## Friday, April 14, 2017

### Cost Sheet and Its Preparation (Part 2)

Practical Problems
Q.1. The Tripathi electrical ltd. Manufactures one product. A Summary of its activities for 2015 is as follows:
 Particulars Units Amount Sales Raw Material (Opening) Raw Material (Closing) W – I – P (Opening) W – I – P (Closing) Finished Goods (Opening) Finished Goods (Closing) Material purchases Direct Labour Manufacturing overheads Selling expenses General and administrative expenses 80,000 16,000 24,000 8,00,000 40,000 32,000 55,000 72,000 64,000 ………….. 1,52,000 1,45,000 1,08,000 50,000 40,000
Prepare a cost sheet showing total cost and profit made during the year.  Also show value of closing stock on the basis of LIFO and FIFO.

Cost Sheet of Tripathi Electrical Ltd.

Q. 2. Following are the figures extracted from the books of an iron foundry after the close of the year: (Dibrugarh University – 2004)
 Particulars Amount Raw Materials: Opening Stock Purchases of Raw materials Closing stock of raw materials Direct wages Works overheads Stores overheads on materials 14,000 1,00,000 10,000 20,000 50% of direct wages 10% on the cost of material
10% of the castings were rejected being not up to specification and a sum of Rs. 800 was realised from sale of scrap, 10% of the finished casting were found to be defective in manufacture and were rectified by expenditure of additional works overheads charged to the extent of 20 % on the proportionate direct wages. The total gross output of castings during the year: 2000 tons. Find out the manufacturing cost of the saleable casting per ton.
Ans:
Cost Sheet of an Iron foundry Ltd.
 PARTICULARS AMOUNT UNIT Materials used: Opening Stock Purchase Less: Closing Stock 14,000 1,00,000 10,000 1,04,000 Add: Direct wages           Prime Cost           Work overhead: 50% of direct wages           Stores overhead: 10% of material cost 20,000 1,24,000 10,000 10,400 Less: Sale of scrap: 200 tons (i.e. 10% of gross output) 1,44,400 800 Add: Cost of rectification of defective works: 180 tons (i.e. 10% of net output) @ Rs. 2 per ton [Note – 1] 1,43,600 360 Manufacturing cost of 1,800 tons saleable castings 1,43,960 Cost per ton (approx) 80.00
1. Working Note: Cost of rectification of defective works per ton:
Direct wages per ton = 20,000/2,000 = Rs. 10 per ton
Rectification cost: 20% of Rs. 10 = Rs. 2.
Q.3. From the following information, prepare a cost sheet showing the cost and profit:  (Dibrugarh University – 2010)
 Particulars Rs Opening raw material 29,500 Closing raw material 36,000 Opening work-in-progress :      Material      Wages      Works overhead 13,600 11,000 6,600 Closing work-in-progress :      Material      Wages      Works overhead 12,000 16,500 9,900 Opening finished goods – 200 units @ Rs 84 Closing finished goods – 1600 units Purchase of raw material 1,90,000 Carriage on purchase 1,500 Sale of scrap of raw material 5,000 Wages 2,97,000
Works overhead @ 60% of direct labour cost
Selling and distribution overhead @ 20% of selling price
Sales – 7600 units at a profit of 10% on sales price.
Ans:
Statement of Cost or Cost sheet
Production = Sales + closing stock – opening stock = 7,600+1,600 – 200 = 9,000
Working note:
Let the sales be                                                                       x
Less: Profit @ 10% on Sales                                               0.10x
Cost of sales                                                                         0.90x
Less: Selling and distribution expenses (20% on x)       0.20x
Cost of goods sold                                                               0.70x
Now,
Selling and distribution overheads = (5,58,480*0.20x)/0.70x = 1,59,566
Profit for the year = (7,18,046*0.10x)/0.90x = 79,783

Q.4. Following extract of costing information relates to a commodity for the year ended 31st March, 2012: (Dibrugarh University – 2013)
 Stock on 1st April, 2011: Raw materials 5000 Finished product (1000 tones) 4000 Stock on 31st March, 2012: Raw materials 5560 Finished product (2000 tons) 8000 Raw materials purchased 30000 Direct wages 25000 Rent, Rates and Taxes 1000 Carriage inwards 360 Work in progress on 1st April, 2011 1200 Work in progress on31st April, 2012 4000 Cost of factory supervision 2000 Sales of finished goods 75000
Advertisement and selling expenses amounts of 0.25 paise per ton sold. 16000 tones were produced during the year. Prepare a statement showing:
a)      The value of raw material used;
b)      The cost of production;
c)       The cost of turnover for the year;
d)      The net profit for the year and net profit per ton.
Ans:
Statement of Cost or Cost sheet
Profit per ton = 20250/15000 = 1.35
Q.5. Following details relate to ATEACO Ltd. for the year ending 31.03.2013: (Dibrugarh University – 2014)
 01.04.2012 31.03.2013 Units Rs. Units Rs. Stock of Raw Materials 1000 12,000 800 10,000 Work-in-progress 800 16,000 1000 20,000 Stock of Finished Goods 6000 - 10000 -
Expenses during the year in Rs.
 Direct Wages 6,00,000 Purchase of Raw Materials (97000 units) 11,14,000 Other Materials 36,000 Carriage Inward 5,640 Carriage Outward 3,000 Wages to Foremen 48,000 R & D Expenses 30,000 Other Wages 6,000 Manager’s Salary 72,000 Employee’s State Insurance 6,000 Power and Fuel 54,000 Office Expenses 36,000 Printing and Stationery 12,000 Counting House Salary 12,000 Sales of Scraps 1,640 Income Tax 22,000 Donation to Charity 5,000
Selling and Distribution expenses Rs. 1 per unit. Units manufactured during the year are 96000. Finished stock is valued at current cost. Prepare Cost Sheet showing the following:
a)      Materials consumed
b)      Prime cost
c)       Factory cost
d)      Cost of production
e)      Cost of goods sold
f)       Total cost of sales
Ans:
Cost Sheet of ATEACO Ltd.

Q.6. Following details have been obtained from the costing records of a manufacturing company:
 Particulars Amount Stock of Raw material (Opening) Stock of Raw material (closing)                                                                                                                      Material purchased Office salaries (Drawings) Count house salaries Carriage inwards Carriage outwards Cash discount Bad debt written off Repairs to plant and machinery Rent, rates, etc. (Factory) Rent, rates, etc. (Office) Travelling expenses Travelling commission Productive wages Depreciation on Plant and machinery Depreciation on office furniture Director’s fees Gas and water charges: Factory Gas and water charges: Office General charges Manager’s Salary 47,000 50,000 2,08,000 9,600 14,000 8,200 5,100 3,400 4,700 10,600 3,000 1,600 3,100 8,400 1,40,000 7,100 600 6,000 1,500 300 5,000 12,000
Out of 48 working hours in a week, the time devoted by the manager in the factory and office was on average 40 hours and 8 hours respectively throughout the accounting year. Prepare a statement of cost
Ans:
Cost Sheet of a Manufacturing Company Ltd.

7. Production cost of VSK Ltd. a manufacturing company, for the year ending 31st March, 2011, are as follows:
 Rs. Direct wages Direct materials Drawing office salaries and expenses Salary of general manager Advertising display material Wages of dispatch department Salaries and expenses of directors Travelers’ salaries Depreciation of delivery vans Chargeable expenses Office overhead (5% of works cost) Sales office expenses Salary of sales manager Rent and rates of warehouses Catalogues and price lists Rent and Rates of showrooms Production overheads (10% of prime cost) 60,000 1,00,000 2,000 16,000 8,000 11,000 22,000 13,000 7,000 4,000 9,000 14,000 3,000 6,000 5,000
Draw up a cost statement from the above bearing in mind that goods are sold at a profit of 20% on selling price.
Ans:
Cost Sheet of VSR Ltd.
For the year ended on 31st March, 2011
Working Note:  Sales price = 3,05,520*100/80 = 381900
8. A manufacturing company produces two commodities X and Y. Related data for the year 2010-11 are as follows:
 Commodity X Rs. Y Rs. Number of units produced Direct expenses:      Raw material used      Wages      Other direct expenses Other expenses:      Supervisor’s salary      Selling and distribution expenses      Administrative expenses 5,000 16,020 9,430 6,950 5,824 1,504 1,918 3,000 11,735 7,846 4,719
Prepare a cost sheet showing the cost of each commodity taking the following into consideration:
a)      Works overhead will be charged in the ratio of prime cost.
b)      Administrative expenses will be apportioned in the ratio that works cost of X bears to similar cost of Y.
c)       Selling and distribution expenses will be apportioned in production ratio.
Ans:
Cost Sheet of two commodities
For the year ended on 2010-11
 PARTICULARS X (5,000) Y (5,000) Raw Material used Add: Wages Other Direct Expenses 16,020 9,430 6,950 11,735 7,846 4,719 Prime Cost Add: Work Overhead: Supervisor’s Salary [32,400:24,300] 32,400 3,328 24,300 8,32 Work’s Cost Add: Office and administrative overhead: 35,728 1,096 25,132 822 Cost of production Add: Selling and distribution overhead 36,824 940 27,618 564 Total Cost 37,764 28,182

9. From the following particulars of Jackson and Company Ltd. prepare a cost sheet for the month of December, 2010:
 Rs. Stock on 1.12.10      Raw materials      Work-in-progress (valued at prime cost)      Finished goods Stock on 31.12.10      Raw materials      Work-in-progress (valued at prime cost)      Finished goods Purchased of raw materials Chargeable expenses Abnormal loss of materials Insurance of raw materials Remuneration of technical directors Internal transport cost Factory wages Personnel department expenses Depreciation of staff cars Cost of free after-sales service Insurance of finished stock Warehouse wages Sales Professional fees Market research expenses Power and fuel Works canteen and welfare expenses Depreciation of delivery van 10,000 8,000 6,000 3,000 2,000 1,000 75,000 4,000 5,000 7,000 9,000 11,000 70,000 12,000 1,500 3,500 2,500 4,500 3,00,000 6,500 7,500 20,000 13,000 8,500
Ans:
Cost Sheet
For The Month of December, 2010

10. ARB Ltd. furnished the following information for the year 2010-11:
 Rs. Stock of raw materials on 1.4.10 Stock of finished goods on 1.4.10 (500 tons) Freight paid Prime cost Stock of raw materials on 31.3.11 Stock of finished goods on 31.3.11 (750 tons) Direct Labour:      60 skilled labourers @ Rs. 50 per day for 250 days      200 unskilled labourers @ Rs. 30 per day for 250 days Indirect wages Factory rent, rates and power Salary of managing director Office rent and taxes Donation Advertisement Income tax Depreciation of plant and machinery Selling overhead Packing and distribution expenses Fuel 1,00,000 8,00,000 2,00,000 44,50,000 3,00,000 ? 40,000 30,000 50,000 1,00,000 30,000 4,50,000 60,000 35,000 5,00,000 85,990 65,000
Other information:
a)      During the year 2010-11 2,250 tons of finished goods were sold.
b)      The company valued the closing stock of finished goods under FIFO basis.
c)       The company maintains profit @20% on sales.
On the basis of abovementioned data, you are required to prepare a detailed cost sheet for the year 2010-11.
Ans:
Cost Sheet of ABC Ltd
Period: Year ended 31-3-11
Output – 2,500 tons
Note 1: Production during the year:  (Sales 2,250 tons + closing stock 750 tons – opening stock 500 tons) = 2,500 tons
Note 2: Calculation of Purchases:
 Prime Cost Less: Direct Labour Add: Closing Stock of Raw material Less: Freight Less: Opening Stock of Raw material 44,50,000 22,50,000 3,00,000 2,00,000 1,00,000 Purchases 22,00,000
Note 3: Per unit cost of goods sold Rs. 1,839.56 has been obtained by 44,39,000 by 2,250.
11. The accounts of the Steelways Engineering Co. Ltd. show for 2010:
 Rs. Materials used Manual and machine labour wages directly chargeable Works overhead expenditure Establishment and general expenses 1,80,000 1,60,000 40,000 19,000
a)      Show the works cost and total cost, the percentage that the works overhead cost bears to the manual and machine labour wages and the percentage that the establishment and general expenses bear to the works cost.
b)      What price should the company quote to manufacture a machine which, it is estimated will require an expenditure of Rs. 8,000 on materials and Rs. 6,000 on wages so that it will yield a profit of 25% on the total cost or 20% on selling price.
Ans:
Cost Sheet or Statement of Cost
 PARTICULARS AMOUNT Material used Manual and machine labour wages (Directly chargeable) 1,80,000 1,60,000 Prime Cost Work’s overhead expenditure 3,40,000 40,000 Work’s Cost Establishment & General Expenses 3,80,000 19,000 Total cost 3,99,000

 Percentage of works overhead to manual and machine labour = (40,000/1,60,000*100) Percentage of establishment and general expenses to work’s cost  = (19,000/3,80,000*100) 25% 5%
Statement of Estimated Cost for the Manufacture of the Machine Enquiry from………….
 PARTICULARS AMOUNT Cost of Materials Direct wages 8,000 6,000 Prime Cost Works overhead (25% of wages) 14,000 1,500 Work’s Cost Establishment and general expenses (5% of work’s cost) 15,500 775 Total Cost Profit (20% on selling price or 25% on cost) 16,275 4,069 Price to be quoted 20,344
12. From the following particulars prepare a statement in such from as you consider most suitable for showing clearly all element of cost:
 Rs. Rs. Opening stock of raw materials Purchase of raw materials Raw materials returned to suppliers Closing stock of raw materials Wages paid to:      Productive workers      Non-productive workers Salaries paid to office staff Carriage on raw materials purchased 25,000 70,000 2,000 18,800 18,000 2,000 5,000 500 Carriage on goods sold Rent and rates of workshop Fuel, gas and water etc. Repairs to plant Depreciation on machinery Office expenses Direct chargeable expenses Advertising Abnormal loss of raw materials 1,500 2,500 1,000 600 1,400 1,500 800 1,200 1,200
Ans:
Cost Sheet or Statement of Cost
 PARTICULARS AMOUNT AMOUNT Material Consumed: Opening Stock Purchases Carriage on Purchases 25,000 70,000 500 Less: Return 95,500 2,000 Less: Abnormal loss 93,500 1,200 Less: Closing Stock 92,300 18,800 73,500 Productive Wages Direct chargeable expenses 18,000 800 Prime Cost Work’s overheads: Non-productive wages Rent, rates of workshop Fuel, gas, water etc Repairs to plant Depreciation on Machinery 2,000 2,500 1,000 600 1,400 92,300 7,500 Work’s Cost Office overheads: Salaries to Office staff Office expenses 5,000 1,500 99,800 6,500 Cost of production Selling & distributing Overheads: Carriage on goods sold Advertising 1,500 1,200 1,06,300 2,700 Cost of sales 1,09,000
Note: Abnormal loss of materials should be excluded from cost and debited to Costing profit and loss A/c, hence it has been deducted from material cost.
13. The following data relate to the manufacture of a standard product during the four-week period to June 30th, 2011:
 Particulars Rs. Raw materials consumed Wages Machine hours worked Machine hour rate Office overhead Selling overhead Units produced Units sold 4,000 6,000 1,000 50 paise 20% on works cost 6 paise per unit 20,000 18,000 @ Re. 1 per unit
You are required to prepare a cost sheet showing the cost per unit and profit for the period.
Ans:
Cost Sheet or Statement of Cost
Output – 20,000 units
Period: 4 weeks ended 30-06-11
 PARTICULARS TOTAL AMOUNT Rs. PER UNIT Rs. Raw Material consumed Wages 4,000 6,000 0.200 0.300 Prime Cost Add: Work’s overhead: 1,000 hours @ Re. 50 10,000 500 0.500 0.025 Work’s Cost Add: Office overhead: (20% of Work’s Cost) 10,500 2,100 0.525 0.105 Cost of Production Less: Closing Stock (2,000 units @ Re. 0.630) 12,600 1,260 0.630 Cost of goods sold (18,000 units) Add: Selling overhead: 0.60 per unit on 18,000 units 11,340 1,080 0.630 0.060 Cost of sales Profit (Balancing figure) 12,420 5,580 0.690 0.310 Sales 18,000 1.000

14. From the following particulars you are required to prepare a monthly cost sheet of a manufacturing company showing cost and profit per 1,000 units of production. Show also in the form of a summary the cost of sales, net profit and sales for the month. The company manufacturers only one type of product. The opening stock was valued at the same price per 1,000 units as the production of the month concerned.
 Particulars Amount Materials:      Basic raw materials      Stores Labour:      Direct      Indirect Overheads:      Works      Office Production for the month of November, 2010 Sales for the month Stock at the beginning of the month Stock at the end of the month 1,400 tonnes @ Rs. 5 per ton Rs. 5,000 16,000 3,000 25% of direct labour 10% of works cost 10,00,000 units 9,00,000 units @ Rs. 50 per 1,000 units 2,00,000 units 3,00,000 units
Ans:
Cost Sheet or Statement of Cost
 PARTICULARS TOTAL AMOUNT UNIT Basic raw materials: 1,400 tonnes @ Rs. 5 per tones Direct Labour 7,000 16,000 700 1,600 Prime Cost Indirect materials Indirect Labour Work’s overhead (25% of direct labour) 23,000 5,000 3,000 4,000 2,300 500 300 400 Work Cost Office overhead (10% of work’s cost) 35,000 3,500 35.00 3.50 Cost of production Add: Opening Stock: 2,00,000 unit @ Rs. 38.50 per thousand unit 38,500 7,700 38.50 Less: Closing Stock: 3,00,000 unit @ Rs. 38.50 per thousand unit 46,200 11,550 Cost of goods sold (9,00,000 units) Profit (Balancing figure) 34,650 10,350 11.50 Sales 45,000 50.00

15. The following figures for the month of April, 2011 were extracted from the records of a factory:
 Rs. Opening stock of finished goods (5,000 units) Purchase of raw materials Direct wages Factory overhead Administration overhead Selling and distribution overhead Closing stock of finished goods (10,000 units) Sales (45,000 units) 45,000 2,57,100 1,05,000 100% of direct wages Re. 1 per unit 10% of sales ? 6,60,000
Prepare a cost sheet for the month of April, 2011, assuming that sales are made on the basis of ‘first-in-first-out’ principle.
Ans:
Statement of cost
Output: 50,000 units (See Note – 1)
Period: April, 2011
 PARTICULARS TOTAL AMOUNT Rs. PER UNIT Rs. Raw Material Direct Wages 2,57,100 1,05,000 5.142 2.100 Prime Cost Add: Factory Overhead (100% of direct wages) 3,62,100 1,05,000 7.242 2.100 Work’s Cost Add: Administration overhead (Re. 1 per unit) 4,67,100 50,000 9.342 1.000 Cost of production Add: Opening Stock of finished goods 5,17,100 45,000 10.342 Less: Closing Stock of finished goods (10,000 units @ Rs. 10.342) (See Note 2) 5,62,100 1,03,420 Cost of goods sold (45,000 units) Add: Selling and distribution overhead @ 10% of sales 4,58,680 66,000 1.467 Cost of Sales Profit (Balancing figure) 5,24,680 1,35,320 11.809 2.858 Sales (See Note – 3) 6,60,000 14.667
Note – 1: Production during the month: [Sales 45,000 unit + closing stock 10,000 units – opening stock 5,000 units] = 50,000 units.
Note – 2: Since goods have been sold on FIFO basis the entire closing stock represents current production                  @ Rs. 10.342 per unit, because sales include all opening stock and part of current production.
Note – 3: Per unit sale Rs. 14.667 has been obtained by dividing Rs. 6,60,000 by 45,000 sales units.

16. The Tripati Electricals Ltd. manufacturers one product. A summary of its activities for 2010 is as follows:
 Particulars Units Rs. Sales Material inventory:      1.1.10      31.12.10 Work-in-progress inventory:      1.1.10      31.12.10 Finished goods:      1.1.10      31.12.10 Material purchases Direct labour Manufacturing overheads Selling expenses General and administration expenses 80,000 16,000 24,000 8,00,000 40,000 32,000 55,000 72,000 64,000 - 1,52,000 1,45,000 1,08,000 50,000 40,000
Prepare a cost sheet showing:
a)   The total cost of goods manufactured (finished), the number of units manufactured (finished) and the cost per unit; and
b)   The cost of goods sold for the year presuming the company uses the LIFO inventory costing method for its finished goods inventory.
Ans:
Statement of cost
Output: 88,000 units (See Note – 1)
Period: Year ended 5/12/10
 PARTICULARS TOTAL AMOUNT Rs. PER UNIT Rs. Materials Consumed: Opening Inventory                                                                                             40,000 Purchases                                                                                                         1,52,000                                                                                                                            1,92,000 Less: Closing inventory                                                                                     32,000 Add: Direct labour 1,60,000 1,45,000 1.81818 1.64773 Prime Cost Add: Manufacturing overhead: 3,05,000 1,08,000 3.46591 1.22727 Adjustment for work-in-progress Opening                                                                                                               55,000 Closing                                                                                                            (-) 72,000 4,13,000 (-)17,000 4.69318 (-)0.19318 Work Cost Add: General and Administration expenses: 3,96,000 40,000 4.50000 0.45455 Total Cost of goods manufactured Add: Opening Stock (16,000 units) 4,36,000 64,000 4.95455 Less: Closing Stock (24,000 units) (See Note – 2) 5,00,000 1,03,636 Cost of goods sold (80,000 units) Add: Selling and Distributive overhead 3,96,364 50,000 0.625000 Cost of sales Profit (Balancing figure) 4,46,364 3,53,363 5.57955 4.42045 Sales 8,00,000 10.00000
Working Note: Note – 1: Production during the month: (Sales 80,000 units + closing stock 24,000 units – opening stock 16,000 units) = 88 units.
Note – 2: Value of closing stock on LIFO basis:
 Rs. 16,000 units @ Rs. 4 per unit 8,000 units @ Rs. 4.95455 per unit 64,000 39,636 1,03,636