cost ascertainment
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Cost Ascertainment
Cost
Amount of Expenditure (actual or notional) incurred or attributable to a given thing- material purchased
Cost Object
Anything for which a measurement of cost is desired
It could be a product, Service, Customer, Brand, Activity, Department
Cost Assignment
Tracing Accumulated Costs that have direct relationship to a cost object & allocating accumulated costs that have an indirect relationship to a cost object
Allocation & Apportionment
Cost Accumulation
Collection of Cost Data in some organized way by means of an accounting system
Keeping Cost Accounts
Cost Unit
A unit of Quantity of product, service or time in relation to which costs may be expressed It is unit of Measurement of Cost
Automobile -numberCloth -metreSugar -QuintalTele-call -minute/secondsPower -KW/HTransport T/KM
Cost Centre
•A Location, person ,or item of equipment or group of these for which costs may be ascertained and used the purpose of Cost Control
Personal or Impersonal Cost CentreProduction And Service Cost CentreOperation and Process Cost Centre
Components Of Total Cost
Prime Cost –Total Of DMC,DLC & DE
Factory Cost orWorks Cost - Prime Cost +Factory Overheads
Office Or COP- Factory Cost +AOH
Total Cost - COP+ Selling & Distribution OH
Prime Cost
F Cost
COPcos
D Materials
D .Labour
D. Expenses
Prime Cost F. Overhead
F Cost
A.Overhead
COP
SD overhead
cosPROFIT
salesCost Accumulation
PrimeCost
Components Of Total Cost
Direct Materials+ Direct Labor+Direct Expenses
Prime Cost+Factory Over Heads
Factory Cost+Administration Overheads
COP+SD Overheads
Prime Cost OrDirect Cost
Factory Or Works OrManufacturing Cost
Office Cost OrCost Of Production
Total Cost OrCost Of Sales
Cost Of Sales+Profit
Selling Price Or Sales
Cost Sheet
Reveals Total Cost Of Production Per Unit
Discloses Break Up Of Total Cost
Helps in Preparation Of Estimate
Helps in Fixing Sales Price
Comparison Of Costs
Few Instructions for Preparation Of Cost Sheet
Particulars Total (Rs.)
Per Unit (Rs.)
Opening Stock of Raw Materials
Add : Purchases
Expenses on Purchases
Less: Closing Stock of Raw Materials
Value of raw materials consumed
Director Labour
Direct Expenses
Prime Cost Factory Overheads :
Add OP stock OF WIP
Less Cl. Stock of WIP
Factory Cost Office & Administration Overheads
+ Opening Stock Of FG
-Cl Stock Of FG
Cost of ProductionSelling and distribution Overheads
Cost of Sales Profit
Sales
COST SHEETName of the Company ----------------------------
Cost Sheet of (Name of the Product) ----------------- For the period ending ------------------------------
Units--
Production Account/Statement
Particulars Amount Rs Particulars
Amount Rs
To Direct Materials Cons.To Direct Lab ourTo Direct Expenses Prime Cost ------------
To Factory Overheads Factory Cost ---------- To O A Overheads
To Cost Of Prod b/d -----------
To Opening Stock Of FG
To Cost Of Goods Sold b/d ---------
To SD OverheadsTo Cost Of Sales b/dTo Profit ---------
By Cost Of Production C/d ------------
By CL Stock Of FG
By Cost Of Goods Sold C/d
By Cost Of Sales Sales c/d
By Sales
Preparation Of Cost Sheet
1 Computation Raw Materials Consumed2 Computation Of Value of Work In Progress3 Computation Of Value Of Finished Materials4 Computation Of Profit5 Estimation Of Overheads6 Treatment Of Scrap/By Product7 Treatment Of Shortage of FG8 Treatment Of Subsidy
Preparation Of Cost Sheet
1 Computation Of Raw Materials Consumed
Opening Stock Of Raw Materials ---------Add Purchases Of Raw Materials --------- Expenses On Purchase -------- ------------Less Closing Stock Of Raw Materials----- Defective Materials Returned ----- Abnormal Wastage Of RM ------
Cost Of Raw Materials Consumed
Opening Stock Of Raw Materials ---------Add Purchases Of Raw Materials --------- Expenses On Purchase -------- ------------Less Closing Stock Of Raw Materials----- Defective Materials Returned ----- Abnormal Wastage Of RM ------
Cost Of Raw Materials Consumed
Opening Stock Of Raw Materials ---------Add Purchases Of Raw Materials --------- Expenses On Purchase -------- ------------Less Closing Stock Of Raw Materials----- Defective Materials Returned ----- Abnormal Wastage Of RM ------ ----------
Cost Of Raw Materials Consumed ------------
Preparation Of Cost Sheet
2 Computation Of Value Work In Progress Consists of
• Cost Of Materials To date• Cost Of Labor to date• Factory Overheads to date
Valued At Factory Cost
Prime CostAdd Opening Stock Of WIP
Less Closing Stock Of WIP Factory Cost
Value At Prime Cost
Direct MaterialsDirect LabourDirect Expenses+OP Stock Of WIP-CL Stock Of WIP Prime Cost
Preparation Of Cost Sheet
3 Computation Of Value Of Finished Materials
Cost Of Production ---Add Opening Stock Of FG---Less Closing Stock Of FG---- Cost Of Goods Sold
Preparation Of Cost Sheet
4 Computation Of Profit
1 Profit As % of Cost( Total Cost Given)
Profit=Cost x Profit% 1002 Profit as a percentage of Selling Price (Total Cost is given)
Profit=Cost X Profit% 100-profit%3 Profit as percentage Of Cost ( Selling Price is given)
Profit =Selling Price x Profit % 100+profit%
Preparation Of Cost Sheet
5 Estimation Of Overheads
1 As % Of Prime Cost2 As % Of Direct Wages3 As % of Labor Cost 4 As % of Administration Cost5 As Cost Of Direct Materials
Preparation Of Cost Sheet
6 Treatment Of Scrap/By Product-
Reliable Value deducted from FOH
7 Treatment Of Shortage of FG Normal Shortage added to Cost Of Production
8 Treatment Of Subsidy To be deducted from profit
Items Excluded From Cost
1 Purely Financial Incomes2 Purely Financial Charges3 Appropriation Of Profit4 Abnormal Expenses
Items Excluded From Cost
Purely Financial Incomes Interest On Investments Interest on Bank Deposits Share Transfer fee Rent Receivable Capital Profit Dividend Received Cash Commission or Discount
Items Excluded From Cost
2 Purely Financial Charges
Capital LossesDamages PayablePenalties and FinesExpenses On Transfer Of Company OfficeInterest On Bank Loan, DebenturesDiscount On Bonds etcLosses on investmentCash Discount
Items Excluded From Cost
3 Appropriation Of Profit
Appropriation Of Sinking FundDividend PaidTaxes On Income & ProfitsCharitable DonationsTransfer To Reserves
Items Excluded From Cost
4 Abnormal Expenses & Losses
Cost Of Abnormal Wastage of MaterialsLoss by theftLoss by fireCost of Abnormal Idle TimeExceptional Bad Debts
Factory Overhead
Operating Supplies- lubricating Oil, detergent, Welding Materials, paints, nuts, bolts, dyes, nondurable toolsRepairs & Maintenance-gears, pulleys, belts, washersLabour cost of Set up, Inspection, Rearranging of Machinery & EquipmentsUnproductive Wages or Indirect WagesFactory RentInternal Transport, Overhead CraneFactory Rates & InsurancePower & FuelSalaries of Foremen ,Supervisor ,technical Directors & StaffWages of –gateman, time keeper, factory Clerk, Tool Room Staff store keeperLighting & Heating Of FactoryDepreciation Of PM, Factory building, toolsWaste DisposalTraining Factory StaffCanteenDrawing Office Cost,Dispensary
Administration Overheads
Rent, Rates & Insurance of Gen OfficeLighting Heating Of OfficeOffice SalariesDepreciation of office building, furniture, equipmentsBank Charges,Audit Fee,Counting House,Legal ExpensesOffice Telephone & Postage,Printing & StationerySuperannuationetc
Selling & Distribution Overheads
•Salaries, commission, traveling of sales Staff•Advertising,•Catalogues, price lists •Rent & Rates,•Maintenance & Insurance of Sales Office, Show Rooms•Selling Department Salaries & Stationery•Bad Debts, Collection Charges•Telephones & Postage for Selling•Trade Discount•Market Research•Carriage Out and transport• Normal Wastage of finished Goods •Samples•Warehousing Expenses•Packing,•Rent, Rates & Insurance Of Warehouse•Dep & Running Cost Of Delivery Vans•Wages of Packers ,Van Drivers
Cost Sheet Of Jay Engineering LtdFor the period Ending 31st March,2004
Particulars Amount in Rs
Question No 1
Direct Materials 80,000Direct Labour 40,000Direct Expenses 12,000 Prime Cost 1,32,000Factory Overheads:Indirect Wages 10,000Electric Power 1,000Depreciation On P&M 2,000Oil & Waste 200Lubricants 300Consumable Stores 1,000Lighting –Factory 1,200Store Keeper’ Wages 2,000Rent-Factory 2,000Gn. Factory Expenses 500
Factory Cost 1,51,200
Cost Sheet Of Jay Engineering LtdFor the period Ending 31st March,2004
Particulars Amount in Rs
Question No 1
Factory Cost C/F 1,51,000Office & Administration OH:Depreciation Of Office Building 1,000Director’s Fee 2,000Postage & Telegraph 500Lighting-Office 400Printing & Stationery 500Telephone Charges 800Rent-Office 1,000Manager’s Salary 3,000 Cost Of Production 1,60,400Selling & Distribution OHBad Debts 2,000Carriage Outwards 300Gn. Selling Expenses 2,000Traveling Expenses 1,000 Cost Of Sales 1,65,700
Particulars Amount in Rs
Amount in Rs
Ques No 2
COST SHEET
Raw Materials 2,00,000Add Carriage Inwards 1,200 Value Of Materials Consumed 2,01,200Manufacturing Wages 1,80,000Chargeable Expenses 3,800 PRIME COST 3,85,000Factory Overheads:Depreciation-P &M 10,000Oil & Waste 500Motive Power 5,000Lighting & Heating 800Rent: Factory 2,000Gas & Water-factory 1,500Repairs-factory 7,200 Unproductive Wages 14,000 Stationery Works 1,200 Manager’s Salary 18,000(60% Of 30000) 60,000
FACTORY COST 4,45,000
Particulars Amount in Rs
Amount in Rs
Ques No 2
COST SHEET
Factory Cost C/F 4,45,200OA Overheads Depreciation 800Salaries 15,000Rent 1,000Gas & Water 600 Director’s Fee 7,000Gn. Administration Expenses 5,000Stationery 800Manager’s Salary (40%0 12,000 42,200 COST OF PRODUCTION 4,87,400SD Overheads:Traveler's Commission 4,000Bad Debt 6,200Rent-Warehouse 1,500Carriage Outwards 3,200Discount Allowed 2,100 Packing Expenses 2,100Advertising 5,000 COST OF SALES 5,11,500 Profit 88,500 Sales 6,00,000
ParticularsTotal Cost Rs
Ques No 3
Per Qtl Cost Rs
Cost Sheet Of A Product OutPut 17,200units
Raw Materials 28,000 1.63Process & General Wages 63,000 3.69 Prime Cost 91,500 5.32
Factory Overheads :Fuel 6,900 0.40Electric Power 1,340 0.08Repairs 2.400 0.14Haulage 1,060 0.06Light & Water 400 0.02 Rent 2,000 0.11Rates and Insurance 2,500 0.15Depreciation On Machinery Factory Cost 1,08,400 6.30 O &A OverheadsOffice Salaries 7,000 0.41Administration Exp 5,000 0.29
Cost Of Production 1,20,000 7.00
Total Cost Per Unit=Rs 7.00
Cost Sheet for the Half Year Ended 30th September,2004 Units-25,600
Particulars Amount in Rs
Question No 4
Raw Materials Purchased 1,32,000Add Opening Stock 22,000 Carriage Inward 1,584 1,55,584Less Closing Stock 24,464
a) Value Of Materials Consumed 1,31,120Direct Wages 1,10,000 PRIME COST 2,41,120Works Overheads Rent, Taxes, Insurance & Others 44,000 Cost Of Supervision 8,800 Opening WIP 5,280 2,99,200Less Closing Stock Of WIP 17,600 b) Cost Of Manufacturing 2,81,000
Add Opening Stock Of Finished Goods 17,600 2,99,000Less Closing Stock Of Finished Stock 35,200 Cost Of Production 2,64,000
Cost Sheet for the Half Year Ended 30th September,2004 Units-25,600
Particulars Amount in Rs
Question No 4
Cost Of Production C/F 2,64,000Add Selling & Distribution Expenses 18,000 24000 tons@ 75 paise per ton
C) Cost of Sales 2,82,000 d) Net Profit 48,000
SALES 3,30,000
Workings
1 Profit Per Ton = 48,000/24000= Rs 2 Per ton
2 Qty Sold= Opening Stock Of finished Goods+ Produced-Cl. Stock Of Finished Goods 1600 tons+25,600-32000=24,000tons
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