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Preparation of Cost Sheet

Cost sheet is one of the method of unit costing. Detail of cost sheet we will discuss in lesson 7. The format of cost sheet is as under:-

Cost Sheet for the Period___________________

Production __________ Unit

ParticularsAmountAmount
Opening Stock of Raw Material*** 
Add: Purchase of Raw materials*** 
Add: Purchase Expenses*** 
Less: Closing stock of Raw Materials*** 
Raw Materials Consumed*** 
Direct Wages (Labour)*** 
Direct Charges*** 
Prime cost (1) ***
Add :- Factory Over Heads:  
Factory Rent*** 
Factory Power*** 
Indirect Material*** 
Indirect Wages Supervisor Salary*** 
Drawing Office Salary*** 
Factory Insurance*** 
Factory Asset Depreciation*** 
Works cost Incurred ***
Add: Opening Stock of WIP*** 
Less: Closing Stock of WIP*** 
Works cost (2) ***
Add:- Administration Over Heads:-  
Office Rent*** 
Asset Depreciation*** 
General Charges*** 
Audit Fees*** 
Bank Charges*** 
Counting house Salary*** 
Other Office Expenses*** 
Cost of Production (3) ***
Add: Opening stock of Finished Goods*** 
Less: Closing stock of Finished Goods*** 
Cost of Goods Sold  
Add:- Selling and Distribution OH:-  
Sales man Commission*** 
Sales man salary*** 
Traveling Expenses*** 
Advertisement*** 
Delivery man expenses*** 
Sales Tax*** 
Bad Debts*** 
Cost of Sales (5) ***
Profit (balancing figure) ***
Sales ***

Notes:-

  1. Factory Over Heads are recovered as a percentage of direct wages
  2. Administration Over Heads, Selling and Distribution Overheads are recovered as a percentage of works cost.
The document Preparation of Cost Sheet - Overheads, Cost Accounting | Cost Accounting - B Com is a part of the B Com Course Cost Accounting.
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FAQs on Preparation of Cost Sheet - Overheads, Cost Accounting - Cost Accounting - B Com

1. What is a cost sheet and why is it important in cost accounting?
Ans. A cost sheet is a statement that shows the various components of cost incurred in the production of goods or services. It includes details of direct materials, direct labor, and manufacturing overheads. It is important in cost accounting as it helps in determining the total cost of production, analyzing cost behavior, and making informed decisions regarding pricing, profitability, and cost control.
2. What are overheads in cost accounting?
Ans. Overheads in cost accounting refer to the indirect costs incurred in the production process that cannot be directly attributed to a specific product or service. Examples of overheads include rent, utilities, salaries of administrative staff, depreciation of machinery, etc. These costs are allocated to different cost centers or products based on a suitable allocation base, such as machine hours or labor hours.
3. How are overheads allocated in cost accounting?
Ans. Overheads are allocated in cost accounting using a predetermined overhead rate. The predetermined overhead rate is calculated by dividing the estimated total overhead costs for a specific period by the estimated activity level (e.g., machine hours, labor hours) for the same period. This rate is then used to allocate overhead costs to different cost centers or products based on their respective activity levels.
4. What is the purpose of analyzing cost behavior in cost accounting?
Ans. Analyzing cost behavior in cost accounting helps in understanding how costs change in relation to changes in the level of production or activity. It helps in identifying fixed costs, variable costs, and semi-variable costs. This information is essential for budgeting, cost control, pricing decisions, and determining break-even points. It also helps in identifying cost-saving opportunities and improving the efficiency of operations.
5. How does a cost sheet assist in determining the profitability of a product or service?
Ans. A cost sheet provides a detailed breakdown of all the costs incurred in the production of a product or service. By subtracting the total cost from the selling price, the profitability of a product or service can be determined. It helps in identifying the contribution margin, which is the difference between the selling price and the variable cost per unit. This information is crucial in evaluating the profitability of different products or services and making decisions regarding product mix and pricing strategies.
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