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# Format of Cost Sheet

A cost sheet is a statement prepared at periodical intervals of time, which accumulates all the elements of the costs associated with a product or production job. It is used to compile the margin earned on a product or job and forms the basis for the setting of prices on similar products in the future. We shall study the Cost Sheet Format in detail.

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## Cost Sheet Format

A Cost Sheet depicts the following facts:

1. Total cost and cost per unit for a product.
2. The various elements of cost such as prime cost, factory cost, production cost, cost of goods sold, total cost, etc.
3. Percentage of every expenditure to the total cost.
4. Compare the cost of any two periods and ascertain the inefficiencies if any.
5. Information to management for cost control
6. Calculate and summarize the total cost of the product.

### Objects of Cost Sheet

#### 1. For determining the selling price

A cost sheet helps in determination of selling price of a product or of a service. Cost sheet ascertains cost at each stage of the product and also the total cost of the product, where a margin of profit is added and thus the selling price is ascertained.

### Browse more Topics under Fundamentals Of Cost Accounting

#### 2. Facilitating in managerial decision making

Preparation of cost sheet helps managers at various levels in their decision-making process such as

1. to produce or buy a component,
2. what price of goods to quote in the tender,
3. whether to retain or replace an existing machine,
4. how to reduce costs and maximize profit.
5. identify and make decisions whether they need to continue with the product or not.

#### 3. Preparation of budgets

Organizations can prepare a budget with the help of a cost sheet. We can prepare the budget by using the current or previous year’s data.

Based on our existing cost sheet, we can make estimates of our cost for the next financial year. It helps to prepare and make the necessary arrangement of funds for costs of the next financial year

### Elements of Cost

Prime Cost: It comprises of direct material, direct wages, and direct expenses. Alternatively, the Prime cost is the cost of material consumed, productive wages, and direct expenses.

Factory Cost: Factory cost or works cost or manufacturing cost or production cost includes in addition to the prime cost the cost in indirect material, indirect labor, and indirect expenses. It also includes amount or units of WIP or incomplete units at the end of the period.

Cost of Production: When Office and administration cost at the end of the period are added to the Factory cost, we arrive at the cost of production or cost of goods sold. Here, we make an adjustment for opening and Closing finished goods.

Total Cost: Total cost or alternatively cost of sales is the cost of production plus selling and distribution overheads.

### Method of Preparation of Cost Sheet

 Step I Prime Cost =  Direct Material Consumed + Direct Labour + Direct Expenses Direct Material= Material Purchased + Opening stock of raw material-Closing stock of raw material. Step II Works Cost = Prime Cost + Factory Overheads (Indirect Material + Indirect Labour + Indirect Expenses)+opening Work in progress-Closing Work in progress Step III Cost of Production = Works Cost + Office and Administration overheads + Opening finished goods-Closing finished goods Step IV Total Cost = Cost of Production + Selling and Distribution Overheads Profit Sales – Total Cost

## Solved Example for You

From the following information prepare a cost sheet.

 Particulars Amount Direct material-purchased 80000 Direct material -Opening stock 20000 Direct material -Closing Stock 25000 Productive wages 22,000 Direct Expenses 5,000 Consumable stores 4000 Factory manager salary 15000 Unproductive wages 7000 Factory Overheads 12,000 Work-in-progress: Opening stock 13,000 Closing stock 7,000 Office and administration overheads 28,000 Opening stock  of finished goods 5000 Closing stock of finished goods 10000 Selling and distribution overheads 33,000

Company desires a margin of 20%  profit on the cost of sales

Ans.

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