinery 48,000
Sales office building 18,000
Vehicles used by directors 19,600 85,600
(xv) Insurance premium paid for:
Plant & Machinery 31,200
Factory building 18,100
Stock of raw materials & WIP 36,000 85,300
(xvi) Expenses paid for quality control check activities 19,600
(xvii) Salary paid to quality control staffs 96,200
(xviii) Research & development cost paid for
improvement in production process 18,200
(xix) Expenses paid for pollution control and
engineering & maintenance 26,600
(xx) Expenses paid for administration of factory work 1,18,600
(xxi) Salary paid to functional mangers:
Production control 9,60,000
Finance & Accounts 9,18,000
Sales & Marketing 10,12,000 28,90,000
(xxii) Salary paid to General Manager 12,56,000
(xxiii) Packing cost paid for:
Primary packing necessary to maintain quality 96,000
For re-distribution of finished goods 1,12,000 2,08,000

(xxiv) Wages of employees engaged in

distribution of goods 7,20,000
(xxv) Fee paid to auditors 1,80,000
(xxvi) Fee paid to legal advisors 1,20,000
(xxvii) Fee paid to independent directors 2,20,000
(xxviii) Performance bonus paid to sales staffs 1,80,000
(xxix) Value of stock as on 1st April, 2020:
Raw materials 18,00,000
Work-in-process 9,20,000
Finished goods 11,00,000 38,20,000
(xxx) Value of stock as on 31st March, 2021:
Raw materials 9,60,000
Work-in-process 8,70,000
Finished goods 18,00,000 36,30,000

Amount realized by selling of scrap and waste generated during manufacturing process – ₹
86,000/-
 Cost & Management Accounting
By Gourav Kabra

From the above data you are required to PREPARE Statement of cost for Arnav Ispat Udyog
Ltd. for the year ended 31st March, 2021, showing
(i) Prime cost,
(ii) Factory cost,
(iii) Cost of Production,
(iv) Cost of goods sold and
(v) Cost of sales.
[Answer: ₹ 10,74,25,200; ₹ 10,80,83,100; ₹ 10,93,05,700; ₹ 10,86,05,700; ₹ 11,35,03,300]

Illustration 3
From the following figures, CALCULATE cost of production and profit for the month of March
2018.

Amount (₹) Amount (₹)

Stock on 1st March, 2018 Purchase of raw materials 28,57,000
- Raw materials 6,06,000 Sale of finished goods 1,34,00,000
- Finished goods 3,59,000 Direct wages 37,50,000
Stock on 31st March, 2018 Factory expenses 21,25,000
- Raw materials 7,50,000 Office & administration expenses 10,34,000
- Finished goods 3,09,000 Selling and distribution expenses 7,50,000
Work-in-process: Sale of scrap 26,000
- On 1st March, 2018 12,56,000
- On 31st March, 2018 14,22,000

[Answer: ₹ 83,96,000; ₹ 29,73,000]

Illustration 4
From the following data of Arnav Metallic Ltd., CALCULATE Cost of production:
Amount (₹)
Repair & maintenance paid for plant & machinery 9,80,500
Insurance premium paid for inventories 26,000
Insurance premium paid for plant & machinery 96,000
Raw materials purchased 64,00,000
Opening stock of raw materials 2,88,000
Closing stock of raw materials 4,46,000
Wages paid 23,20,000
Value of opening Work-in-process 4,06,000
Value of closing Work-in-process 6,02,100
Quality control cost for the products in manufacturing process 86,000
Research & development cost for improvement in production process 92,600
Administrative cost for:
- Factory & production 9,00,000
- Others 11,60,000
Amount realised by selling scrap generated during the manufacturing process 9,200
Packing cost necessary to preserve the goods for further processing 10,200
Salary paid to Director (Technical) 8,90,000
[Answer: ₹ 1,05,48,000]
 Cost & Management Accounting
By Gourav Kabra

Illustration 5
Following information relate to a manufacturing concern for the year ended 31st March,
2019:

(₹)
Raw Material (opening) 2,28,000
Raw Material (closing) 3,05,000
Purchases of Raw Material 42,25,000
Freight Inwards 1,00,000
Direct wages paid 12,56,000
Direct wages-outstanding at the end of the year 1,50,000
Factory Overheads 20% of prime cost
Work-in-progress (opening) 1,92,500
Work-in-progress (closing) 1,40,700
Administrative Overheads (related to production) 1,73,000
Distribution Expenses ₹ 16 per unit
Finished Stock (opening)- 1,217 Units 6,08,500
Sale of scrap of material 8,000

The firm produced 14,000 units of output during the year. The stock of finished goods at the
end of the year is valued at cost of production. The firm sold 14,153 units at a price of ₹ 618
per unit during the year.
PREPARE cost sheet of the firm.

[Answer: Profit ₹ 14,43,606]

Illustration 6
DFG Ltd. manufactures leather bags for office and school purpose. The following information
is related with the production of leather bags for the month of September 2019.
i. Leather sheets and cotton cloths are the main inputs, and the estimated requirement
per bag is two meters of leather sheets and one meter of cotton cloth. 2,000 meter of
leather sheets and 1,000 meter of cotton cloths are purchased at ₹ 3,20,000 and ₹
15,000 respectively. Freight paid on purchases is ₹ 8,500.
ii. Stitching and finishing need 2,000 man hours at ₹ 80 per hour.
iii. Other direct cost of ₹ 10 per labour hour is incurred.
iv. DFG has 4 machines at a total cost of ₹ 22,00,000. Machine has a life of 10 years with
a scrape value of 10% of the original cost. Depreciation is charged on straight line
method.
v. The monthly cost of administrative and sales office staffs are ₹ 45,000 and ₹ 72,000
respectively. DFG pays ₹ 1,20,000 per month as rent for a 2400 sq.feet factory
premises. The administrative and sales office occupies 240 sq. feet and 200 sq. feet
respectively of factory space.
vi. Freight paid on delivery of finished bags is ₹ 18,000.
vii. During the month 35 kg. of leather and cotton cuttings are sold at ₹ 150 per kg.
viii. There is no opening and closing stocks for input materials. There is 100 bags in stock
at the end of the month.
 Cost & Management Accounting
By Gourav Kabra

Required:
PREPARE a cost sheet following functional classification for the month of September 2019.

[Answer: Cost of Sales ₹ 7,26,475]

Illustration 7
From the following data of Arnav Metallic Ltd., CALCULATE Cost of production:
Amount (₹)
Repair & maintenance paid for plant & machinery 9,80,500
Insurance premium paid for plant & machinery 96,000
Raw materials purchased 64,00,000
Opening stock of raw materials 2,88,000
Closing stock of raw materials 4,46,000
Wages paid 23,20,000
Value of opening Work-in-process 4,06,000
Value of closing Work-in-process 6,02,100
Quality control cost for the products in manufacturing process 86,000
Research & development cost for improvement in production process 92,600
Administrative cost for:
- Factory & production 9,00,000
- Others 11,60,000
Amount realised by selling scrap generated during the manufacturing process 9,200
Packing cost necessary to preserve the goods for further processing 10,200
Salary paid to Director (Technical) 8,90,000

[Answer: ₹ 1,05,22,000]

Illustration 8
The following details are available from the books of R Ltd. for the year ending 31st March
2020:
Particulars Amount (₹)
Purchase of raw materials 84,00,000
Consumable materials 4,80,000
Direct wages 60,00,000
Carriage inward 1,72,600
Wages to foreman and store keeper 8,40,000
Other indirect wages to factory staffs 1,35,000
Expenditure on research and development on new production technology 9,60,000
Salary to accountants 7,20,000
Employer’s contribution to EPF & ESI 7,20,000
Cost of power & fuel 28,00,000
Production planning office expenses 12,60,000
Salary to delivery staffs 14,30,000
Income tax for the assessment year 2019-20 2,80,000
Fees to statutory auditor 1,80,000
Fees to cost auditor 80,000
Fees to independent directors 9,40,000
 Cost & Management Accounting
By Gourav Kabra

Donation to PM-national relief fund 1,10,000

Value of sales 2,82,60,000
Position of inventories as on 01-04-2019:
- Raw Material 6,20,000
- W-I-P 7,84,000
- Finished goods 14,40,000
Position of inventories as on 31-03-2020:
- Raw Material 4,60,000
- W-I-P 6,64,000
- Finished goods 9,80,000
From the above information PREPARE a cost sheet for the year ended 31st March 2020.

[Answer: Profit ₹ 24,02,400]

Illustration 9
RTA Ltd. has the following expenditures for the year ended 31st December, 2020:

Amount (₹) Amount (₹)

Raw materials purchased 5,00,00,000
Freight inward 9,20,600
Wages paid to factory workers 25,20,000
Royalty paid for production 1,80,000
Amount paid for power & fuel 3,50,000
Job charges paid to job workers 3,10,000
Stores and spares consumed 1,10,000
Depreciation on office building 50,000
Repairs & Maintenance paid for:
- Plant & Machinery 40,000
- Sales office building 20,000 60,000
Insurance premium paid for:
- Plant & Machinery 28,200
- Factory building 18,800 47,000
Expenses paid for quality control check activities 18,000
Research & development cost paid for improvement
in production process 20,000
Expenses paid for pollution control and engineering
& maintenance 36,000
Salary paid to Sales & Marketing mangers 5,60,000
Salary paid to General Manager 6,40,000
Packing cost paid for:
- Primary packing necessary to maintain quality 46,000
- For re-distribution of finished goods 80,000 1,26,000
Fee paid to independent directors 1,20,000
Performance bonus paid to sales staffs 1,20,000
Value of stock as on 1stJanuary, 2020:
- Raw materials 10,00,000
 Cost & Management Accounting
By Gourav Kabra

- Work-in-process 8,60,000
- Finished goods 12,00,000 30,60,000
Value of stock as on 31stDecember, 2020:
- Raw materials 8,40,000
- Work-in-process 6,60,000
- Finished goods 10,50,000 25,50,000
Amount realized by selling of scrap and waste generated during manufacturing process – ₹
48,000/-

From the above data you are requested to PREPARE Statement of Cost for RTA Ltd. for the
year ended 31st December, 2020, showing (i) Prime cost, (ii) Factory cost, (iii) Cost of
Production, (iv) Cost of goods sold and (v) Cost of sales.

[Answer: ₹ 5,44,40,600; ₹ 5,48,73,600; ₹ 5,49,09,600; 5,50,59,600; ₹ 5,66,49,600]

Illustration 10
Impact Ltd. provides you the following details of its expenditures for the year ended 31st
March, 2021:

Particulars Amount (₹) Amount (₹)

Raw materials purchased 5,00,00,000
GST paid under Composition scheme 10,00,000
Freight inwards 5,20,600
Trade discounts received 10,00,000
Wages paid to factory workers 15,20,000
Contribution made towards employees’ PF & ESIS 1,90,000
Production bonus paid to factory workers 1,50,000
Fee for technical assistance 1,12,000
Amount paid for power & fuel 2,62,000
Job charges paid to job workers 4,50,000
Stores and spares consumed 1,10,000
Depreciation on:
Factory building 64,000
Office building 46,000
Plant & Machinery 86,000 1,96,000
Salary paid to supervisors 1,20,000
Repairs & Maintenance paid for:
Plant & Machinery 58,000
Sales office building 50,000
Vehicles used by directors 20,600 1,28,600
Insurance premium paid for:
Plant & Machinery 31,200
Factory building 28,100 59,300
Expenses paid for quality control check activities 25,000
Research & development cost paid for
improvement in production process 48,200
Expenses paid for administration of factory work 1,38,000
 Cost & Management Accounting
By Gourav Kabra

Salary paid to functional mangers:

Production control 4,80,000
Finance & Accounts 9,60,000
Sales & Marketing 12,00,000 26,40,000
Salary paid to General Manager 13,20,000
Packing cost paid for:
Primary packing necessary to maintain quality 1,06,000
For re-distribution of finished goods 1,12,000 2,18,000
Interest and finance charges paid
(for usage of non- equity fund) 3,50,000
Fee paid to auditors 1,80,000
Fee paid to legal advisors 1,20,000
Fee paid to independent directors 2,40,000
Payment for maintenance of website for online sales 1,80,000
Performance bonus paid to sales staffs 2,40,000
Value of stock as on 1st April, 2020:
Raw materials 9,00,000
Work-in-process 4,00,000
Finished goods 7,00,000 20,00,000
Value of stock as on 31st March, 2021:
Raw materials 5,60,000
Work-in-process 2,50,000
Finished goods 11,90,000 20,00,000

Amount realized by selling of waste generated during manufacturing process – ₹ 66,000/-

From the above data, you are required to PREPARE Statement of cost of Impact Ltd. for the
year ended 31st March, 2021, showing
(i) Prime cost,
(ii) Factory cost,
(iii) Cost of Production,
(iv) Cost of goods sold and
(v) Cost of sales.

[Answer: ₹ 5,35,44,600; ₹ 5,41,91,900; 5,49,23,100; ₹ 5,44,33,100; ₹ 5,94,51,700]

Illustration 11
Following details are provided by M/s ZIA Private Limited for the quarter ending 30
September, 2018:
(i) Direct expenses ₹ 1,80,000
(ii) Direct wages being 175% of factory overheads ₹ 2,57,250
(iii) Cost of goods sold ₹ 18,75,000
(iv) Selling & distribution overheads ₹ 60,000
(v) Sales ₹ 22,10,000
(vi) Administration overheads are 10% of factory overheads
 Cost & Management Accounting
By Gourav Kabra

Stock details as per Stock Register:

Particulars 30.06.2018 30.09.2018

₹ ₹
Raw material 2,45,600 2,08,000
Work-in-progress 1,70,800 1,90,000
Finished goods 3,10,000 2,75,000

You are required to prepare a cost sheet showing:

(i) Raw material consumed
(ii) Prime cost
(iii) Factory cost
(iv) Cost of goods sold
(v) Cost of sales and profit

[Answer: ₹ 12,60,250; ₹ 16,97,500; ₹ 18,25,300; ₹ 18,75,000; ₹ 2,75,000]

Illustration 12
M/s Areeba Private Limited has a normal production capacity of 36,000 units of toys per
annum. The estimated costs of production are as under:

i. Direct Material ₹ 40 per unit

ii. Direct Labour ₹ 30 per unit
(subject to a minimum of ₹ 48,000 p.m.)
iii. Factory Overheads:
(a) Fixed ₹ 3,60,000 per annum
(b) Variable ₹ 10 per unit
(c) Semi-variable ₹ 1,08,000 per annum up to 50% capacity and
additional ₹ 46,800 for every 20% increase in
capacity or any part thereof.
iv. Administrative Overheads ₹ 5, 18,400 per annum (fixed)
v. Selling overheads are incurred at ₹ 8 per unit.
vi. Each unit of raw material yields scrap which is sold at the rate of ₹ 5 per unit.
vii. In year 2019, the factory worked at 50% capacity for the first three months but it wa,s
expected that it would work at 80% capacity for the remaining nine months.
viii. During the first three months, the selling price per unit was ₹ 145.

You are required to:

i. Prepare a cost sheet showing Prime Cost, Works Cost, Cost of Production and Cost of
Sales.
ii. Calculate the selling price per unit for remaining nine months to achieve the total
annual profit of ₹ 8,76,600.

[Answer: Cost of Sales ₹ 6,29,100; ₹ 26,02,800; ₹ 160]

 Cost & Management Accounting
By Gourav Kabra

Illustration 13
XYZ a manufacturing firm, has revealed following information for September, 2019:
1st September 30th September
(₹) (₹)
Raw Materials 2,42,000 2,92,000
Works-in-progress 2,00,000 5,00,000
The firm incurred following expenses for a targeted production of 1,00,000 units during the
month:
(₹)
Consumable Stores and spares of factory 3,50,000
Research and development cost for process improvements 2,50,000
Quality control cost 2,00,000
Packing cost (secondary) per unit of goods sold 2
Lease rent of production asset 2,00,000
Administrative Expenses (General) 2,24,000
Selling and distribution Expenses 4,13,000
Finished goods (opening) Nil
Finished goods (closing) 5000 units
Defective output which is 4% of targeted production, realizes ₹ 61 per unit.
Closing stock is valued at cost of production (excluding administrative expenses)
Cost of goods sold, excluding administrative expenses amounts to ₹ 78,26,000.
Direct employees cost is 1/2 of the cost of material consumed.
Selling price of the output is ₹ 110 per unit.
You are required to:
i. Calculate the Value of material purchased
ii. Prepare cost sheet showing the profit earned by the firm.

[Answer: ₹ 52,50,000; ₹ 13,65,000]

Illustration 14
X Ltd. manufactures two types of pens 'Super Pen' and 'Normal Pen'.
The cost data for the year ended 30th September, 2019 is as follows:
(₹)
Direct Materials 8,00,000
Direct Wages 4,48,000
Production Overhead 1,92,000
Total 14,40,000
It is further ascertained that:
1) Direct materials cost in Super Pen was twice as much of direct material in Normal Pen.
2) Direct wages for Normal Pen were 60% of those for Super Pen.
3) Production overhead per unit was at same rate for both the types.
4) Administration overhead was 200% of direct labour for each.
5) Selling cost was ₹ 1 per Super pen.
6) Production and sales during the year were as follow:
 Cost & Management Accounting
By Gourav Kabra

Production Sales
No. of units No. of units
Super Pen 40,000 Super Pen 36,000
Normal Pen 1,20,000

7) Selling price was ₹ 30 per unit for Super Pen.

Prepare a Cost Sheet for 'Super Pen' showing:

i. Cost per unit and Total Cost
ii. Profit per unit and Total Profit

[Answer: ₹ 22.20; ₹ 7,99,200; ₹ 7.80; ₹ 2,80,800]

Illustration 15
The following data are available from the books and records of Q Ltd. for the month of April
2020:
Direct Labour Cost = ₹ 1,20,000 (120% of Factory Overheads)
Cost of Sales = ₹ 4,00,000
Sales = ₹ 5,00,000
Accounts show the following figures:
1st April, 2020 30th April, 2020
(₹) (₹)
Inventory:
Raw material 20,000 25,000
Work-in-progress 20,000 30,000
Finished goods 50,000 60,000
Other details:
Selling expenses 22,000
General & Admin. expenses 18,000

You are required to prepare a cost sheet for the month of April 2020 showing:
i. Prime Cost
ii. Works Cost
iii. Cost of Production
iv. Cost of Goods sold
v. Cost of Sales and Profit earned.

[Answer: ₹ 2,80,000; ₹ 3,70,000; ₹ 3,60,000; ₹ 4,00,000; ₹ 1,00,000]

Illustration 16
The following data relates to manufacturing of a standard product during the month of
March, 2021:
Particulars Amount (in ₹)
Stock of Raw material as on 01-03-2021 80,000
Work in Progress as on 01-03-2021 50,000
Purchase of Raw material 2,00,000
Carriage Inwards 20,000
 Cost & Management Accounting
By Gourav Kabra

Direct Wages 1,20,000

Cost of special drawing 30,000
Hire charges paid for Plant 24,000
Return of Raw Material 40,000
Carriage on return 6,000
Expenses for participation in Industrial exhibition 8,000
Legal charges 2,500
Salary to office staff 25,000
Maintenance of office building 2,000
Depreciation on Delivery van 6,000
Warehousing charges 1,500
Stock of Raw material as on 31-03-2021 30,000
Stock of Work in Progress as on 31-03-2021 24,000

− Store overheads on materials are 10% of material consumed.

− Factory overheads are 20% of the Prime cost.
− 10% of the output was rejected and a sum of ₹ 5,000 was realized on sale of scrap.
− 10% of the finished product was found to be defective and the defective products
were rectified at an additional expenditure which is equivalent to 20% of
proportionate direct wages.
− The total output was 8000 units during the month.

You are required to prepare a Cost Sheet for the above period showing the:
(i) Cost of Raw Material consumed.
(ii) Prime Cost
(iii) Work Cost
(iv) Cost of Production
(v) Cost of Sales

[Answer: ₹ 2,30,000; ₹ 4,04,000; ₹ 5,41,960; ₹ 5,36,960; ₹ 5,81,960]