cost accounting - aunja mam
TRANSCRIPT
Unit Or Output Costing (Cost Sheet & Tender Costing)
Introduction
Unit or output costing is used in these industries or factories where standard products are produced from a common process and all the units produced are more or less similar to each other. Unit or output costing is also known as single costing method. Following are the main features of unit or output costing:
(i) Production consists of a single product or a few varieties of the same product,
(ii) Production units should be identical;
(iii) Production is uniform and on continuous basis, and
(iv) Per unit cost has to be determined in this method.
Definitions of Unit or Output Costing
According to J.R. Batliboi, "Output or single cost method is used in business where a standard product is turned out and it is desired to find out the cost of a basic unit of production."
According to Herald J. Wheldon, "Unit of output costing is a method of costing by the units of production, where manufacture is continuous and the units are identical or can be made by means of ratios."
Objectives of Unit or Output Costing
The following are the main objectives of unit or output or single costing:
(i) To know the total cost of production as well as the cost per unit of output,
(ii) To know the profit or loss on the production or output,
(iii) To classify various cost under relevant categories and its detail analysis,
(iv) To facilitate the preparation of tender price or quotation price,
(v) To control the cost of product through comparative statement study of the cost of two or more periods, and
(vi) To analyse the effect of each element of cost on total cost.
Methods of Unit of Output Costing
Following methods are adopted to calculate the unit or output costing:
C Cost Sheet,
C Statement of Cost, and
C Production Account.
It is to be noted that the fundamental principles of preparing above records of unit of output costing are almost same except that of Performa.
1 Unit or Output Costing (Cost Sheet & Tender Costing)
Cost Sheet
Unit or output costing is one of the important objectives of Cost Accounting. For this, it is essential to classify cost into certain constituents or categories. These are known as elements of cost. Elements of cost are:
(i) Direct Material,
(ii) Direct Labour,
(iii) Direct Expenses, and
(iv) Overheads.
(i) Direct Material
(ii) Direct Labour
(iii) Direct Expenses
(iv) Factory Overheads
(v) Office and Administrative Overheads
(vi) Selling and Distribution Overheads
When all the direct materials, direct labour and direct expenses are aggregated, the resultant sum is the prime cost. If we add factory expenses to the prime cost, this will give the factory or works cost and if in the factory cost, office and administrative expenses are added, the result is to the cost of production. If selling and distribution expenses are added to the cost of production, it gives the cost of sales.
It profit is added to the cost of sales, selling price is obtained. This can also be calculated by deducting losses, if any, from the cost of sales.
(i) Direct Material: It is the cost of all the materials which directly enter the product and become part of it. Expenses are such as inward components and primary packing materials. Expenses, such as inward freight, custom and insurance charges are also to be treated as direct material cost.
(ii) Direct Labour Cost: The portion of wages or salaries which can be identified with the charged to a single cost unit is treated as direct labour cost.
(iii) Direct or Chargeable Expenses: This covers all expenses directly incurred and identifiable to the specific unit of production, for example, royalty on production, special tools, special technical assistance for a particular job.
(iv) Factory Overheads: They can be classified into:
C Indirect materials, like lubricants, shop supplies, fuels, etc.
C Indirect labour, like supervision charges, inspection, helpers charges, etc., and
C Indirect expenses, like factory rent, taxes and insurance, electric and water supplies, power, depreciation on factory buildings and machines, etc.
(v) Office and Administrative Overheads: The cost of office maintenance, formulation of policies, direction of organization and controlling the operation of an undertaking which is not related directly to research development, production, distribution or selling activity or function. Examples of office and administrative overheads are general office expenses, postage, stationery, rent of office, auditor's, lawyer's and director's fee etc.
2 Unit or Output Costing (Cost Sheet & Tender Costing)
Prime Cost Factor Cost or
Works CostCost of
ProductionCost of Sales
(vi) Selling and Distributing Overheads: The cost incurred in promoting sales and retaining customers. This includes the cost of process which begins with making the packed product available for dispatch and ends with final sale. Examples are advertising, salaries of salesmen, market research expenses, sales office expenses, normal bad debts, discounts and commissions, expenses of warehouse at the selling point, usual loss in selling, freight outwards, etc.
Cost sheet serves the following objectives:
(i) Quantity or units of produced items in a particular period,
(ii) It reveals the total cost and cost per unit of goods produced,
(iii) Profit and loss statement may also be added in cost sheet,
(iv) It discloses the break-up of total cost into different elements of cost,
(v) Comparison of old record with new one is also possible in cost sheet, and
(vi) It acts as a guide to top management for fixation of selling prices and quotations.
Specimen of a Simple Cost Sheet
Cost Sheet for the period of ……………
Output ……………. Units …………..
ParticularsTotal Cost
(Rs.)
Cost of Per
Unit (Rs.)
Direct Materials - -
Direct Labour - -
Direct or Chargeable Expenses - -
Prime Cost - -
Add: Factory or Works Overheads - -
Factory or Works Cost - -
Add: Office and Administrative
Overheads - -
Cost of Production - -
Add: Selling and Distribution Overheads - -
Total Cost or Cost of Sales - -
Profit or Loss - -
Sales - -
3 Unit or Output Costing (Cost Sheet & Tender Costing)
Accounting Treatment of Stocks
Three types of stocks may be of the following :
C Stocks of raw materials,
C Stock of work-in-progress, and
C Stock of finished goods.
Stock of Raw Material : In order to calculate the value of raw materials consumed during the period of output, opening stock raw materials is added to the raw materials purchased and closing stock is subtracted. This is shown below with assumed figures.
Rs.
Opening stock of raw materials 10,000
Add : Purchases 30,000
40,000
Less : Closing stock of raw materials 8,000
Cost of materials consumed 32,000
Stock of Work-in-Progress : Stock of Work-in-progress is the stock of semi-finished goods. In cost sheet, opening stock of work-in-progress is added in prime cost along with factory or works overheads and closing stock of work-in-progress in subtracted therefore. Thus opening and closing stocks of work-in-progress are adjusted in factory or works cost as shown below:
Rs.
Prime cost 50,000
Add : Factory or works overheads 25,000
Manufacturing cost 75,000
Add : Opening stock of work-in-progress 12,000
Total goods processed during the period 87,000
Less : Closing stock of work-in-progress 10,000
Factory or works cost 77,000
Stock of Finished Goods: In cost sheet, finished goods are adjusted after calculating the cost of production. Opening stock of finished goods is added to the cost of production and closing stock of finished goods is subtracted therefore. The resultant figure is called cost of goods sold. This is illustrated below:
Rs.
Cost of production 1,00,000
Add: Opening stock of finished goods 15,000
Cost of goods available for sale 1,15,000
Less: Closing stock of finished goods 8,000
Cost of goods sold 1,07,000
4 Unit or Output Costing (Cost Sheet & Tender Costing)
The treatment of the stocks of raw materials, work-in-progress and finished goods are illustrated in the following specimen cost sheet:
Cost Sheet for the period …………………..
Output …………… Units …………..
ParticularsTotal Cost
(Rs.)
Cost of Per
Unit (Rs.)
Opening Stock of Raw Materials -
Add: Purchases -
Add: Expenses on Purchases -
-
Less: Closing Stock of Raw Materials -
Cost of Materials Consumed -
Direct Wages - -
Direct Expenses - -
Prime Cost - -
Add: Factory or Works Overheads - -
Add: Opening Stock of Work-in-Progress - -
- -
Less: Closing Stock of Work-in-Progress - -
Factory or Works Cost - -
Add: Office and Administrative Overheads - -
Costs of Production - -
Add: Opening Stock of Finished Goods -
-
Less: Closing Stock of Finished Goods -
Cost of Goods Sold
Add: Selling and Distribution Overheads
Cost of Sales
Profit (or Loss)
Sales
5 Unit or Output Costing (Cost Sheet & Tender Costing)
Items Excluded from Cost Sheet
The following items are of financial nature and thus are not included while preparing of a cost sheet:
Cash discount Interest payment
Preliminary expenditure (written off) Goodwill (written off)
Provision for taxation Provision for bad debts
Transfer to reserves Donations
Income tax paid Payment of dividend
Capital loss on sale of fixed assets Damages payment as per law
Detailed Cost Sheet
Specimen of a Cost Sheet of Kartik Limited Company for the
month of ……………………….
Output ………………. Units
ParticularsTotal Cost
(Rs.)
Cost Per
Unit (Rs.)
Opening stock of raw materials
Add: Purchases
Carriage inward
Customs duty and Octroi
Less: Closing stock of raw materials
Cost of Direct Materials Consumed
Direct labour or Productive wages
Direct or Chargeable expenses
Prime Cost
Add: Works or Factory Overheads:
Indirect materials
Indirect wages
Overtime payment
Fuel and Power charges
Rent and Taxes
Insurance
Lighting
6 Unit or Output Costing (Cost Sheet & Tender Costing)
Supervision
Stationery
Canteen and Welfare expenses
Repairs
Haulage
Salaries to factory manager
Depreciation of plant and machinery
Works expenses
Gas and water charges
Drawing office salaries
Technical director's fees
Laboratory expenses
Factory telephone expenses
Less: Sale of scrap
Add: Operating stock of work-in-progress
Less: Closing stock of work-in-progress
Factory or Works Cost
Add: Office and Administrative Overheads:
Office salaries
Director's fees
Office rent and rates
Office stationery and Printing charges
Salary to managerial staff
Depreciation of office furniture
Office lighting & Heating charges
Establishment charges
Director's travelling expenses
Postage charges
7 Unit or Output Costing (Cost Sheet & Tender Costing)
Legal charges
Audit fees
Depreciation and repair of office equipment and building
Cost of Production
Add: Selling and Distribution Overheads:
Advertising expenses
Showroom expenses
Bad debts
Salaries to salesman's
Packing expenses
Carriage outward
Commission on sales to agents
Counting house salaries
Cost of catalogues or product
Expenses of delivery vans
Collection charges
Travelling expenses
Cost of tenders for product
Warehouse expenses
Sales manager's salaries
Sales director's fees
Showroom expenses
Sales office expenses
Depreciation and Repairs of delivery vans
Expenses of sales branches
Cost of Sales or Total Cost
Profit
Sales
8 Unit or Output Costing (Cost Sheet & Tender Costing)
Problem (1): The following details are extracted from the accounting books of a manufacturer :
Rs.
Material Purchased and Consumed 10,000
Direct Labour Expenses 20,000
Direct Expenses 5,900
Factory Depreciation 100
Repairs and Renewals 200
Insurance 500
Rent, Rates and Taxes 600
Electric Consumption 100
Power 100
Fuel 50
Water 50
Chowkidar's Wages 100
Factory Manager's salary 500
Foreman's Salary 100
Office Stationery 50
General Charges 100
Bank Charges 150
Office Rent 100
Postage & Stamps 40
Telephone & Telegrams 10
Manger's Salary 500
Office Clerk's Salary 200
Advertising 100
Commission to Salesmen 200
Discounts 100
Prepare a Cost Sheet.
Solution :
Cost Sheet
Particulars (Rs.) Total Cost (Rs.)
Materials Consumed 10,000
Labour 20,000 35,000
Direct Expenses 5,000
Prime Cost 35,000
Add: Factory Expenses:
Depreciation 100
9 Unit or Output Costing (Cost Sheet & Tender Costing)
Repairs and Renewals 200
Insurance 500
Rent, Rates and Taxes 600
Electric Charges 100
Power 100
Fuel 50
Water 50
Chow kidar's Wages 100
Manager's Salary 500
Foreman's Salary 100 2,400
Factory or Works Cost 37,400
Add: Administrative Expenses:
Office Stationery 50
General Charges 100
Bank Charges 150
Office Rent 100
Postage and Stamps 40
Telephone and Telegrams 10
Manager's Salary 500
Office Clerk's Salary 200 1,150
Cost of Production 38,550
Add : Selling Expenses:
Advertising
Commission to Salesmen
Discounts
Cost of Sales 38,950
Statement of Cost
Where a statement is prepared to show total cost and the profit or loss, but where it is not desired to find out cost per unit, the statement so prepared is the statement of cost. If from this statement the cost per unit has to be calculated then it can be had by dividing the total cost by the number of units produced. The simple type of statement of cost is as under:
10 Unit or Output Costing (Cost Sheet & Tender Costing)
Problem (2): Prepare a statement of cost from the following particulars for the year 2007:
Opening stock of raw materials Rs. 20,000
Purchases of raw materials Rs. 30,000
Closing stock of raw materials Rs. 15,000
Direct labour Rs. 15,000
Factory overheads Rs. 12,000
Office and administrative overheads Rs. 7,000
Solution :
Statement of Cost for the year 2007
Particulars Total Amount (Rs.)
Opening Stock of raw materials 20,000
Add: Purchases of raw materials 30,000
50,000
Less: Closing stock of raw materials 15,000
35,000
Cost of Materials Consumed 35,000
Direct Labour 15,000
Prime Cost 50,000
Factory Overheads 12,000
Factory Cost 62,000
Office and Administrative Overheads 7,000
Total Cost 69,000
Problem (3): A firm manufactured and sold 1000 typewriters. Its summarized Trading and Profit and Loss Account for the year 2007 is as follows:
Trading and Profit & Loss Account
Rs. Rs.
To Materials 80,000 By Sales 4,00,000
To Direct Wages 1,20,000
To Factory Charges 50,000
To Gross Profit b/d 1,50,000 4,00,000 4,00,000
To Management & By Gross Profit b/d 1,50,000
Staff Salaries 60,000
To Rent, Rates and Taxes 10,000
To General Expenses 20,000
To Selling Expenses 30,000 _______
1,50,000 1,50,000
11 Unit or Output Costing (Cost Sheet & Tender Costing)
For the year 2008, it is estimated that:
(a) Prices of materials rose by 20% on the previous year's level.
(b) Wage rate have risen by 5%.
(c) Factory charges increased by 25%.
(d) Office expenditure remained unaffected.
Prepare a statement showing the price at which the typewriters should be sold so as to yield a profit of 10% on sales.
Solution :
Statement Showing the Price of Typewriters for the year 2008
Particulars Total Amount (Rs.)
Materials 96,000
Direct Wages1,26,00
02,22,000
Prime Cost
2,22,000
Add : Factory Charges 62,500
Factory or Works Cost 2,84,500
Add : Administrative And General Expenses :
Managerial & Staff Salaries 60,000
Rent, Rates & Taxes 10,000
General Expenses 20,000 90,000
Cost of Production 3,74,500
Add : Selling Expenses 30,000
Cost of Sales 4,04,500
Add : Profit (on 10% Sales Price) 44,945
Sales Price 4,49,445
Problem (4): The following figures have been extracted from accounting records of business concern during a month:
Rs.
Stock-in-hand 1-4-2006
Raw Materials 25,000
Finished Goods 17,360
Stock-in-hand 30-4-2006
Raw Materials 26,250
Finished Goods 15,750
Purchases of Raw Materials during the month 21,900
Work-in-Progress 1-4-2006 8,220
Work-in-Progress 30-4-2006 9,100
Sales of Finished Goods 72,310
12 Unit or Output Costing (Cost Sheet & Tender Costing)
Direct Wages 17,150
Works Expenses 8,344
Office Expenses 6,870
Selling and Distribution Expenses 4,210
Prepare a statement of cost for the month of April 2006.
Solution :
Statement of Cost for the Month of April 2006
Particulars Total Amount (Rs.)
Stock of Raw Materials 1-4-2006 25,000
Add: Purchases 21,900
46,900
Less: Stock of Raw Materials 31-4-2006 26,250
Materials Consumed 20,650
Add: Direct Wages 17,150
Prime Cost 37,800
Add: Work Expenses 8,340
46,140
Add: Work-in-progress 1-4-2006 8,220
56,360
Less: Work-in-progress 30-4-2006 9,100
Factory or Works Cost 45,260
Add: Office Expense 6,870
52,130
Add: Stock of Finished goods 1-4-2006 17,360
69,490
Less: Stock of Finished goods 30-4-2006 15,750
Cost of Production 53,740
Add: Selling and Distribution Expenses 4,210
Total Cost 57,950
Add: Profit 14,360
Sales of Finished Goods 72,310
13 Unit or Output Costing (Cost Sheet & Tender Costing)
Problem (5): 15,000 pens of a factory were manufactured during the month of July, 2008 of which 13,500 pens were sold at Rs. 7 per pen. The following figures are obtained from the costing record:
Rs.
Raw Materials Consumed 52,000
Direct Wages 15,600
Works expenses are allocated to production by means of a machine hour rate. This rate for July, 2008 was Rs. 4 per hour and 1,100 machine hours were per cent works cost and selling overheads at Re. 0.25 per cent.
Compile a cost sheet showing:
(i) Cost per unit, and
(ii) Profit for the month.
Cost Sheet for July, 2008
ParticularsAmount
(Rs.)
Cost Per
Unit (Rs.)
(i) Raw Materials Consumed 52,000 3.46
Direct Wages 15,600 1.04
Prime Cost 67,600 4.50
Add: Works Overheads 4,400 0.33
Factory or Works Cost 72,000 4.80
Add: Office Overheads 10,800 0.72
Cost of Production 82,800 5.52
(ii) Cost of Sales and Profit
Cost of Production for 13,500 pens 74,520
(13,500 x 5.52)
Add: Selling Overheads (13,500 x 0.25) 3,375
Cost of Sales 77,895
Sales (13,500 x 7) 94,500
Less: Cost of Sales 77,895
Profit 16,605
14 Unit or Output Costing (Cost Sheet & Tender Costing)
Problem (6): In respect of a factory, the following figures have been extracted for the year 2006:
Rs.
Cost of Materials 6,00,000
Wages 5,00,000
Factory Overheads 3,00,000
Administrative Charges 3,36,000
Selling Expenses 2,24,000
Distribution Charges 1,40,000
Profit 4,20,000
A work order has been executed in 2007 and the following expenses have been incurred.
Rs.
Material 8,000
Wages 5,000
Assuming that in 2007 the rate for factory overheads gone up by 20%. Distribution charges have gone down by 10% , and selling and administration charges have each gone up by 120%, at what price the product should be sold so as to earn the same rate of profit as in 2006.
Factory overheads are based on direct wages and administration selling and distribution charges on Factory Cost.
Solution :
Statement of Cost for the year 2006
Particulars Amount (Rs.)
Cost of Materials 6,00,000
Wages 5,00,000
Prime Cost 11,00,000
Add: Factory Overhead 3,00,000
Factory or Works Cost 14,00,000
Add: Administrative Charges 3,36,000
Cost of Production 17,36,000
Add: Selling expenses 2,24,000
Distribution Charges 1,40,000
Total Cost 21,00,000
Add: Profit 4,20,000
Sales 25,20,000
15 Unit or Output Costing (Cost Sheet & Tender Costing)
Calculations :
Percentage of factory overhead to Wages
(3,00,000 x 100 + 5,00,000) = 60
Percentage of Administration overhead to Factory cost
(3,36,000 x 100 + 14,00,000) = 24
Percentage of Selling overhead to Factory cost
(2,24,000 x 100 + 14,00,000) = 16
Percentage of Distribution overhead to Factory cost
(1,40,000 x 100 + 14,00,000) = 10
Statement of Cost for the year 2007
Particulars Amount (Rs.)
Cost of Materials 8,000
Wages 5,000
Prime Cost 13,000
Add: Factory Overheads 3,600 (1)
Factory or Works Cost 16,600
Add: Administrative Charges 4,462 (2)
Cost of Production 21,062
Add: Selling Charges 2,975 (3)
Distribution Charges 1,494 (4)
Total Cost 25,531
Add: Profit 5,106 (5)
Sales 30,637
Working notes:
(1) 60% of 5,000 = 3,000 + 600 (20% of 3,000) = 3,600
(2) 24% of 16,600 = 3984 + 478 (12% of 3,984) = 4,462
(3) 16% of 16,600 = 2,656 + 319 (12% of 2,656) = 2,975
(4) 10% of 16,600 = 1,660 - 166 (10% of 1,660) = 1,494
(5) Profit @ 20% on Total cost (as per previous year) = 5,106
Production Account
According to G.R. Glower and R.G. Williams, "The production account is used to denote a particular form of manufacturing account prepared in conjunction with the financial accounts in order to show the actual cost of producing the goods manufactured during the period."
The production account is presented in the form of an account based on double entry system. The basic objective of production account is to show the cost of production along with the cost per unit.
16 Unit or Output Costing (Cost Sheet & Tender Costing)
The production account, also known as manufacturing account is used for industries or factories producing Pig iron, yarn and cloth, bricks, coal and coke, etc. The information in this account is presented in form of prime cost, factory or works cost, cost of production, Total cost and profit.
Difference between a Cost Sheet and Production Account
Following are the main differences between a Cost Sheet and a Production Account:
S. No. Cost Sheet Production Account
(i) It is a statement. It is an account based on debit and credit system.
(ii)They provides basis for comparison between two periods.
Production accounts do not provide information for comparison.
(iii) It is helpful in cost control system. It is not helpful in cost control system.
(iv)It is not based on double entry system of book- keeping.
It is based on double entry system of book-keeping.
(v)It is a basic statement and other costing documents are prepared with its help.
It is not so in their case.
(vi)It can be prepared even during the production.
It is prepared only when production is over.
(vii)It is helpful in reconciliation of costing Profit/Loss with that of financial accounts.
In its case, it is not possible.
Problem (7) : The following are the balances of the impersonal ledger of a colliery relating to revenue at the end of the year 2007 :
Rs. Rs.
Wages paid for coal production 5,80,000 Salaries 36,000
Coal for colliery consumption 45,000 Coal sold (including 8,84,000
Timber used in coal production 64,000 colliery) 1,12,000 tons
Ropes used in coal production 12,000 Wages paid for coke making 50,000
Stores used in coal production 76,000 Stores used for coke making 37,000
Royalties paid 42,000 Salaries for coke making 8,000
General charges 70,000 Coke sold (43,500 tons) 5,40,000
The stock of coal at the beginning of the year amounted to 7,000 tons valued at Rs. 5 per ton and at the end of the year 15,000 tons valued at the same rate. The stock of coke at the beginning of the year amounted to 2,000 tons valued at Rs. 10 per ton and at the end of the year 500 tons valued at the same rate. The total production of the colliery was 1,85,000 tons of coal and 42,000 tons of coke; 65,000 tons of coal being used for coke making. Prepare separate production accounts for coal and coke, showing the cost of each item of expense per ton of coal and coke respectively, taking coal used for coke making at cost price.
17 Unit or Output Costing (Cost Sheet & Tender Costing)
Solutions :
Production Account of Coal for the year 2007
(Output: 1,85,000 Tons)
ParticularsCost Per Ton (Rs.)
Amount (Rs.)
ParticularsCost Per Ton (Rs.)
Amount (Rs.)
To Wages 3.14 5,80,000 By Cost of production 5.00 9,25,000
To Coal for colliery consumption 0.24 45,000
To Timber used 0.35 64,000
To Ropes used 0.06 12,000
To Stores used 0.41 76,000
To Royalties 0.23 42,000
To General charges 0.38 70,000
To Salaries 0.19 36,000
5.00 9,25,000 5.00 9,25,000
Tons (Rs.) Tons (Rs.)
To Opening stock 7,000 35,000 By Sales 1,12,000 8,84,000
@ Rs. 5 per ton By Coke production 65,000 3,25,000
To Cost of production 1,85,000 9,25,000 account @
To Profit 3,24,000 Rs.5 per ton
By Closing stock @ 15,000 75,000
Rs. 5 per ton
1,92,000 12,84,000 1,92,000 12,84,000
Production Account of Coke for the year 2007
(Output: 42,000 Tons)
ParticularsCost Per
Ton (Rs.)
Amount
(Rs.)Particulars
Cost Per
Ton (Rs.)
Amount
(Rs.)
To Coal consumed 7.74 3,25,000 By Cost of production 10.00 4,20,000
65,000 tons @ Rs. 5 per ton 42,000 tons
To Wages 1.19 50,000
To Stores used 0.88 37,000
To Salaries 0.19 8,000
10.00 4,20,000 10.00 4,20,000
Tons Amount Tons Amount
(Rs.) (Rs.)
To Opening stock 2,000 20,000 By Sales 43,500 5,40,000
@ Rs. 10 per ton By Closing stock 500 5,000
To Cost of production 42,000 4,20,000 @ Rs. 10 per ton
To Profit 1,05,000
18 Unit or Output Costing (Cost Sheet & Tender Costing)
44,000 5,45,000 44,000 5,45,000
Tender Price or Quotation Price
Quite often the management has to quote prices of its products in advance or has to submit tenders for products to be supplied. For this objective an estimated cost sheet has to be prepared to show the estimated cost of products to be manufactured. In this cost sheet, cost of direct materials, direct labour or wages and overheads are pre-determined on the basis of previous costs after taking in to account the present conditions and also the anticipated changes in the future price.
After the total cost has been estimated, a desired profit is added to arrive at the price to be quoted. Such profit may be given as a percentage of cost or percentage of selling price. In order to calculate the amount of profit, it is easy to assume that figure as 100 on which profit percentage is given and then calculate the amount of profit.
Problem (8): Given:
Total cost = Rs. 30,000
Profit = 20% of cost
Suppose Cost = Rs. 100
Profit = 100 x 20% = Rs. 20
When cost is Rs. 30,000
Profit = 30,000 X 20 / I00 = Rs. 6,000
Profit = Rs. 6,000.
Problem (9): Given:
Total Cost = Rs. 30,000
Profit = 20% of selling price
Suppose Selling price = Rs. 100
Profit = 100 x 20% = Rs. 20
Cost = Selling price – Profit
= 100 – 20 = Rs. 80
So when profit is 20% or 1/5 of selling price, it is 20/80 = 1/4 or 25% of cost. When total cost is Rs. 30,000, the profit will be calculated as follows:
Profit = 30,000 X 25% = Rs. 7,500.
Profit = Rs. 7,500
Problem (10): Given:
Selling price = Rs. 30,000
Profit = 20% of cost
Suppose Cost = Rs. 100
Profit = 100 x 20% = Rs. 20
19 Unit or Output Costing (Cost Sheet & Tender Costing)
Selling price = Cost + Profit
Selling price = 100 + 20 = Rs. 120
So profit of 20% of cost is equal to 20/120 or 1/6 of selling price. Thus, the profit will be calculated as follows:
Profit = Rs. 30,000 X 1/6 = Rs. 5,000
Profit = Rs. 5,000
Problem (11): Mr. Kartik furnishes the following data relating to the manufacture of a standard product during the month of March, 2007 :
Raw materials consumed Rs. 10,000
Direct labour Rs. 6,000
Machine hours worked 600 Hrs.
Machine hour rate Rs. 5
Administrative overheads 20% on factory cost
Selling overhead Re. 0.50 per unit
Unit produced 15,000
Units sold 14,000 at Rs. 4 per unit
You are require to prepare a cost sheet from the above, showing:
(i) the cost per unit,
(ii) cost per unit sold and profit for the period.
Solution:
Cost Sheet of Mr. Kartik for the month of March, 2007
Output: 15,000 Units
ParticularsTotal
(Rs.)
Per Unit
(Rs.)
Direct materials 1,000 0.677
Direct labour 6,00 0.44
Prime Cost 16,000 1.077
Production overheads (600 machine hrs. @ Rs. 5 per hour) 3,000 0.200
Factory or Works Cost 19,000 1.277
Administrative overheads (a 20% on factory cost) 3,800 0.253
Cost of Production 22,800 1.530
Less: Closing stock on 31st March 2007 1,530
(1,000 units @ Rs. 1.53 per units)
Cost of Goods Sold 21,270 1.530
Selling overhead (@ Re. 0.50 for 14,000 units) 7,000 0.500
Cost of Sales 28,270 2.030
20 Unit or Output Costing (Cost Sheet & Tender Costing)
Profit 27,730 1.970
Sales for 14,000 Units 56,600 4.000
Problem (12): On the various items of direct cost for the production of 100 units of a product, a firm has expended the following amount:
Materials Rs. 10,000
Labour Rs. 5,000
Other Expense Rs. 1,000
The expenses incurred in the factory are to be apportioned as 5% of prime cost. Administrative expenses come to 2% of the factory cost. Expenses for sales and distribution are just the half of both factory and administrative expenses. The firm charges a profit of 10% on the sales price and output is 100 units.
Calculate the various costs including the amount of sales and profits.
Solution :
Statement of Cost
Output : 100 Units
ParticularsTotal Cost
(Rs.)Cost Per Unit
(Rs.)
Materials 10,000
Labour 5,000
Other Expenses 1,000 16,000 160.00
Prime Cost 16,000 160.00
Add: Factory Expenses (5% of prime cost) 800 8.00
Factory Cost 16,800 16,800
Add: Administrative Expenses (2% of factory cost) 336 3.36
Cost of Production 17,136 171.36
Add: Selling Expenses (1/2% of Rs. 1,113) 568 5.68
Cost of Sales 17,704 177.04
Add: Profit (10% of Sales price) 1,967 19.67
Sales and Selling Price 19,671 196.71
Problem (13): From the following particulars Prepare a Cost Sheet showing the prime cost, factory cost, administrative cost and selling cost. Also calculate the percentage of factory expenses to wages, percentage of office expenses to factory cost:
Rs.
Stock of raw material on 1st Jan. 2006 20,000
21 Unit or Output Costing (Cost Sheet & Tender Costing)
Stock of raw material on 31st Dec. 2006 10,000
Purchases of raw materials 10,000
Wages 5,000
Factory expenses 1,000
Office and administrative expenses 2,600
Selling expenses 1,300
The firm has to send a tender for the supply of goods. It is estimated that the materials required would cost Rs. 5,000 and the wages Rs. 1,250. The tender is to be made at a net profit of 10% on the cost of sales. State the amount of tender based on the percentages you have calculated.
Solution :
Cost Sheet for the Year 2006
Particulars Amount (Rs.)
Stock of raw materials as on 1-1-2006 20,000
Add: Purchases of raw material 10,000
30,000
Less: Stock of raw materials on 31-12-2006 10,000
Materials Consumed 20,000
Add: Wages 5,000
Prime Cost 25,000
Add: Factory expenses 1,000
Factory Cost 26,000
Add: Office and administrative expenses 2,600
Cost of Production 28,600
Add: Selling expenses 1,300
Cost of Sales 29,900
Calculations for percentages:
(1) Percentage of Factory expenses to Wages
= (1,000 + 5,000) x 100 = 20%
(2) Percentage of Office expenses to Factory cost
= (2,600 26,000) x 100 = 10%
(3) Percentage of Selling expenses to Factory cost
= (1,300 26,000) x 100 = 5%
22 Unit or Output Costing (Cost Sheet & Tender Costing)
Statement Showing Tender Price
Particulars Amount (Rs.)
Direct materials 5,000
Direct labour 1,250 6,250.00
Prime Cost 6,250.00
Add: Factory expenses (20% of Wages) 250.00
Factory Cost 6,500.00
Add: Adminish'ative expenses ( 10% of Factory cost) 650.00
Cost of Production 7,150.00
Add: Selling expenses (5% of Factory cost): 325.00
Cost of Sales 7,475.00
Add: Profit (10% on the Cost of sales) 747.50
Tender Price 8,222,50
Problem (14): The following extract of costing information relates to commodity A for the year ending 31 December, 2007.
Rs.
Purchases of raw materials 60,000
Direct wages 50,000
Rent, rates, insurance and factory on cost 20,000
Factory charges 1,000
Stock- 1 January, 2007
Raw materials 8,000
Finished products - 2000 tons 8,000
Stock 31 December, 2007
Raw materials 12,000
Finished products - 4,000 tons
Work-in-progress 1 January, 2007 2,400
Work-in-progress 31 December, 2007 8,000
Factory supervision cost 4,000
Sales of finished products 1,50,000
Advertising, discount allowed and selling costs Re. 0.40 per ton sold. 32,000 tons of the commodities
23 Unit or Output Costing (Cost Sheet & Tender Costing)
were produced during the period. Prepare a production statement to ascertain:
(a) the cost of the output of the period and the cost per ton of production, and
(b) the net profit.
ParticularsTotal Amount
(Rs.)Cost of Per Ton (Rs.)
Opening Stock of raw materials (01-01-2007) 8,000
Add: Purchases 63,000
71,000
Less: Closing Stock (31-12-2007) 12,000
Materials Consumed 59,000
Direct wages 50,000
Prime Cost 1,09,000
Factory Overheads:
Rent, rates, insurance and factory on cost 20,000
Factory charges 1,000
Factory supervision cost 4,000 25,000
1,34,000
Less: Work-in-progress (31-12- 2007) 8,000
Cost of Production 1,28,400
Add: Stock of finished products (1-1-2007) 8,000
1,36,400
Less: Stock of finished products (31-12-2007) 16,050
(4,000 tons @ Rs. 4.0125 = 16,050)
Cost of Goods Sold (30,000 tons)(2) 1,20,350
Selling Overhead (@ 40 paise for 30,000 Units) 12,000 0.40
Cost of Sales 1,32,350 4.41
Profit 17,650 0.59
Selling Price 1,50,000 5.00
24 Unit or Output Costing (Cost Sheet & Tender Costing)
Working notes:
(1) Cost of production per ton =Rs. 1,28,400 32,000 tons = Rs. 4.0125
(2) Quantity sold = 2,000 tons + 32,000 tons = 34,000 - 4,000 tons = 30,000 tons
Problem (15): The Rajendra Chemicals Company supplies you the following details from its cost records:
Rs.
Stock of raw materials on 1 September, 2007 65,000
Stock of raw materials on 30 September, 2007 90,000
Direct wages 51,000
Indirect wages 3,750
Sales 2,00,000
Work-in-progress on 1-9-2007 28,000
Work-in-progress on 30-9-2007 35,000
Purchases of raw materials 75,500
Factory rent, rates and power 14,000
Depreciation of plant and machinery 3,500
Expenses on purchases 2,000
Carriage outward 1,000
Advertising 5,000
Office rent and taxes 2,500
Travellers wages and commission 6,500
Stock of finished goods on 1-9-2007 54,000
Stock of finished goods on 30-9-2007 31,000
Prepare a cost sheet giving the maximum possible break-up of cost and profit.
Solution:
Cost Sheet of Rajendra Chemicals Company for the year ending- 30-9-2007
Particulars Amount (Rs.)
Stock of raw materials (1-9-2007) 65,000
Add: Purchases 75,500
Expenses on purchases 2,000
1,42,500
Less: Stock of raw material (30-9-2007) 90,000
Materials Consumed 52,500
Direct wages 51,000
Prime Cost 1,03,500
Add: Work-in-progress (1-9-2007) 28,000
25 Unit or Output Costing (Cost Sheet & Tender Costing)
Factory Overheads:
Indirect wages 3,750
Factory, rent rates and power 14,000
Depreciation of plant and machinery 3,500 21,250
1,52,750
Less: Work-in-progress (30-9-2007) 35,000
Factory or Works Cost 1,17,750
Office and Administrative Overheads:
Office rent and taxes 2,500
Cost of Production 1,20,250
Add: Stock of finished goods (1-9-2007) 54,000
1,74,250
Less: Stock of finished goods (30-9-2007) 31,000
Cost of Goods Sold 1,43,250
Selling and Distribution Overheads:
Carriage outward
Advertising 12,500
Travellers wages and commission
Cost of Sales 1,55,750
Profit 44,250
Sales 2,00,000
Problem (16): The following data are available from the cost ledger of Ramesh Industries for the year 2006 :
Rs.
Plant maintenance 25,000
Lighting 6,300
Depreciation on plant 8,100
Rate and taxes for the works 3,900
Staff salaries 32,000
Management salaries 22,000
Power for plant 10,600
Rental for leasehold equipments 9,600
Indirect wages 37,100
Rectification cost of defectives (Normal) 8,400
26 Unit or Output Costing (Cost Sheet & Tender Costing)
Consumable stores 17,600
Selling expenses 30,000
General charges 15,600
Sale proceeds from Scrap 4,200
During the year total production was 1,20,000 units. The break-up of prime cost per unit was: materials Rs. 2.20 and wages Rs.l.80. The average selling price was Rs. 6.75 per unit and entire quantity produced during the year was sold out.
With effect from January I, 2007, the selling price was reduced to Rs. 6.40 per unit. It was envisaged that production could be enhanced during 2007 by 337 per cent without incurring any overtime on extra shift work or additional selling expenses. You are required to prepare statements showing (i) Actual cost and profit for the year 2006. (ii) Estimated cost and profit for 2007 assuming that the entire production will be sold during the year.
Assumptions, if any, required to be made in the above exercise should be clearly stated.
Solution:
Statement of Cost and Profit of Ramesh Industries For the year 2006
Output: 1,20,000 Units
ParticularsTotal Amount
(Rs.)Cost of Per Unit (Rs.)
Materials 2,64,000 2.20
Wages 2,16,000 1.80
Prime Cost 4,80,000 4.00
Variable Charges:
Power for plant 10,600
Rectification cost of defectives 8,400
Consumable stores 17,600
36,200
Less: Sale' of scrap 4,200 32,400 0.27
Total Variable Cost 5,12,400 4.27
Fixed Overheads:
Indirect wages 37,100
Plant maintenance 25,000
Lighting 6,300
Depreciation on plants 8,100
Rates and taxes for works 3,900
Rental for leasehold equipments 9,600 90,000 0.75
Factory or Works Cost 6,02,400 5.02
Office and Selling Overheads:
Staff salaries 32,000
Management salaries 22,000
General charges 15,600 69,600 0.58
Selling expenses 30,000 0.25
27 Unit or Output Costing (Cost Sheet & Tender Costing)
Cost of Sales 7,02,000 5.85
Profit 1,08,000 0.90
Sale and Selling Price 8,10,000 6.75
Statement of Estimated Cost and Profit Of Ramesh Industries For the year 2007 Estimated
Output: 1,60,000 Units
ParticularsTotal Amt.
(Rs.)Cost of Per Unit (Rs.)
Prime Cost @ Rs. 4.00 per unit 6,40,000 4.00
Variable charges less scrap value @ Re. 0.27 per unit 43,200 0.27
Variable Cost 6,83,200 4.27
Fixed Charges:
Works (90,000 + 1,60,000) 90,000 0.56
Office (69,000 + 1,60,000) 69,000 0.43
Selling (30,000 + 1,60,000) 30,000 0.19
Cost of Sales 8,72,200 5.45
Profit 1,51,800 0.95
Sales (1,60,000 X 6.40) 10,24,000 6.40
Working notes:
(i) Estimated output for 2007 is 1,20,000 4/3 = 1,60,000 units.
(ii) Variable charges have been assumed to increase in proportion to the volume of output whereas fixed charges have been assumed to remain constant.
Problem (17): The Mahesh Electrical Limited manufacturers X product. A summary of its activities for 2005 is as follows:
Units Rs.
80,000 8,00,000
Sales
Material inventory : 1.1.2005 50,000
31.12.2005 32,000
Work-in-Progress inventory
1.1.2005 55,000
31.12.2005 72,000
Finished goods: 1.1.2005 16,000 64,000
31.12.2005 24,000
Material purchases 1,42,000
28 Unit or Output Costing (Cost Sheet & Tender Costing)
Direct labour 1,45,000
Manufacturing overheads 1,08,000
Selling expenses 50,000
General and administration expenses 40,000
Calculate:
(a) The current manufacturing cost for the year 2005.
(b) The total cost of goods manufactured (finished), the number of units manufactured (finished) and the cost per unit.
(c) The cost of goods sold for the year presuming the company uses the LIFO inventory costing method for its finished goods inventory.
Solution:
Cost Sheet of Mahesh Electrical Limited for the year 2005
Output: 88,000 units (1)
Particulars Amount (Rs.)
Opening Stock (1-1-2005) 50,000
Add: Purchases 1,42,000
1,92,000
Less: Closing Stock (31-12-2005) 32,000
Materials Consumed 1,60,000
Direct Labour 1,45,000
Prime Cost 3,05,000
Manufacturing Overheads 1,08,000
4,13,000
Add: Opening work-in-progress (1-1-2005) 55,000
4,68,000
Less: Closing work-in-progress (31-12-2005) 72,000
Factory Cost (Cost of Goods Manufactured) 3,96,000
General and Administration Expenses 40,000
Cost of Production 4,36,000
Add: Opening stock of finished goods (1-1-2005) 64,000
5,00,000
Less: Closing stock of finished goods (31-12-2005) 1,03,600 (3)
3,96,400
Selling Expenses 50,000
29 Unit or Output Costing (Cost Sheet & Tender Costing)
Cost of Goods Sold 4,46,400
Net Profit 3,53,600
Sales 8,00,000
Working notes:
(1) No. of units manufactured during the year 2005 :
Sales + Closing stock - Opening Stock 80,000 + 24,000 - 16,000 = 88,000 units
(2) Cost of per unit finished goods = 4,36,000 + 88,000 = Rs. 4.95
(3) Valuation of closing finished stock on UFO basis
16,000 units @ Rs. 4/- = Rs. 64,000
8,000 units @ Rs. 4.95 (2) = Rs. 39,600
Cost of finished stock on 31-12-2005 = Rs. 1,03,600
Problem (18): In respect of Rajesh Limited the following particulars have been extracted for the year 2006 :
Cost of materials Rs. 6,00,000
Direct Wages Rs. 5,00,000
Factory overheads Rs. 3,00,000
Administrative overheads Rs. 3,36,000
Selling overheads Rs. 2,24,000
Distribution overheads Rs. 1,40,000
Profit Rs. 4,20,000
A work order has to be executed in 2007 and the estimated expenses are:
Materials Rs. 8,000, Wages Rs. 5,000
Assuming that in 2007 the rate of factory overheads has gone up by 20%, distribution. overheads have gone down by 10% and selling and administrative overheads have each gone up by 15% at that price should the product be sold as to earn the same rate of profit as in 2006.
Factory overheads are based on wages and administrative, selling and distribution overheads on factory cost.
Particular Amount (Rs.)
Cost of Materials 6,00,000
Direct Wages 5,00,000
Prime Cost 11,00,000
Factory Overheads (60% of Direct wages) 3,00,000
Factory Cost 14,00,000
Administrative Overheads (24% of Factory cost) 3,36,000
Cost Production 17,36,000
Selling Overheads (16% of Factory cost) 2,24,000
Distribution Overheads (10% of Factory cost) 1,40,000
30 Unit or Output Costing (Cost Sheet & Tender Costing)
Cost of Sales 21,00,000
Profit (20% on Total cost or Cost of sales) 4,20,000
Sales 25,20,000
Statement of Estimated Cost and Profit for Work Order in 2007
Particular Amount (Rs.)
Cost of Materials 8,000
Direct Wages 5,000
Prime Cost 13,000
Factory Overheads 3,600
(60% of Wages = 3,000 + 600 (20% of 3,000) = 3,600)
Factory Cost 16,600
Administration Over heads 4,582
(24% of Factory cost = 3,984 + 598 (15% of 3,984) = 4,582)
Cost of Production 21,182
Selling Overheads 3,054
(16% of Factory cost = 2,656 + 398 (15% of 2,656 = 3,054)
24,236
Distribution Overheads 1,494
(10% of Factory cost = 1,660 - 166 (10% of 1,660) = 1,494)
Cost of Sales 25,730
Profit (20% on Cost of sales = 25,730 X 20 + 100) 5,146
Tender Price 30,876
Problem (19): The following informations relating to the year 2007 have been taken from the books of a Pradeep Chemicals works manufacturing and selling a chemical mixture:
Kg. Rs.
Stock on 1-1-2007 :
Stock of raw materials 2,000 2,000
Stock of finished mixture 500 1,750
Stock of factory stores – 7,250
Purchases of raw materials 1,60,000 1,80,000
Purchases of factory stores – 24,250
31 Unit or Output Costing (Cost Sheet & Tender Costing)
Sales' of finished mixture 1,53,000 9,18,000
Sales of factory scrap – 8,170
Factory wages 1,68,650
Power charges 30,400
Depreciation of machinery 18,000
Factory salaries 72,220
Office salaries 37,220
Salaries of selling department 41,500
Direct expenses 28,500
Office expenses 18,200
Selling expenses 18,000
Stock on 31-12-2007 :
Stock of raw materials 1,200 –
Stock of finished mixture 450 –
Stock of factory stores – 5,550
The stock of finished mixture at the end of 207 is to be valued at the factory cost of the mixture for that year. The purchase price of raw materials remained unchanged throughout 2007. Prepare a Production Statement.
Solution:
Statement of Production of Pradeep Chemicals Works
(For the year ending 31st December, 2007)
Particulars Kg. Amount (Rs.)
Stock of raw materials (on 1-1-2007) 2,000 2,000
Add: Purchases of raw materials 1,60,000 1,80,000
1,62,000 1,82,000
Less: Stock of raw materials (on 31-12-2007) 1,200 1,350 (1)
Materials Consumed 1,60,800 1,80,650
Factory wages 1,68,650
Direct expenses 28,500
Prime Cost 3,77,800
Factory Overheads :
Factory stores consumed 25,950 (2)
32 Unit or Output Costing (Cost Sheet & Tender Costing)
Power charges 30,400
Depreciation on machinery 18,000
Factory salaries 72,220
5,24,370
Less : Factory scrap sold 7,800 (3) 8,170
Factory or Works Cost 1,53,000 5,16,200
Office and Administrative Overheads:
Office salaries 37,220
Office expenses 18,200
Cost of Production 1,53,050 5,71,620
Add: Opening stock of finished mixture (on 1-1-2007) 500 1,750
1,53,500 5,71,620
Less: Closing stock of finished mixture (on 31-12-007) 450 1,518 (4)
Cost of Finished Mixture Sold 1,53,050 5,71,852
Selling and Distribution Overheads:
Salaries of selling dept. 41,500
Selling expenses 18,000
Cost of Sales 6,31,352
Profit 2,86,648
Sales 1,53,050 9,18,000
Working notes :
(1) Valuation of closing stock of raw material on 31-12-2007 :
(2) Factory stores consumed = (7,250 + 24,250 – 5,550) = Rs. 25,950
(3) Calculation of Factory scrap sold in Kg.:
Sales of finished mixture in kg. 1,53,050
Add: Closing Stock of finished mixture 450
1,53,500
33 Unit or Output Costing (Cost Sheet & Tender Costing)
Less: Opening Stock o finished mixture 500
Finished mixture produced in Kg. 1,53,000
Factory scrap sold (balance figure in Kg.1,60,800 - 1,53,000) 7,800
Materials consumed in Kg. 1,60,800
(4) Closing Stock of finished mixture :
Problem (20): From the following particulars prepare a Cost Sheet showing the total cost per ton for the period ended 31St December, 2007:
Rs. Rs.
Raw materials 33,000 Loose tools written off 600
Productive wags 35,000 Rent and taxes (office) 500
Direct expenses 3,000 Water supply 500
Unproductive wages 10,000 Factory insurance 1,200
Factory rent and taxes 7,500 Office insurance 500
Factory lighting 2,200 Legal expenses 400
Factory heating 1,500 Rent of warehouse 300
Power 4,400 Depreciation of plant and machinery 2,000
Haulage 3,000 Depreciation of office building 1,000
Director's fee (works) 1,000 Depreciation of delivery vans 200
Director's fee (office) 2,000 Bad debts 100
Factory cleaning 500 Advertising 300
Sundry office expenses 200 Sales department salaries 1,500
Estimating expenses 800 Up-keeping of delivery vans 700
Factory stationery 750 Bank charges 50
Office stationery 900 Commission on sales 1,500
Solution :
Cost Sheet for the year 2007
Output : 14,775 tons
Particulars Amount (Rs.)
Raw materials 33,000
Productive wags 35,000
Direct expenses 3,000
Prime Cost 71,000
34 Unit or Output Costing (Cost Sheet & Tender Costing)
Factory or Work Overheads:
Unproductive wages 10,500
Factory rent and taxes 7,500
Factory lighting 2,200
Factory heating 1,500
Power 4,400
Haulage 3,000
Director's fee (works) 1,000
Factory cleaning 500
Estimating expenses 800
Factory stationery 750
Loose tools written off 600
Water supply 1,200
Factory insurance 1,100
Depreciation of pant and machinery 2,000 37,050
Factory or Works Cost 1,08,050
Office and Administrative Overheads:
Director's fee (office) 2,000
Sundry office expenses 200
Office stationery 900
Rent and taxes (office) 500
Office insurance 500
Legal expenses 400
Depreciation of office building 1,000
Bank charges 50 5,550
Office and Administrative Cost 1,13,600
Selling Overheads:
Rent of warehouse 300
Depreciation of delivery vans 200
Bad debts 100
Advertising 300
Sales department salaries 1,500
35 Unit or Output Costing (Cost Sheet & Tender Costing)
Commission on sales 1,500
Up-keeping of delivery vans 700 4,600
Total Cost 1,18,200
Cost of per ton = 1,18,200 + 17,775 = Rs. 8 per ton.
Problem (21): The following is the costing information of production for the half year ended 30th June, 2005 :
Rs.
Purchases of raw materials 1,32,000
Direct wages 1,10,000
Rent, taxes, insurance and works on cost 44,000
Carriage inwards 1,584
Stock on 1-1-2005 :
Raw materials 22,000
Finished product 1,600 tons 17,600 Stock on 30-6-2005 :
Raw materials 24,464
Finished product 3,200 tons 35,200
Work-in-progress 1-1-2005 5,280
Work-in-progress 30-6-2005 17,600
Cost of factory supervision 8,800
Sales of finished products 3,30,000
Advertising, discounts allowed and selling expenses @ 75 paise per ton, Sold 25,600 tons of commodity were produced during the half year period.
You are required to prepare cost sheet and calculate:
(i) The value of raw materials used,
(ii) The cost of the output for the period,
(iii) The cost of the turnover for the period,
(iv) The net profit for the period, and
(v) The net profit per ton of the commodity.
Solution :
Cost Sheet for the half year ended 30 June, 2005
Particulars Amount (Rs.)
Stock of raw materials on 1-1-2005 22,000
Add: Purchases 1,32,000
1,54,000
36 Unit or Output Costing (Cost Sheet & Tender Costing)
Less: Stock of raw materials 30-6-2005 24,464
(i) Materials Consumed 1,29,536
Direct Wages 1,10,000
Carriage inwards 1,584
Prime Cost 2,41,120
Factory or Works Overhead:
Rent, taxes, insurance and Works on cost 44,000
Factory supervision 8,800
Work-in-progress on 1-1-2005 5,280 58,080
2,99,200
Less: Work-in-progress on 30-6-2005 17,600
(ii) Cost of Output 2,81,600
Cost of Turnover for the period will be calculated as follows:
Opening stock of finished goods on 1-1-2005 17,600
Add: Cost of output 2,81,600
2,99,200
Less: Closing stock of finished goods on 30-6-2005 35,200
2,64,000
Add: Advertising, discounts and selling expenses 18,000
(@ 75 paise per ton on 24,000 tons)
(iii) Cost of Turnover 2,82,000
Sales 3,30,000
Cost of turnover 2,82,000
(iv) Net Profit for the period 48,000
(v) Net Profit per ton (Rs. 48,000 + 24,000 (1) ) 2.0
Working note:
(1) Calculation of total tons for net profit. Tons
Opening stock(1-1-2005) 1,600
Add: Finished goods produced 25,600
27,200
Less: Closing stock (30-6-2005) 3,200
37 Unit or Output Costing (Cost Sheet & Tender Costing)
Total Tons 24,000
Problem (22): From the following particulars, you are required to prepare a statement showing (a) The cost of material consumed (b) Prime cost (c) Factory cost (d) Total cost (e) The percentage of factory on cost to productive wages, and (f) The percentage of general on cost to factory cost.
Rs.
Stock of finished goods 31-12-2005 72,800
Stock of raw material 1-1-2005 33,280
Purchase of raw materials 7,59,200
Productive wages 5,16,800
Stock of finished goods 31st Dec. 2005 78,000
Stock of raw materials 31st Dec. 2005 35,360
Sales of finished goods 15,39,200
Works overhead charges 1,29,200
Office and general charges 70,161
The company is about to send a tender for a large plant. The costing department estimates that the materials required would cost Rs. 52,000 and the wages to workmen for making the plant would cost Rs. 31,200. The tender is to be made at a net profit of 25% on the selling price. Show what the amount of tender would be if based on the above percentage.
Solution:
Statement of Cost for the year 2005
Particulars Amount (Rs.)
Raw Materials
Opening stock on 1-1-2005 33,280
Add: Purchases of raw materials 7,59,200
7,92,480
Less: Closing Stock on 31-12-2005
35,360
(a) Cost of Materials Consumed 7,57,120
Productive wags 5,16,880
(b) Prime Cost 12,74,000
Works overhead charges 1,29,220
(c) Factory or Works Cost 14,03,220
38 Unit or Output Costing (Cost Sheet & Tender Costing)
Office and General expenses 70,161
(d) Total Cost 14,73,381
(e) Percentage of factory on cost to Productive wags is 25% (1) 25%
(f) Percentage of general on cost to Factory cost is 5% (2) 5%
Working notes:
(1) (1,29,220 + 5,16,880) x 100 = 25%
(2) (70,161 + 14,03,220) x 100 = 5%
Particulars Amount (Rs.)
Materials consumed 52,000
Productive wages 31,200
Prime Cost 83,200
Works overheads charges (25% of Productive wages) 7,800 (1)
Factory or Works Cost 91,000
Office and General expenses (5% of the Factory cost) 4,550 (2)
Total Cost 95,550
Net profit (25% of Selling price or 33112% of cost) 31,850 (3)
Tender Price 1,27,400
Working notes:
(1) 31,200 x 25 100 = 7,800
(2) 91,000 x 5 100 = 4,550
(3) 95,550 x 25 100 = 31,850
Problem (23): From the following figures calculate the :
(a) Cost of materials consumed,
(b) Value of output of manufactured goods, and
(c) Percentage of gross profit on sales.
Trading Account
Particular Amount (Rs.) Particular Amount (Rs.)
To Stock finished goods 1,28,000 By Sales 13,44,000
To Stock of raw materials 38,400 By Closing stock of finished goods 1,12,000
To Purchases 3,84,000 By Closing stock of raw materials 44,800
39 Unit or Output Costing (Cost Sheet & Tender Costing)
To Wages 6,40,600
To Carriage inward 32,000
To Gross profit 2,68,800
15,00,800 15,00,000
Solution :
Statement of Cost
Particular Amount (Rs.)
Opening stock of raw materials 38,400
Add: Purchases 3,84,000
Less: Closing stock of raw materials 4,22,400
(a) Cost of Materials Consumed 44,800
Carriage inward Wages 3,77,600
(b) Value of Output en: Manufactured Goods 32,000
(c) Percentage of gross profit on Sale 6,40,600
(2,68,800 13,44,000) 100 = 20% 10,50,200
20%
Problem (24): From the following information, prepare Pig Iron Production Account showing the cost per ton of each:
Stock on 1st January, 2007 : Rs.
Coal 4,720 Coke 3,580Limestone 1,450Iron stone 3,930Sundries 3,930Pig Iron 12,500
Purchase during the years: Coal 21,880Coke 29,470Limestone 4,080Iron stone 18,690Sundries 7,810Sales of slag 10,500General works charges 4,500Sales of Pig Iron 1,20,000Wages 17,000
40 Unit or Output Costing (Cost Sheet & Tender Costing)
Stock on 31st December 2007 : Coal 3,600Coke 2,050Limestone 1,530Iron stone 3,620Sundries 3,010Pig Iron 21,500
The total production of Pig Iron amounts to 32,000 tons.
Solution:
Production Account for Pig Iron
Output: 32,000 Tons
ParticularsCost Per
tons (Rs.)
Amount
(Rs.)Particulars
Cost Per
tons (Rs.)
Amount
(Rs.)
To Coal consumed 0.72 23,000 By Sales of slag 0.33 10,500
To Coke consumed 0.97 31,000 By Cost of production 3.01 96,730
To Limestone consumed 0.12 4,000
To Iron stone consumed 0.59 19,000
To Sundries used 0.27 8,730
To wages 0.53 17,000
To General works charges
0.14 4,500
3.34 1,07,230 3.34 1,07,230
By Opening stock of Pig Iron
12,500 By Sales 1,20,000
To Cost of production 96,730 By Closing stock of Pig
Iron21,500
To Profit 32,270
1,41,500 1,41,500
Problem (25): A manufacturer was required to quote for a contract for the supply of 1,000 electric fans. From the following data, prepare a statement showing the price to be quoted to give the same percentage of net profit on turnover as was realized during the six months.
Rs.
Opening stock of raw materials 35,000
Closing stock of raw materials 4,900
Purchases of materials 52,500
Factory wages 95,000
Factory expenses 17,500
41 Unit or Output Costing (Cost Sheet & Tender Costing)
Establishment expenses 10,000
Completed Stock in hand Ist October, 2006 Nil
Completed Stock in hand 1st October, 2007 35,000
Sales 1,89,000
The number of fans manufactured during the six months was 4,000 including those sold and those in stock at the close of the period. The fans to be quoted for are of uniform quality and make, and similar to those manufactured during the six months. The cost of factory labour had increased by 10 percent and material cost by 15 per cent.
Solution:
Statement of Cost for the Manufacture of 4,000 Electric Fans
Particulars Amount (Rs.)
Opening stock of raw Materials 35,000
Purchases of material 52,500
87,500
Closing stock 4,900
Materials Consumed 82,600
Factory wages 95,000
Prime Cost 1,77,600
Factory expenses 17,500
Factory Cost 1,95,100
Establishment expenses 10,000
Total Cost 2,05,100
Add: Completed opening stock on 1-10-2006 Nil
Cost of Fans Manufactured 2,05,100
Less: Completed closing stock on 01-10-2007 35,000
Cost of Sales 1,70,100
Profit (10% on Sales) 18,900
Sales 1,89,000
Tender Price for 1,000 Electric Fans
Particulars Amount (Rs.)
Materials (1/4 of Rs. 82,600 + 15% of 20,650) 23,748
Wages (1/4 of Rs. 95,000 + 10% of 23,750) 26,125
Prime Cost 49,873
42 Unit or Output Costing (Cost Sheet & Tender Costing)
Factory expenses (1/4 of Rs. 17,500) 4,375
Factory Cost 54,248
Establishment expenses (1/4 of Rs. 10,000) 2,500
Total Cost 56,748
Add: Profit (10% on Sales) 6,305
Tender Price 63,053
Problem (26): From the following particulars, you are required to prepare a statement showing (a) the cost of material used (b) the works cost (c) total cost (d) the percentage of works overheads to wages (e) the percentage of general overheads to work cost:
Rs.
Stock of finished goods 1st January, 2007 56,000
Stock of raw materials 1st January, 2007 25,600
Purchases 5,84,000
Wages 3,97,600
Sales of finished goods 11,84,000
Stock of finished goods 31st December 2007 60,000
Stock of raw materials 31s1 December, 2007 27,200
Works overheads 87,402
Office and general expenses 71,048
The company is about to send a tender for a large plant. The costing department estimate that the materials required would cost Rs. 40,000 and the wages to workmen for making the plant would cost Rs. 24,000. The tender is to be made at a net profit of 20 per cent on the sales.
Show that the amount of tender would be if based on the above percentages.
Solution:
Statement of Cost for the Year ended 31st December, 2007
Particulars Amount (Rs.)
Stock of raw materials (on 1st January, 2007) 25,600
Purchases 5,84,000
6,09,600
Less: Stock of raw materials 31st December 2007 27,200
(a) Materials Consumed 5,82,400
Wages 3,97,600
Prime Cost 9,80,000
Works overheads 87,402
43 Unit or Output Costing (Cost Sheet & Tender Costing)
(b) Factory or Works Cost 10,67,402
Office and General expenses 71,048
(c) Total Cost 11,38,450
Add : Stock of finished goods 1st January, 2007 56,000
11,94,450
Less: Stock of finished goods 31St December, 2007 60,000
Cost of Goods Sold 11,34,450
Profit 49,550
Sales 11,84,000
(a) Percentage of works overheads to Wages 21.98% or 22% (approx.) 22%
(e) Percentage of general overheads to Works Cost 6.6% 6.6%
Statement Showing Tender Price
Particulars Amount (Rs.)
Materials 40,000
Wages 24,000
Prime Cost 64,000
Work overheads (22% of wages) 5,280
Factory or Works Cost 69,280
General overheads (6.6% of works cost) 4,572
Total Cost 73,852
Add: Profit (20% of the Sales = 73,852 X 20 80) 18,463
Tender Price 92,315
Problem (27): Below is mentioned the expenditure in the manufacture of A:
Three months ended
31-12-2006
Raw materials 28,000
Fuel 6,900
Electric power 1,340
44 Unit or Output Costing (Cost Sheet & Tender Costing)
Direct wages 63,500
Repairs of factory 2,400
Haulage 1,060
Light and water charges of factory 400
Rent of factory 2,000
Rates and insurance 300
Salaries and general expenses 7,000
Administrative expenses 5,000
Depreciation charges 2,500
Tons Manufactured - 17,200.
Prepare a cost sheet, showing the cost per item and total cost per ton for the period.
Solution :
Cost Sheet for the three months
Particulars Amount (Rs.)
Raw materials 28,000
Direct wages 63,500
Prime Cost 91,500
Factory Overheads:
Fuel 6,900
Electric power 1,340
Repairs of factory 2,400
Haulage 1,060
Light and water charges 400
Rent of factory 2,000
Rates and insurance 300
Depreciation charges 2,500 16,900
Factory Cost 1,08,400
Office and Administrative Overheads:
Salaries and general expenses 7,000
Administration expenses 5,000 12,000
Total Cost 1,20,400
Calculation of Cost of per ton = 1,20,400 -7 17,200 = Rs. 7.0 7.0
45 Unit or Output Costing (Cost Sheet & Tender Costing)
Problem (28): The accounts of a factory show the following information during the year ended 30th June, 2006 :
Rs.
Materials used 3,00,000
Productive wages 2,50,000
Factory and general expenses 50,000
Administrative expenses 30,000
The factory and general expenses relate to the factory only. You are required to prepare the following statements showing:
(a) Cost of Production,
(b) Percentage of factory and general expenses to productive wags,
(c) Percentage of administrative expenses to factory cost,
(d) The price the company should quote, on the basis of the above information, for the production of a machine requiring materials valued at Rs. 1,000 and wages Rs. 500, so that the price will yield a profit of 25 per cent on the selling price.
Solution:
Particulars Amount (Rs.)
Materials used 3,00,000
Productive wages 2,50,000
Prime Cost 5,50,000
Factory 'and general expenses 50,000
(a) Factory Cost or Cost of Production 6,00,000
Administrative Expenses 30,000
Total Cost 6,30,000
(b) Percentage of factory and general expenses to Productive
wages (50,000 + 2,50,000) X 100 = 20%20%
(c) Percentage of administrative expenses to Factory cost
(30,000 + 6,00,000) X 100 = 5%5%
Statement of Tender Price
Particulars Amount (Rs.)
Materials 1,000
Wages 500
Prime Cost 1,500
46 Unit or Output Costing (Cost Sheet & Tender Costing)
Factory and general expenses ( 20% of Productive wages) 100
Factory Cost 1,600
Administrative expenses (5% of Factory cost) 80
Total Cost 1,680
Add: Profit 25% on Selling price ( 1680 25 + 75) 560
Tender Price 2,240
Problem (29): In 2002 the account of a company manufacturing cars, disclosed following particulars :
Rs.
Materials used 16,00,000
Direct wages 17,40,000
Factory overhead expenses 2,82,000
Establishment and general expenses 2,78,000
You are asked to prepare a cost sheet showing the price at which the company should sale its car during 2003, assuming:
(a) That it is estimated that each car will require materials worth Rs. 2,900 and expenditure in direct wages Rs. 1,200.
(b) That during 2003, the factory overhead expenses will bear the same ratio to direct wages as in 2002.
(c) That the percentage of establishment and general expenses on factory will be the same in 2003 as in 2002.
(d) That the company has decided to earn a profit of 10 percent on the selling price.
Particulars Amount (Rs.)
Materials used 16,00,000
Direct Wages 17,40,000
Prime Cost 33,40,000
Factory overhead expenses
(Percentage with Direct wages = 16.2% )2,82,000
Factory or Works Cost 36,22,000
Establishment and General expenses
(Percentage with Factory cost = 7.7% )2,78,000
Total Cost 39,00,000
Solution :
Statement of Tender Price of Car for the year 2003
47 Unit or Output Costing (Cost Sheet & Tender Costing)
Particulars Amount (Rs.)
Materials 2,900
Direct wages 1,200
Prime Cost 4,100
Factory overhead expenses
(16.2% of Direct wages = (1200X16.2 +100)194
Factory Cost 4,294
Establishment and General expenses
(7.7% of Factory cost = 4294 X 7.7 + 100 )331
Total Cost 4,625
Profit (10% on Selling price = 4625 X 10 + 100) 514
Tender Price for Car 5,139
Problem (30): From the following particulars, write up the Item No. 25 account and find out the value of the tender:
Rs.
Materials used 3,000
Productive wages 2,300
Direct Expenses 250
Provide 60 percent of productive wages for works on cost and 121/2 per cent on works cost for office on cost. Profit to be realized 15 per cent on the tender price.
Solution :
Statement for Value of the Tender of Item No. 25
Particulars Amount (Rs.)
Materials used 3,000
Productive wages 2,300
Direct expenses 250
Prime Cost 5,550
Works-on-cost (60% of Productive wages) 1,380
(2,300 60 100 = 1,380)
Factory or Works Cost 6,930
Office-on-cost (12½ per cent on Works cost)
(6,930 12.5) 100 = 866866
48 Unit or Output Costing (Cost Sheet & Tender Costing)
Total Cost 7,796
Profit (15% on Tender price)
(7,795 15) 1001,376
Tender Price 9,172
Problem (31): Mahesh Company Limited manufactured and sold 1,000 Refrigerators in the year ending 3pt March, 2005. The summarized Trading and Profit and Loss Account is set out below:
Rs. Rs.
To Raw materials 80,000 By Sales 1,20,000
To Direct wages 1,20,000
To Manufacturing exp. 50,000
To Gross profit c/d 1,50,000 _______
4,00,000 4,00,000
To Management and staff salaries 60,000 By Gross profit b/d 1,50,000
To Rent rates and insurance 10,000
To Selling expenses 30,000
To General expenses 20,000
To Net profit 30,000 ______
1,50,00 1,50,00
For the year ending 3pt March, 2005, it is estimated that:
(a) The output and sales will be 1,200 Refrigerators.
(b) The prices of materials will rise by 20 per cent on the previous year's level.
(c) The wage rates will rise by 5 per cent.
(d) Manufacturing expenses will rise in proportion to the combined costs of materials and wages.
(e) Selling cost per unit will remain unchanged.
(f) Other expenses will remain unaffected by the rise in output.
You are required to submit a statement for the Board of Directors showing the price at which refrigerators should be marketed so as to show a profit of 10 per cent on selling price.
Solution :
Cost Sheet for 1,000 Refrigerators
Particulars Total Cost Cost of Per
49 Unit or Output Costing (Cost Sheet & Tender Costing)
(Rs.) Refrigerator (Rs.)
Raw materials 80,000 80
Direct wages 1,20,000 120
Prime Cost 2,00,000 200
Manufacturing expenses 50,000 50
Factory Cost 2,50,000 250
Office Overheads:
Salaries to management and staff 60,000 60
Rent, rates and insurance 10,000 10
General expenses 20,000 20
Cost of Production 3,40,000 340
Selling expenses 30,000 30
Total 3,70,000 370
Cost
Profit 30,000 30
Sales 4,00,000 400
Statement of Tender Price for 1,200 Refrigerators
ParticularsAmount
(Rs.)
Cost of Per Refrigerator (Rs.)
Materials (80,000 1,000 = 80 + 20% of 80 = 96 1,200) 1,15,200 96.00
Direct wages (1,20,000 1,000 = 120 + 5% of 120 = 126 1,200) 1,51,200 126.00
Prime Cost 2,66,400 222.00
.Manufacturing expenses ( 2,66,400 25 + 100) 66,600 55.50
Factory or Works Cost 3,33,000 277.50
Rent, rates and insurance 10,000 8.33
Management and staff salaries 60,000 50.00
General expenses 20,000 16.67
Cost of 4,23,000 352.50
50 Unit or Output Costing (Cost Sheet & Tender Costing)
Production
Selling expenses (30,000 X 1200 + 1000 = 36,000) 36,000 30.00
Total Cost 4,59,000 382.50
Profit 10% on Selling price (4,59,000 X 10 + 90 = 51,000) 51,000 42.50
Sale of Price for Refrigerator 5,10,000 425.00
51 Unit or Output Costing (Cost Sheet & Tender Costing)