cost ascertainment

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


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 ------------


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


3 Computation Of Value Of Finished Materials

Cost Of Production ---Add Opening Stock Of FG---Less Closing Stock Of FG---- Cost Of Goods Sold


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%


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


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


Purely Financial Incomes Interest On Investments Interest on Bank Deposits Share Transfer fee Rent Receivable Capital Profit Dividend Received Cash Commission or Discount


2 Purely Financial Charges

Capital LossesDamages PayablePenalties and FinesExpenses On Transfer Of Company OfficeInterest On Bank Loan, DebenturesDiscount On Bonds etcLosses on investmentCash Discount


3 Appropriation Of Profit

Appropriation Of Sinking FundDividend PaidTaxes On Income & ProfitsCharitable DonationsTransfer To Reserves


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


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


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


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


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


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

cost ascertainment

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