Cost Sheet – PGDM – Meena Goyal - Management Accounting 1

Q1) Calculate prime cost from the following information:-

Opening stock of raw material = Rs. 15,500
Purchased raw material = Rs. 65,000
Expenses incurred on raw material = Rs. 3,000
Closing stock of raw material = Rs. 20,000
Wages Rs. 37,600 Direct expenses Rs. 23,400

Q2) The cost of sale of production ‘X’ is made up as follows:-

Raw Material used in manufacturing Rs 6,750

Material used in packing material Rs 500
Material used in selling the product Rs 250
Material used in the factory Rs 150
Telephone expenses in the office Rs 120
Direct Labour required in production Rs 1,000
Labour required for supervision in factory Rs 300
Expenses direct factory Rs 500
Depreciation of plant and machinery Rs 100
Stationery Expenses in office Rs 125
Depreciation of office building Rs 75
Depreciation on delivery van Rs 155
Other Selling expenses Rs 350
Freight on material Rs 500
Advertising Rs 125
Assuming that all products manufactured are sold, what should be the selling price to obtain a
profit of 20% on selling price?

Solution:
Note:
a) Before preparing the cost sheet, the students can segregate the expenses as per their
function.
b) Packaging material is a direct material i.e. the expenses can directly be allocated to the
product.
c) Profit is 20% of selling price means 25% of cost.

Cost Sheet for Product X

Q3) Prepare cost sheet from the following particulars in the book of Mr. Jay
Raw material purchased = Rs. 200,000
Paid freight charges = Rs 10,000
Wages paid to labour = Rs 55,000
Directly chargeable expenses = Rs 20,000
Factory on cost = 20% of prime cost

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General and administrative expenses = 10% of factory cost

Selling and distribution expenses = 15% of cost of goods sold
Profit 20% on sales
Opening stock Closing stock
Raw material 20,000 5,000
Work in progress 27,000 34,000
Finished goods 40,000 48,300
Solution:
Cost Sheet in the books of Mr. Jay

Q4) What will be your answer if in the above question,

a) profit is 20% of cost
b) profit is 15% of sales
c) profit is 15% of cost
d) profit is 10% of sales
e) profit is 10% of cost

Solution:
Profit is 20% of cost

Total Cost of sales 437,000

Add Profit (20 % of Cost) 87,400

Sales 524,400
Profit is 15% of sales
Total Cost of sales 437,000

Add Profit (15% of sales i.e profit is 15/85 of cost) 77,118

Sales 514,118
Profit is 15% of cost

Profit is 10% of sales

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Profit is 10% of cost

Q5) Novel manufacturing works Ltd. manufactures and sold 1000 sewing machines in 2019.
Following are the particulars obtained from the record of the company:
Cost of material Rs. 100,000
Wages paid Rs. 130,000
Manufacturing expenses Rs. 70,000
Salaries Rs. 80,000
Rent, rates and insurance Rs. 15,000
Selling expenses Rs. 35,000
General expenses Rs. 25,000
Sales 5,00,000
The company plans to manufacture 1200 sewing machines in 2020. You are required to submit a
statement showing the price at which the machines would be sold so as to show profit of 10% on
selling price
Additional information:
a) The price of material will rise by 20% on previous year’s level
b) Wage rate rise by 5%
c) Manufacturing expenses will rise in proportion to the combined cost of material and
wages
d) Selling expenses per unit will remain unchanged.
e) Other expenses will remain unaffected by the rise in output
Solution:
Following is the cost sheet for 1000 sewing machines

Following is the estimated cost sheet for 1200 sewing machines

Q6) Calculate prime cost, factory cost, cost of production and cost of sales from the following
particulars.
Direct materials Rs. 40,000 Direct wages Rs. 10,000
Direct expenses Rs. 2,000 Oil and waste Rs. 100
Wages of foreman Rs. 1000 Storekeeper’s wages Rs. 500
Electric power Rs. 200 Consumable stores Rs. 1000
Repairs and renewals - Depreciation -
Factory plant Rs. 500 Office premises Rs. 500
Machinery Rs. 1000 Plant and machinery Rs. 200

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Office premises Rs. 200

Lighting - Rent –
Factory Rs. 500 Factory Rs. 2000
Office Rs. 200 Office Rs. 1000
Manager’s salary Rs. 2000 Director’s fees Rs. 500
Office printing and stationery Rs. 200 Telephone charges Rs. 50
Postage and telegrams Rs. 100 Salesman’s commission Rs. 500
Travelling expenses Rs. 200 Advertising Rs. 500
Warehousing charges Rs. 200 Carriage outward Rs. 150
Solution:

Q7) Prepare a cost sheet from the following data to find out profit and cost per unit
Raw materials consumed Rs. 320,000 Direct wages Rs. 160,000
Factory overheads Rs. 32,000 Selling overheads Rs. 24,000
Units produced 5000 Units sold 4000
Office overheads 10% of factory cost Selling price Rs. 140 per unit
Solution:
Note: Since 5000 units were manufactured and only 4000 units were sold, the closing stock is
valued for 1000 units.

Practice Questions:

1) Explain the concept of cost sheet with its importance

2) What are the different types of cost?
3) Distinguish between Direct and Indirect cost
4) Write a note on behavioral classification of costs
5) Explain the difference between cost centers and cost units with relevant examples.
6) From the following information prepare a cost sheet
Direct material Rs. 160,000
Direct Labour Rs. 50,000
Direct Expenses Rs. 30,000
Factory overheads Rs. 35,000
Office and administration overheads 20% of works cost
Selling and distribution overheads Rs. 50,000
Opening stock of finished goods Rs. 30,000
Closing stock of finished goods Rs. 20,000
Profit on sale 10%

5) Calculate cost of production from the following information:-

Raw material purchased = Rs 42,500
Freight paid = Rs 5,000
Labour charges = Rs 12,500
Direct expenses = Rs 10,000

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Factory overhead 80% of Direct labour charges

Administrative overhead = 10% of work cost

Opening stock Closing stock

Raw material 8,000 10,000
Work in progress 7,500 9,000
6) A factory produces a standard product. The following information is given to you from
which you are required to prepare a cost sheet for January 2019
Raw material consumed Rs. 90,000
Direct wages Rs. 30,000
Other direct expenses Rs. 10,000
Factory overheads 80% of direct wages
Office overheads 10% of works cost
Selling and distribution expenses Rs. 2 per unit sold
Units produced and sold during the month 10,000
Also, find the selling price per unit on the basis that profit mark up is uniformly made to
yield a profit of 20% of the selling price. There was no stock or work – in- progress either
at the beginning or at the end of the year.
7) From the following particulars, prepare a statement showing
a) Cost of material consumed
b) Works cost
c) Cost of production
d) Percentage of works overheads to productive wages
e) Percentage of general overheads to works cost
Stock of materials on 1 Jan 2019 Rs. 50,000
Stock of materials on 31 Dec 2019 Rs. 60,000
Purchase of raw materials during the year Rs. 12,00,000
Productive wages Rs. 450,000
Factory overheads Rs. 200,000
Office and general expenses Rs. 120,000
Stock of finished goods on 1 Jan 2019 Rs. 100,000
Stock of finished goods on 31 Dec 2019 Rs. 120,000
Sales Rs. 25,00,000

Multiple Choice questions:

1) Which of the following is not a manufacturing cost category?
a. Cost of goods sold
b. Direct materials
c. Direct labour
d. Manufacturing overheads

2) Sales commission is classified as

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a. Production overheads
b. Selling and Distribution overheads
c. Works overheads
d. Fixed overheads

3) Following is an example of abnormal cost

a. Loss by fire
b. Advertisement
c. Bad debts
d. Painting expenses

4) Following type of cost vary with the level of activity

a. Semi-variable
b. Fixed
c. Variable
d. None of the above

5) One of the following is not an example of selling and distribution overheads

a. Advertisement
b. Carriage outward
c. Delivery van expenses
d. Power expenses

6) The following balances are taken from the cost sheet of ABC Ltd. manufacturing
company
Raw material purchases Rs. 48
Direct labour Rs. 25
Direct expenses Rs. 12
Indirect labour Rs. 10
Indirect expenses Rs. 5
The prime cost of production is
a. Rs. 37
b. Rs. 60
c. Rs. 85
d. Rs. 100

7) Which of the following are direct costs?

a. Rent of factory
b. Wages of production supervisor
c. Cost of glue attached to label the products
d. Royalty paid to the holder of a patent after each item is produced