What is the primary purpose of a cost sheet in business?

The primary purpose of a cost sheet is to calculate the accurate cost of a product, showing both the total cost and the cost per unit.

Fill in the blank: A cost sheet can be created using either historical cost or ___ costs.

Estimated

Fill in the blank: Total cost consists of several components including prime cost, factory cost, office cost, and ___ cost.

Cost of sales

True or False: Fixed costs vary with the level of production.

False. Fixed costs remain constant regardless of the number of items produced.

How is prime cost calculated?

Prime cost is calculated by adding direct material, direct wages, and direct expenses.

Fill in the blank: Factory cost is the sum of prime cost and ___ overhead.

Factory

What is the significance of comparing current costs with previous per-unit costs?

This comparison helps in identifying any increase in costs, prompting corrective actions.

Fill in the blank: The total cost of production includes the cost of goods sold plus ___ and distribution overheads.

Selling

What limitations does a cost sheet have in terms of accuracy?

Cost sheets involve assumptions and estimates, which, if incorrect, can lead to unreliable cost data and poor decision-making.

What is the final step in preparing a cost sheet?

The final step is to calculate total sales, which is the sum of total cost and profit.

Discuss how a cost sheet aids in decision-making for management.

Management uses the cost sheet to make informed decisions regarding production, purchasing components, or pricing in tenders.