Elements of cost sheet. Element Of Cost: Meaning of Cost, Various Elements of Cost, Classification of Cost, Capital and revenue 2022-10-28
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A cost sheet is a document used in cost accounting that shows the various components of the total cost of a product or service. It is an important tool for businesses to understand the various costs involved in producing a product or providing a service, as well as to determine the selling price of the product or service. There are several elements that make up a cost sheet, and they can be grouped into two main categories: direct costs and indirect costs.
Direct costs are those costs that can be directly traced to a specific product or service. Examples of direct costs include raw materials, direct labor, and direct expenses. Raw materials refer to the materials used in the production of a product, such as wood for a piece of furniture or steel for a car. Direct labor refers to the wages paid to workers who are directly involved in the production of a product or service, such as assembly line workers or service providers. Direct expenses are expenses that are directly related to the production of a product or service, such as the cost of fuel for a delivery truck.
Indirect costs, on the other hand, are costs that cannot be directly traced to a specific product or service, but are still necessary for the production process. Examples of indirect costs include indirect labor, indirect expenses, and overheads. Indirect labor refers to the wages paid to workers who are not directly involved in the production of a product or service, such as office staff or maintenance workers. Indirect expenses are expenses that are not directly related to the production of a product or service, such as rent or utilities. Overheads are the costs of running a business, such as office supplies and insurance.
In addition to direct and indirect costs, a cost sheet may also include other elements such as selling and distribution costs and administrative expenses. Selling and distribution costs refer to the costs associated with selling and distributing a product or service, such as marketing and advertising expenses, sales commissions, and shipping costs. Administrative expenses are the costs of running the administrative side of a business, such as salaries for executives and office staff, office supplies, and rent.
Understanding the various elements of a cost sheet is important for businesses because it allows them to accurately determine the cost of producing a product or providing a service, and to set a selling price that will cover their costs and generate a profit. By analyzing the costs on a cost sheet, businesses can identify areas where they can reduce expenses and increase efficiency, which can help them to improve their bottom line.
What is a Cost Sheet?
There is no prescribed format or form of the cost sheet. It is estimated that direct materials required will be of Rs. It can not be treated as part of the product. For that, it employs labour and provides other facilities. These costs are further sub classified as direct and indirect. The production account is usually divided into two parts. Overhead: It is the combination of all indirect materials, indirect labour and indirect expenses.
Element Of Cost: Meaning of Cost, Various Elements of Cost, Classification of Cost, Capital and revenue
Research and development cost Research cost is the cost incurred for the improvement of the existing product or development of new product of methods of new application of materials. For example When an order is received, a manufacturer will have to prepare a mould exclusively for this purpose. It discloses the total cost as well as the cost per unit of the product manufactured during the given period. Profit on sale of investments, fixed assets etc. Such costs can be classified as fixed cost, variable cost and semi variable cost. The preparation of a simple cost statement is illustrated in Illustration: Illustration Simple Cost Statement : From the following information relating to a manufacturing firm for the month of January, prepare cost statement showing total cost per unit- The cost statement can be extended to ascertain the sales value or the profit.
The information required to prepare a cost sheet is gathered from several records in the organization. For example, nails in shoes or furniture. In short, it is a statement prepared on memorandum basis and does not form part of the double entry system in cost accounts. Treatment of Certain Specific Items With Format 1. The general procedure of estimation may be summarised as follows: 1.
Cost Sheet: Definition, Importance, Elements, Format
Using estimated values, you can produce a cost sheet just before the production begins. In case work-in-progress is valued at prime cost, the cost of work-in-progress shall consist of cost of direct materials consumed, direct wages paid and other direct expenses incurred for the work-in-progress. But if sales value is given, the profit will be the difference between sales value and the total cost. X in 1995-96 for which the following expenses were incurred: Rs. Statement of Estimated Cost and Profit for 1991 Estimated output-- 150000 units Total Per unit Materials Rs.
Elements of Cost and Cost Sheet Solved MCQs with PDF Download
It may be in raw or semi manufactured state. It gives you both the total cost and cost per unit of a product. Only the variable costs will come into the picture. Direct wage is a component of prime cost whereas indirect wage is a component of factory overhead. However, there may be several changes in the estimate and the final figures. For instance, nails used in the manufacture of chairs and tables, the glue used in the manufacture of toys, the thread used in stitching garments etc.
Cost Sheet — Definitions All costs incurred or expected to be incurred during a given period are presented in the form of a statement, popularly called cost sheet or statement of cost or production statement. Thousands Sales Less: Cost of goods sold: 1,460 Opening stock of finished goods Cost of goods manufactured Less: Closing stock of finished goods Gross profit Less: Administrative expenses Selling expenses Financial charges Net profit 120 800 920 80 160 140 120 840 620 420 200 Problem 7 A company is manufacturing refrigerators and the following details are furnished in respect of its factory operations for the year ended on December 31, 1995: Work-in-progress on 1st January, 1995 At prime cost Manufacturing expenses Work-in-progress, 31st December, 95 At prime cost Manufacturing expenses Stock of raw materials on 1st January, 95 Purchase of raw materials Direct labor Manufacturing expenses Stock of raw materials on 31st December, 95 Rs. It is not prepared to get the profit or loss. Direct wage is a part of prime cost while indirect wage is a part of factory overhead. Some more advantages given in point wise format: 1. It is of general character and can not be directly identified with a particular cost unit. Cost sheets are more common for production-based businesses, but they also come in handy for service providers.
These expenses are also considered a part of the purchase cost of raw-materials as the raw-materials cannot be physically brought to the purchasing industry without incurring these expenses. It is prepared for each job. It is treated as part of overheads. Variable Overhead The overhead expenses that vary proportionately with the output are variable overhead. You are required to prepare: a.
A historical cost sheet records all the Estimated Cost Sheet In an estimated cost sheet, the business projects the expenses for production, forecasts the profit per item, and uses this information to fix the ideal cost per unit. The elements that constitute the cost of manufacture are known as the elements of cost. The cost of preparing blue print for a production is another example of direct expense. Direct materials Direct wages Prime cost Works overhead Works cost Administration overhead Cost of production Selling overhead Distribution overhead Cost of sales 60,000 50,000 11,000 30,000 1,40,000 33,600 1,73,600 22,400 14,000 2,10,000 30000 + 20% thereof 336 + 12. The information required to prepare a cost sheet is gathered from several records in the organization.
Expenses All costs other than material and labour are termed as expenses. A cost sheet statement consists of prime cost, factory cost, cost involved in the production of goods sold, and total cost. It refers to the material out of which a product is manufactured. Classification of Overhead Cost Sheet: Definition, Importance, Elements, Format What is Cost? Semi-Variable or Semi-Fixed Overhead The overhead expenses that vary with the output but not proportionately are semi-variable or semi-fixed overhead. It helps in cost control by comparison of various elements of cost with the help of standard costing. It is prepared for the purpose of cost determination, cost comparison, pricing, cost control and cost estimation.
Further assume that factory overhead is recovered as a percentage of the wages and administration and selling overhead as a percentage of works cost. Solution Cost Sheet for the Year Output-- 1000 units Total Per unit Rs. Cost is generally measured in monetary terms. You are required to prepare the following: a A schedule of cost of goods manufactured for the year ended on 30th June, 95 b A profit statement for the year ended on 30th June, 95 Solution Schedule of Cost of Goods Manufactured Period-- Year ended on June 30, 1995 Rs. Hire purchase installment paid and other such financial expenses. It is prepared for a short period, say for three or six months while production continuous. These costs vary proportionately with the output.