Single Output or Unit Costing - Overheads, Cost Accounting B Com Notes | EduRev

Cost Accounting

Created by: Universal Academy

B Com : Single Output or Unit Costing - Overheads, Cost Accounting B Com Notes | EduRev

The document Single Output or Unit Costing - Overheads, Cost Accounting B Com Notes | EduRev is a part of the B Com Course Cost Accounting.
All you need of B Com at this link: B Com

Single/Output/Unit Costing
Unit costing refers to the costing procedure, under which costs are accumulated and analyzed under different elements of cost and then cost per unit is ascertained by dividing the total cost by number of units produced. It is ideally used in case of concerns producing a single article on large scale by continuous manufacture. The units of output are identical. The products are homogenous. Concern using single or output costing produces basically one product or two or more grades of one product.
It is not necessary to maintain separate cost accounts under this system. as all the information required can be obtained only by organizing and analyzing the financial accounts. On dividing the total expenditure incurred by the number of units produced, the cost per unit is ascertained.
This system of costing is suitable for breweries, collieries, cement works, steel, brick making, floor mills etc. In all these cases the unit cost of the article produced requires to be ascertained.

The information on expenditure incurred on material, labour and direct expenses can be available without any special difficulty. The works and administration expenses actually incurred also are included in the total cost. Items of indirect expenses which are paid at periodical intervals are included in cost accounts on the basis of estimates. Selling and distributing expenses are not included in cost sheets since these have no connection with the quantity produced, If, however, it is decided to include them, the same also are estimated on the basis of past experience.

Cost Sheet
Cost sheet is a document which provides for the assembly of the detailed cost of a cost centre or cost unit. It is a periodical statement of cost designed to show in detail the various components of cost of goods produced like prime cost, factory cost, cost of production, total cost and cost per unit. A specimen of a simple cost sheet is given below:

Cost Sheet (or Statement of Cost) for the period.
No. of units produced..

Particulars

Total cost

Cost per unit

Direct Materials

Direct Labour

Direct (or Chargeable) Expenses*

Prime cost

Add: Works Overheads

Works Cost

Add: Administrative Overheads

Cost of Production

Add: Selling and Distribution Overheads

Total Cost or Cost of Sales

 

 

 

 

 

 

 

 

 

 

If possible the cost sheet should have columns for (i) total cost; (ii) percentage to total cost; (iii) cost per unit; and (iv) corresponding figures of the pervious period and clear figures for each element of cost.

Treatment of stock
Stock requires special treatment while preparing a cost sheet. Stock may be of raw materials, work-inprogress and finished goods.

Stock of Raw Materials
If opening stock of raw material, purchase of raw materials and closing stock of raw materials are given, then, raw material consumed can be calculated as follows:
Opening stock of raw materials            —
Add: Purchase of raw materials           —
Less: Closing stock of raw materials   —
Value of raw materials consumed       —

Stock of Work-in-Progress
Work-in-progress is valued at prime cost or works cost basis, but latter is preferred. If it is valued at works or factory cost then opening and closing stock will be adjusted as follows :
Prime cost                                —
Add: Factory overheads            —
Work-in-progress (beginning)   —
Less: Work-in-progress (closing)  —
Works cost    —

Stock of Finished Goods
If opening and closing stock of finished goods are given, then these must be adjusted before calculating cost of goods sold:
Cost of production—
Add: Opening stock of finished goods —
Less: Closing stock of finished goods —
Cost of goods sold —

Uses Of Cost Sheet

  1. It gives total cost and cost per unit for a particular period.
  2. It gives information to management for cost control.
  3. It provides comparative study of actual current costs with the cost of corresponding periods, thus causes of inefficiencies and wastage can be known and suitably corrected by management.
  4. It acts as a guide to manufacture in formulation of suitable and definite policies and in fixing up the selling price.

Items Excluded From Cost Sheet 

The following items are of financial nature and thus not included while preparing a cost sheet.

  1. Cash discount
  2. Interest paid 
  3. Preliminary expenses written off
  4. Goodwill written off
  5. Provision for taxation
  6. Provision for bad debts
  7. Transfer to reserves
  8. Donations
  9. Income tax paid
  10. Dividend paid
  11. Profit/loss on sale of assets
  12. Damages payable at law etc.

Example with Solution
Illustration 1:
The accounts of Pleasant Company Ltd. show for 2012:
Materials Rs 3,50,000; Labour Rs 2,70,000; Factory Overheads Rs 81,000 and Administration Overheads Rs 56,080.
What price should the company quote for a refrigerator? It is estimated that Rs 1,000 in material and Rs 700 in labour will be required for one refrigerator. Absorb factory overheads on the basis of labour and administration overheads on the basis of works cost. A profit of 12½ % on selling price is required.
Solution.
Single Output or Unit Costing - Overheads, Cost Accounting B Com Notes | EduRev

Illustration 2:
From the following data prepare a cost and profit statement of Popular Stoves Manufacturing Co. for the year 2011:
Single Output or Unit Costing - Overheads, Cost Accounting B Com Notes | EduRev

The number of stoves manufactured during the year 2011 was 4,000.
The company wants to quote for a contract for the supply of 1,000 Electric Stoves during the year 2012. The Stoves to be quoted are of uniform quality and make and similar to those manufactured in the previous year ; but cost of materials has increased by 15% and cost of factory labour by 10%.
Prepare a statement showing the price to be quoted to give the same percentage of net profit on turnover as was realised during the year 2011, assuming that the cost per unit of overheads will be the same as in the previous year.
Solution.
Single Output or Unit Costing - Overheads, Cost Accounting B Com Notes | EduRev
Single Output or Unit Costing - Overheads, Cost Accounting B Com Notes | EduRev

Illustration 3:
Following are the particulars for the production of 2,000 sewing machines of Nath Engineering Co. Ltd., for the year 2011:
Cost of Materials Rs. 1,60,000; Wages Rs. 2,40,000; Manufacturing Expenses Rs. 1,00,000; Salaries Rs. 1,20,000; Rent, Rates and Insurance Rs. 20,000; Selling Expenses Rs. 60,000; General Expenses Rs. 40,000 and Sales Rs. 8,00,000.
The company plans to manufacture 3,000 sewing machines during 2012. You are required to submit a statement showing the price at which machines would be sold so as to show a profit of 10% on selling price.
Following additional information is supplied to you:
(a) Price of material is expected to rise by 20%
(b) Wages rates are expected to show an increase of 5%.
(c) Manufacturing expenses will rise in proportion to the combined cost of materials and wages
(d) Selling expenses per unit will remain the same,
(e) Other expenses will remain unaffected by the rise in output.
Solution.
Single Output or Unit Costing - Overheads, Cost Accounting B Com Notes | EduRev
Single Output or Unit Costing - Overheads, Cost Accounting B Com Notes | EduRev

Illustration 4:
In respect of a factory the following figures have been obtained for the year 2011:
Cost of material 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 and Profit Rs. 4,20,000.
A work order has been executed in 2012 and the following expenses have been incurred: Materials Rs. 8,000 and wages Rs. 5,000.
Assuming that in 2012 the rate of factory overheads has increased by 20%, distribution overheads have gone down by 10% and selling and administration overheads have each gone up by 12½%, at what price should the product be sold so as to earn the same rate of profit on the selling price as in 2011?
Factory overhead is based on direct wages while all other overheads are based on factory cost.
Solution.
Single Output or Unit Costing - Overheads, Cost Accounting B Com Notes | EduRev

Illustration 5:
The Managing Director of a small manufacturing concern consults you as to the minimum price at which he can sell the output of one of the departments of the company which is intended for mass production in future. The company’s records show the following particulars for this department for the past year for production and sales of 100 units.
Materials Rs. 14,000; Direct Labour Rs. 7,000; Works Overheads Rs. 7,000; Administration Overheads Rs. 2,800; Selling Overheads Rs. 3,200; Profit Rs. 6,000.
You ascertain that 40% of the works overheads fluctuate directly with production and 70% of the selling overheads fluctuate with sales. It is anticipated that the department would produce 500 units per annum and that direct labour charges per unit will be reduced by 20%, while fixed works overheads will increase by Rs. 3,000. Administration overheads and fixed selling overheads are expected to show an increase of 25% but otherwise no changes are anticipated.
Solution.
Single Output or Unit Costing - Overheads, Cost Accounting B Com Notes | EduRev

Illustration 6:
A factory’s normal capacity is 1,20,000 units per annum. The estimated costs of production are as under:
Direct Materials Rs. 3 per unit; Direct Labour Rs. 2 per unit (subject to a minimum of Rs. 12,000 p.m.).
Overheads—Fixed Rs. 1,60,000 per annum; variable Rs. 2 per unit; semi-variable Rs. 60,000 p.a. upto 50% capacity and an additional Rs. 20,000 for every 20% increase in capacity or part thereof. Each unit of raw material yields scrap which is sold at the rate of 20 paise. In 2012 the factory worked at 50% capacity for the first three months but it was expected that it would work @ 80% capacity for the remaining 9 months.
During the first three months, the selling price per unit was f 12. What should be the price in the remaining nine months to produce a total profit of Rs. 2,18,000?
Solution.
Single Output or Unit Costing - Overheads, Cost Accounting B Com Notes | EduRev

Illustration 7:
From the following particulars of Rosa Ram Ltd. for three months ending 31st March, 2012 prepare:
(a) Cost sheet for the period giving various costs, and
(b) Profit and Loss Account for the quarter showing profit per barrel.
Wages Rs. 12,000, Coal and Oil RS. 11,200, Cooperage, Corks and Shives RS. 4,000, Malt Rs40,000, Hops RS. 10,800, Beer Duty Rs2,80,000, Water RS. 1,000, Rent and Taxes RS. 6,000, By product RS. 3,600, Sugar RS. 14,000, Preservatives RS. 1,600, Other Materials RS. 1,200, Repairs RS. 1,800, Depreciation RS. 1,200, Administration Expenses RS. 24,000, Selling and Distribution Expenses RS. 30,000.
Opening stock of beer RS. 40,500 (300 barrels), Closing stock of beer Rs. 67,500 (500 barrels) Beer Sales RS. 4,98,00Q (2,800 barrels). Beer brewed during the period 3,000 barrels.
Solution.
Single Output or Unit Costing - Overheads, Cost Accounting B Com Notes | EduRev
Single Output or Unit Costing - Overheads, Cost Accounting B Com Notes | EduRev

Illustration 8:
Following figures are collected from the books of the Iron Foundry after the close of the year:
Single Output or Unit Costing - Overheads, Cost Accounting B Com Notes | EduRev
10% of the castings were rejected being not up to the specification and a sum of ₹ 400 was realised on sale as scrap. 10% of the finished castings were found to be defective in manufacture and were rectified by expenditure of additional works overhead charges to the extent of 20% on the proportionate direct wages. The total gross output of casting during the year was 1,000 tons. Find out the manufacturing cost of the saleable casting per ton.
Solution.
Single Output or Unit Costing - Overheads, Cost Accounting B Com Notes | EduRev
∴ Manufacturing cost of the saleable casting per ton is Single Output or Unit Costing - Overheads, Cost Accounting B Com Notes | EduRev

Illustration 9:
A company presently sells an equipment for Rs. 35,000. Increase in prices of labour and material cost are anticipated to the extent of 15% and 10% respectively in the coming year. Material cost represents 40% of cost of sales and labour cost 30% of cost of sales. The remaining relates to overheads. If the existing selling price is retained, despite the increase in labour and material prices, the company would face a 20% decrease in the existing amount of profit on the equipment.
You are required to arrive at a selling price so as to give the same percentage of profit on increased cost of sales, as before. Prepare a statement of profit/loss per unit, showing the new selling price and cost per unit in support of your answer.
Solution.
Single Output or Unit Costing - Overheads, Cost Accounting B Com Notes | EduRev
Profit for the current year = 35,000 - x
∴(₹ 35,000 - x)- (₹ 35,000 - 1.085 x)= 20% of (₹ 35,000 - x) 

or ₹ 35,000 - x - ₹ 35,000 + 1.085 x = ₹ 7,000 - .20 x
or .285 x = ₹ 7,000
Single Output or Unit Costing - Overheads, Cost Accounting B Com Notes | EduRev
Hence Cost of Sales = ₹ 24561.
Current Profit = ₹ 35000 - ₹ 24561 = ₹ 10,439
% of Current profit to Cost of Sales Single Output or Unit Costing - Overheads, Cost Accounting B Com Notes | EduRev
Thus to obtain the same percentage of profit after the anticipated changes, the new selling price should be as follows :
Single Output or Unit Costing - Overheads, Cost Accounting B Com Notes | EduRev
Single Output or Unit Costing - Overheads, Cost Accounting B Com Notes | EduRev

Illustration 10:
A company makes two district types of vehicles A and B. The total expenses during a period as shown by the books of assembly of 600 of A and 800 of B are as under:
Single Output or Unit Costing - Overheads, Cost Accounting B Com Notes | EduRev
Calculate the cost of each vehicle per unit giving reason for the basis c 'apportionment adopted by you.
Solution.
Single Output or Unit Costing - Overheads, Cost Accounting B Com Notes | EduRev

Illustration 11:
From the following particulars prepare a Production Account showing all details of cost and their break up and also calculate gross profit and net profit.
Single Output or Unit Costing - Overheads, Cost Accounting B Com Notes | EduRev
Solution.
Single Output or Unit Costing - Overheads, Cost Accounting B Com Notes | EduRev

Dynamic Test

Content Category

Related Searches

Single Output or Unit Costing - Overheads

,

Free

,

Single Output or Unit Costing - Overheads

,

Summary

,

Viva Questions

,

Extra Questions

,

MCQs

,

video lectures

,

Cost Accounting B Com Notes | EduRev

,

shortcuts and tricks

,

practice quizzes

,

pdf

,

mock tests for examination

,

Important questions

,

Semester Notes

,

Exam

,

past year papers

,

Cost Accounting B Com Notes | EduRev

,

Cost Accounting B Com Notes | EduRev

,

Single Output or Unit Costing - Overheads

,

ppt

,

Previous Year Questions with Solutions

,

Objective type Questions

,

study material

,

Sample Paper

;