COST SHEET: MEANING AND IMPORTANCEDEFINITIONCost sheet is a
statement which shows various components of total cost of a
productUSESClassification and anlaysis of cost components of a
productComparison with previous dataDisplay of unit cost with total
costSelling point finalisation with the help of cost sheet
BASIS OF OF SHEET1. HISTORIC COST2. ESTIMATED COSTHISTORIC
COSTHistoric cost sheet is prepare on the basis of actual cost
incurredESTIMATED COSTEstimated cost sheet is prepared before the
commencement of production on the basis of estimated costIt is used
in quoting tender price of a job or a contract
Importance of cost sheetCost ascertainmentFixation of selling
priceHelp in cost controlFaciltates management decision:Whether to
produce or buy a componentWhat prices to quote in the tenderWhether
to retain or replace an existing machine
COMPONENTS OF TOTAL COSTPRIME COSTDirect material+Direct
wages+Direct Expenses
Direct MaterialMaterial consumed=material purchased+opening
stock of material-closing stock of material
PRIME COST
FACTORY COST/WORKS COST/PRODUCTION COSTFACTORY COST= Prime
cost+Factory OverheadsFactory Overheads consist of cost of indirect
material, indirect wages and indirect expenses incurred in the
factory
Factory Cost is also known as Works Cost or Production Cost or
manufacturing cost
FACTORY COST
WORK- IN -PROGRESSUnits remaining to be completed at the end of
a period are called work in progressAdjustment for WIP to be made
to arrive at net Factory cost/Works costNormally the cost of
incomplete units include direct material, direct labour, direct
expenses and average factory overheads
WORK-IN-PROGRESS
TOTAL COST AND COST SHEETTotal cost of production=Factory
Cost+Office and administration overheads
COST OF GOOD SOLDCost of Goods Sold=Total cost of
Production+Opening stock of Finished Goods-Closing Stock of
Finished Goods
TOTAL COST SHEET
TOTAL COST-COST OF SALESTOTAL COST=Cost of Goods sold+Selling
and Distribution Overheads
SALES= Total Cost+ Profit
COST OF GOODS SOLD
COST OF SALESTOTAL COST=Cost of Goods Sold+Selling and
Distribution Overheads
