Friday, April 14, 2017

Cost Sheet and Its Preparation (Part 3)

17. The books of manufacturing company present the following data for the month of April, 2011: Direct labour cost Rs. 17,500 being 175% of works overhead. Cost of goods sold excluding administrative expenses Rs. 56,000. Inventory accounts showed the following opening and closing balances:

April 1
Rs.
April 30
Rs.
Rs.
Raw materials
Work-in-progress
Finished goods
Other data are:
Selling expenses
General and administration expenses
Sales for the month
8,000
10,500
17,600
10,600
14,500
19,000





3,500
2,500
75,000
You are required to:
a)      Compute the value of raw materials purchased; and
b)      Prepare a cost statement showing the various elements of cost and also the profit earned.
Ans:
Cost Sheet or Statement of Cost

PARTICULARS
TOTAL AMOUNT
Rs.
Opening stock of Raw Material
Add: Purchases (Note – 1)
Less: Closing Stock of raw material
8,000
36,500
10,600
Raw material consumed during the year
Add: Direct Labour
33,900
17,500
Prime Cost
Add: Works overhead:
51,400
10,000

Adjustment for work-in-progress:
Opening                                                                                                                                           10,500
Closing                                                                                                                                        (-) 14,500
61,400


(-) 4,000
Works cost or cost of production
Add: Opening stock of finished goods
57,400
17,600

Less: Closing stock of finished goods
75,000
19,000
Cost of goods sold
Add: General and administration expenses
Add: Selling expenses
56,000
2,500
3,500

Profit (Balancing figure)
62,000
13,000
Sales
75,000
Note – 1: Statement computing the value of Raw materials purchased
Cost of goods sold
Add: Closing Stock of finished goods
56,000
19,000

Less: Opening stock of finished goods
75,000
17,600
Work Cost or Cost of production
Add: Closing Stock of work-in-progress
57,400
14,500

Less: Opening Stock of work-in-progress
71,900
10,500

Less: Works overhead: (100/175*17,500)
61,400
10,000
Prime Cost
Less: Direct Labour
51,400
17,500
Raw Materials consumed
Add: Closing Stock of raw materials
33,900
10,600

Less: Opening Stock of raw materials
44,500
8,000
Value of Raw materials purchased
36,500

18. A factory produces and sells 1,000 units of a product in July, 2011, for which the following particulars are available:
Particulars
Rs.
Stock of direct materials on 1.7.11
Purchase and receipt of direct materials in July, 2011
Direct wages paid in cash in July, 2011
(which includes Rs. 3,000 on account of June 2011 and an advance of Rs. 2,000)
Works overhead charges for the month
Stock of direct materials on 31.7.11
Administration and selling overheads
Sales price
6,000
1,44,000
55,000

60,000
10,000
Rs. 25 per unit
Rs. 300 per unit
From the above particulars you are required to:
a)      Prepare a cost statement for July, 2011; and
b)      Estimate the sale price of a unit of the same product in August, 2011, assuming: (i) 20% increase in direct materials cost; (ii) 10% increase in direct wages; (iii) 5% increase in works overhead charges; (iv) 20% reduction in administration and selling overhead charges; and (v) same percentage of profit on sales price as in July, 2011.
Ans:
Cost Sheet
Output: 1,000 units (See Note – 1)
Period: July, 2011
PARTICULARS
TOTAL AMOUNT
Rs.                      Rs.
COST PER UNIT
Rs.
Materials Consumed:
Stock as on 1-7-11
Purchases during the month

6,000
1,44,000



Less: Stock as on 31-7-11
1,50,000
10,000

1,40,000

140
Direct Wages (paid In July)
Less: Payment for June
55,000
3,000



Less: Advance payment
52,500
2,000

50,000

50
Prime Cost
Add: Works overhead

1,90,000
60,000
190
60
Works cost or Cost of Production
Add: Administration and selling overheads @ Rs. 25 per unit

2,50,000
25,000
250
25
Cost of Sales
Profit (Balancing figure)

2,75,000
25,000
275
25
Selling Price @ Rs. 300 [Seen Note – 1]

3,00,000
300
Estimate of Selling Price per unit in August, 2011
Note – 1:
Direct Materials: (120/100*140)
Direct Wages: (110/100*50)
Prime Cost
Works Overhead: (105/100*60)
168.00
55.00
223.00
63.00
Works Cost or Cost of Production
Administration and Selling overhead: (80/100*25)
286.00
20.00
Cost of Sales
Profit [@8.33% on sales or 1/12th of sales or 1/11th of cost] [See Note – 2]
306.00
27.82
Selling Price
333.82
Working Note: Ratio of Profit to sales in July, 2011 = (25,000/3,00,000*100) = 1/12th or 8.33%
19. The following figures are extracted from the books of an iron foundry after the close of the year:

Rs.
Raw Materials:
     Opening stock
     Purchase during the year
     Closing stock
Direct wages
Works overhead
Stores overhead on materials

14,000
1,00,000
10,000
20,000
50% on direct wages
10% on the cost of materials
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 castings were found to be defective in manufacture and were rectified by expenditure of additional works overhead charged to the extent of 20% on proportionate direct wages. The total gross output of castings during the year: 2,000 tons. Find out the manufacturing cost of the saleable castings per ton.
Ans:
Cost Sheet or Statement of Cost
PARTICULARS
TOTAL AMOUNT
Materials Used:
Opening Stock                                          14,000
Purchases                                              1,00,000
                                                                1,14,000
Less: Closing Stock                                  10,000
Direct Wages




1,04,000
20,000
Prime Cost
Work overhead: 50% of direct wages
Stores overhead: 10% of material cost
1,24,000
10,000
10,400

Less: Sale of scrap: 200 tons (i.e. 10% of gross output)
1,44,000
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

Working Note:  Cost of rectification of defective works per ton:
Direct Wages per ton = (20,000/2,000 = 10)
Rectification cost: 20% of Rs. 10 = Rs. 2
20. From the following particulars prepare a Cost Sheet showing the total cost per tone for the period ended 31st Dec, 2012.

Rs.

Rs.
Raw materials
Productive wages
Unproductive wages
Factory rent and taxes
Factory lighting
Factory heating
Motive power
Haulage (works)
Director’s fees (works)
Director’s fees (office)
Factory cleaning
Sundry office expenses
Estimating expenses (works)
Factory stationery
Office stationery
Loose tools written off
33,000
38,000
10,500
7,500
2,200
1,500
4,400
3,000
1,000
2,000
500
200
800
750
900
600
Rent and taxes (office)
Water supply (works)
Factory Insurance
Office Insurance
Legal expenses
Rent of warehouse
Depreciation of
-          Plant and Machinery
-          Office Building
-          Delivery vans
Bad debts
Advertising
Sales department’s salaries
Upkeep of delivery vans
Bank charges
Commission on sales
500
1,200
1,100
500
400
300
The total output for the period has been 14,775 tones.
Ans:
Cost Sheet or Statement of Cost
PARTICULARS
AMOUNT

AMOUNT
Raw Materials
Add: Productive Wages

33,000
38,000
(a) Prime Cost
Add: Factory Overhead:
Unproductive wages
Factory rent and taxes
Factory lighting
Factory heating
Motive power
Haulage (works)
Director’s Fees (works)
Factory cleaning
Estimating expenses (works)
Factory stationery
Water supply (works)
Factory insurance
Depreciation of Plant & Machinery
Loose Tools written off


10,500
7,500
2,200
1,500
4,400
3,000
1,000
500
800
750
1,200
1,100
2,000
600
71,000














37,050
(b) Factory Cost
Add: Office and administrative overhead:
Director’s fees (Office)
Sundry office expenses
Office stationery
Office Insurance
Legal expenses
Depreciation on office Building
Rent and Taxes (office)
Bank charges


2,000
200
900
500
400
1,000
500
50
1,08,050








5,550
(c) Cost of production
Add: Selling & Distribution overhead:
Rent of warehouse
Depreciation on Delivery vans
Bad debts
Advertising
Sales department’s salaries
Un of delivery vans
Commission of sales


300
200
100
300
1,500
700
1,500
1,13,600







4,600
Total Cost

1,18,200
Cost per ton = 1,18,200/14,775 = Rs. 8 per ton
21. The accounts of Z Manufacturing Company for the year ended December, 2012 show the following:

Rs.

Rs.
Factory Office Salaries
General Office Salaries
Carriage Outward
Carriage on Purchases
Bad Debts written off
Repair of Plant, Machinery and Tools
Rent, Rates, Taxes & Insurance
-          Factory
-          Office
Sales
Stock of Materials
-          31st Dec, 2011
-          31st Dec, 2012
Materials Purchased
6,500
12,600
4,300
7,150
6,500
4,450

8,500
2,000
4,61,100

62,800
48,000
1,85,000
Travelling Expenses
Traveler’s Salaries & Commission
Productive Wages
Depreciation – Plant, Machinery and Tools
Depreciation – Furniture
Director’s fees
Gas and Water – Factory
-          Office
Manager’s Salary (3/4 Factory and 1/4 Office)
General Expenses
Income Tax
Dividend
2,100
7,700
1,26,000
6,500
300
6,000
1,200
400

10,000
3,400
500
1,000
Prepare statement giving the following information:  Materials Consumed; Prime Cost; Factory Cost; Cost of Production; Total cost; Net Profit.
Ans:
In the Books of Z Manufacturing Company
Cost Sheet
PARTICULARS
AMOUNT
AMOUNT
Raw Material Consumed:
Opening Stock
Purchases
Carriage on purchases
Less: Closing Stock of Raw Materials

62,800
1,85,000
7,150
48,000

(a) Raw Materials consumed during the year
Productive wages

2,06,950
1,26,000
(b) Prime Cost
Works overheads:
Factory Office salaries
Repairs of plant, machinery & tools
Rent, rates, taxes & insurance
Depreciation on plant, machinery and tools
Gas and water
Manager’s salary


6,500
4,450
8,500
6,500
1,200
7,500
3,32,950






34,650
(c) Factory Cost
Administrative Overheads:
General Office salaries
Rent, rates, taxes & insurance
Depreciation on furniture
Director’s fees
Manager’s salary
General expenses
Gas and water


12,600
2,000
300
6,000
2,500
3,400
400
3,67,600







27,200
(d) Cost of production
Selling & distributive Overheads:
Carriage outward
Bad debts written off
Travelling expenses
Traveler’s salaries & commission


4,300
6,500
2,100
7,700
3,94,800




20,600
(e) Total Cost
Net Profit

4,15,400
45,700
(f) Sales

4,61,100

22. Following data have been extracted from the books of Sunshine Industries Ltd. for the year 2012:

Rs.

Rs.
Opening Stock of Raw Material
Purchase of Raw Material
Closing Stock of Raw Material
Carriage Inward
Wages – Direct
Wages – Indirect
Rent and Rates – Factory
-          Office
Depreciation
-          Plant and Machinery
-          Office Furniture
Cash Discount
25,000
85,000
40,000
5,000
90,000
10,000
5,000
500

1,500
100
5,000
Indirect Consumption of Material
Salary – Office
-          Salesmen
Other Factory Expenses
Other Office Expenses
Manager’s Remuneration
Bad Debts written off
Advertisement Expenses
Travelling Expenses of Salesmen
Carriage and Freight Outward
Sales
Advance Income-tax paid
500
2,500
2,000
5,700
900
12,000
1,000
2,000
1,100
1,000
2,50,000
15,000
The manager has the overall charge of the company and his remuneration is to be allocated as Rs. 4,000 to the factory, Rs. 2,000 to the office and Rs. 6,000 to the selling operations.
From the above particulars prepare a statement showing (a) Prime Cost; (b) Factory Cost; (c) Cost of production; (d) Cost of sales; and (e) Net profit.
Ans:
Cost Sheet of sunshine Industries Ltd.
For the year 2012
PARTICULARS
AMOUNT

AMOUNT
Opening Stock of Raw Material
Add: Purchases
Add: Carriage inward
Less: Closing Stock of Raw Materials

25,000
85,000
5,000
40,000
(a) Raw Material Consumed during the year
Add: Direct wages

75,000
90,000
(b) Prime Cost
Add: Factory Overheads:
Wages (Indirect)
Rent & Rates
Depreciation on Plant & Machinery
Indirect consumption of Material
Other Factory expenses
Manager’s Remuneration


10,000
5,000
1,500
500
5,700
4,000
1,65,000






26,700
(c) Work’s Cost
Add: Office and Administrative Overhead:
Rent & Rates
Depreciation on office furniture
Salary
Other office expenses
Manager’s Remuneration


500
100
2,500
900
2,000
1,91,700





6,000
(d) Cost of Production
Add; Selling & distributive overhead:
Salary of salesmen
Manager’s Remuneration
Advertisement expenses
Travelling expenses of salesmen
Carriage and Freight outward
Bad debts written off


2,000
6,000
2,000
1,100
1,000
1,000
1,97,700






13,100
(e) Cost of sales
(f) Profit (Balancing figure)

2,10,800
39,200
Sales

2,50,000

23. A manufacturing concern requires a statement showing the result of its production operation for September, 2012. Cost records give the following information.

1st Sep. 2012
Rs.
30th Sep. 2012
Rs.
Raw Material
Finished Goods
Work-in-Progress
1,00,000
71,500
31,000
1,23,500
42,000
34,500
Transactions during the month of September 2012:

Rs.

Rs.
Purchase of Raw Materials
Direct Wages
Works Expenses
Administration Expenses
88,000
70,000
39,500
13,000
Sale of Factory Scrap
Selling and Distribution Expenses
Sales
2,000
15,000
2,84,000
Ans:
Cost Sheet
For the month of September, 2012
PARTICULARS
AMOUNT
Raw Materials (Opening)
Add: purchase of Raw Materials
Less: Raw Materials (closing)
1,00,000
88,000
1,23,500
Raw Materials consumed
Add: Direct wages
64,500
70,000
Prime Cost
Add: Work’s overheads:
Less: Sale of Factory scrap
1,34,500
39,500
2,000
Work’s Cost incurred
Add: Work-in-progress (Opening)
Les: work-in-progress (Closing)
1,72,000
31,000
34,500
Work’s Cost
Add: Office and administrative Overhead
1,68,500
13,000
Cost of Production
Add: Finished goods (Opening)
1,81,500
71,500

Less: Finished goods (Closing)
2,53,000
42,000
Cost of goods sold
Add: Selling and Distributive overhead:
Cost of goods sold
Profit (Balancing figure)
2,11,000
15,000
2,26,000
58,000
Sales
2,84,000

24. The Modern Manufacturing Company submits the following information on 31st March, 2012:

Rs.
Rs.
Sales for the year
Inventories at the beginning of the year:
-          Finished goods
-          Work-in-Progress
Purchase of materials for the year
Materials Inventory:
-          At the beginning of the year
-          At the end of the year
Direct Labour
Factory overhead @ 60% of the direct labour cost
Inventories at the end of the year:
-          Work-in-Progress
-          Finished goods
Other expenses for the year:
-          Selling expenses 10% of sales
-          Administrative expenses 5% of sales


7,000
4,000


3,000
4,000



6,000
8,000
2,75,000



1,10,000



65,000
Prepare a statement of cost and profit.
Ans:
In the Books of Modern Manufacturing Company
Cost Sheet
PARTICULARS
AMOUNT
AMOUNT
Raw Material Consumed:
Opening
Purchases
Less: Closing Stock of Raw Materials

3,000
1,10,000
4,000

(a) Raw Materials Consumed during the year
Direct Labour

1,09,000
65,000
(b) Prime Cost
Works Overheads:
Factory overhead (60% of direct labour cost)
Add: Opening stock of work-in-progress
Less: Closing stock of work-in-progress


39,000
4,000
6,000
1,74,000



37,000
(c) Factory’s Cost
Administrative Overheads:
Administrative expenses (5% of sales)

2,11,000

13,750
(d) Cost of Production
Add: Opening stock of finished goods
Less: Closing stock of finished goods

2,24,750
7,000
8,000
(e) Cost of goods sold
Selling and Distributive Overhead:
Selling Expenses (10% of sales)

2,23,750

27,500
(f) Total cost
Net Profit

2,51,250
23,750
(g) Sales

2,75,000

25. Following information has been obtained from the records of a Manufacturing Company:

1-1-2012
Rs.
31-12-2012
Rs.
Stock of Raw Materials
Stock of Finished Goods
Stock of Work-in-Progress
40,000
1,00,000
10,000
50,000
1,50,000
14,000

Rs.

Rs.
Indirect Labour
Lubricants
Insurance on plant
Purchase of Raw Materials
Sales Commission
Salaries of Salesmen
Carriage Outward
50,000
10,000
3,000
4,00,000
60,000
1,00,000
20,000
Administration Expenses
Power
Direct Labour
Depreciation on Machinery
Factory Rent
Property Tax on Factory Building
Sales
1,00,000
30,000
3,00,000
50,000
60,000
11,000
12,00,000
Prepare a Statement of Cost and Profit showing (a) Cost of Raw Materials Consumed; (b) Prime Cost; (c) Total Manufacturing Cost; (d) Factory Manufacturing Cost; (e) Cost of Production; (f) Cost of Goods Sold; (g) Cost of sales; (h) Profit;
Ans:
In the Books of Manufacturing Company
Cost Sheet
PARTICULARS
AMOUNT
AMOUNT
Raw Material Consumed:
Opening Stock
Purchases
Less: Closing Stock of Raw Materials

40,000
4,00,000
50,000

(a) Raw Material consumed during the year
Direct Labour

3,90,000
3,00,000
(b) Prime Cost
Works Overheads:
Indirect Labour
Lubricants
Insurance on Plant
Power
Depreciation on Machinery
Factory Rent
Property for factory Building


50,000
10,000
3,000
30,000
50,000
60,000
11,000
6,90,000







2,14,000
(c) Factory cost incurred
Add: Opening Stock of work-in-progress
Less: Closing Stock of work-in-progress

9,04,000
10,000
14,000
(d) Factory Cost
Administrative Overheads:
Administrative Expenses

9,00,000

1,00,000
(e) Cost of Production
Add: Opening Stock of finished goods
Less: Closing Stock of finished goods

10,00,000
1,00,000
1,50,000
(f) Cost of goods sold
Selling and Distributive Overhead:
Sale Commission
Salaries of Salesman
Carriage outward


60,000
1,00,000
20,000
9,50,000



1,80,000
(g) Total Cost
Net Profit

11,30,000
70,000
(h) Sales

12,00,000

26. Following information has been obtained from the records of a manufacturing concern:

1-1-2012
Rs.
31-12-2012
Rs.
Stock of Raw Materials
Work-in-Progress
Stock of Finished Goods
30,000
15,000
43,700
35,000
20,000
54,000

Rs.

Rs.
Indirect Wages
Sales
Factory Rent & rates
Office Salaries
General Expenses
Office Rent
Rent of Show Room
9,720
3,25,000
7,830
15,030
13,500
2,000
1,200
Purchase of Raw Materials
Productive Wages
Plant Repair
Depreciation on Plant
Factory Lighting
Salesmen’s Salaries
1,20,000
90,000
3,420
8,360
7,380
7,650
Prepare (i) Cost Sheet showing cost of raw materials consumed, prime cost, factory cost incurred and factory cost. (ii) Income statement in traditional form for the year showing gross profit and net profit.
Ans:
Statement Cost Sheet
PARTICULARS
AMOUNT
AMOUNT
Raw Material Consumed:
Opening Stock
Purchases
Carriage inward


30,000
1,20,000


Less: Closing Stock of Raw Materials
1,50,000
35,000

(a) Raw Material consumed during the year
Productive wages

1,15,000
90,000
(b) Prime Cost
Factory Overheads:
Indirect wages
Factory rent & rates
Plant repair
Depreciation on plant
Factory lighting


9,720
7,830
3,420
8,360
7,380
2,05,000





36,710
(c) Factory cost incurred
Add: Opening Stock of work-in-progress
Less: Closing Stock of work-in-progress

2,41,710
15,000
20,000
(d) Factory Cost

2,36,710

Income Statement
For the year ended on 31-12-2012
Particulars
Amount
Net Sales
Less: Cost of Goods Sold
Opening stock of finished goods                                                                                            43,700
Add: Factory cost                                                                                                                   2,36,710
                                                                                                                                                  2,80,410
Less: Closing stock of finished goods                                                                                    54,000
3,25,000




2,26,410
Gross Profit
Less: Operating Expenses
Office and Administrative overheads (15,030+13,500+2,000)                                           30,530                                                         
Selling and Distribution overheads (1,200+7,650)                                                                  8,850
98,590


39,380
Net Profit
59,210

27. From the following particulars, prepare a Cost Statement showing the components of Total Cost and Profit for the year ended 31st

1-1-2012
Rs.
31-12-2012
Rs.
Stock of finished goods
Stock of raw materials
Work-in-Progress
6,000
40,000
15,000
15,000
50,000
10,000

Rs.

Rs.
Purchase of raw materials
Carriage inward
Wages
Works Manger’s Salary
Factory employees salaries
Factory rent, taxes and insurance
Power expenses
Other production expenses
General expenses
4,75,000
12,500
1,75,000
30,000
60,000
7,250
9,500
43,000
32,500
Sales for the year
Income-tax
Dividend
Debenture interest
Transfer to Sinking Fund for replacement of machinery
Goodwill written off
Payment of sales tax
Selling expenses
8,60,000
500
1,000
5,000

10,000
10,000
16,000
9,250
Ans:
Statement Cost Sheet
PARTICULARS
AMOUNT
AMOUNT
Raw Material Consumed:
Opening Stock
Purchases
Carriage inward
Less: Closing Stock of raw material

40,000
4,75,000
12,500
50,000

(a) Raw Material Consumed during the year
Wages

4,77,500
1,75,000
(b) Prime Cost
Factory Overhead:
Work’s manager’s salary
Factory employee’s salary
Factory rent, taxes, insurance
Power expenses
Other production expenses


30,000
60,000
7,250
9,500
43,000
6,52,500





1,49,750
(c) Factory cost incurred
Add: Opening stock of work-in-progress
Less: Closing Stock of work-in-progress

8,02,250
15,000
10,000
(d) Factory Cost
Administrative Overhead:
General Expenses

8,07,250

32,500
(e) Cost of Production
Add: Opening stock of finished goods
Less: Closing stock of finished goods

8,39,750
6,000
15,000
(f) Cost of goods Sold
Selling and Distribution Overhead:
Selling Expenses

8,30,750

9,250
(g) Total Cost
Net Profit

8,40,000
20,000
(h) Sales

8,60,000

28. From the following particulars of a manufacturing firm, prepare a statement showing (a) Cost of materials used; (b) Works cost; (c) Cost of production; (d) Percentage of works overhead to productive wages: (e) Percentage of general overhead to works cost.

Rs.

Rs.
Stock of materials on 1-1-2012
Purchase of materials in January, 2012
Stock of finished goods on 1-1-2012
Productive wages
40,000
11,00,000
50,000
5,00,000
Finished goods sold
Works overhead
Office and general expenses
Stock of materials on 31-1-2012
Stock of finished goods on 31-1-2012
24,00,000
1,50,000
1,00,000
1,40,000
60,000
Ans:
In the books of a Manufacturing firm
PARTICULARS
AMOUNT
AMOUNT
Opening Stock of Raw Materials
Add: Purchases of Raw Materials

40,000
11,00,000

Less: Closing Stock of Raw Materials

11,40,000
1,40,000
(a) Raw Materials Consumed during the year
Add: Productive Wages

10,00,000
5,00,000
(b) Prime Cost
Add: Factory Overheads:
Work’s Overhead

15,00,000

1,50,000
(c) works/Manufacturing/Factory Cost
Add: Office and Administrative Overheads

16,50,000
1,00,000
(d) Cost of production
Add: Opening Stock of finished goods
Less: Closing Stock of finished goods

50,000
60,000
17,50,000

(10,000)
(e) Cost of goods sold /sales
Add: Profit

17,40,000
6,60,000
Sales

24,00,000
Working Note:
% of works overheads to Productive Wages = (1,50,000/5,00,000 * 100) = 30%
% of General overheads to Works Cost = (1,00,000/16,50,000*100) = 6.06%
29. Mr. Gopal furnishes the following data relating to the manufacture of a standard product during the month of April, 2012:
Raw materials consumed
Direct labour charges
Machine hours worked
Machine hour rate
Administrative overheads
Selling overheads
Units produced
Units sold
Rs. 15,000
Rs. 9,000
Rs. 900
Rs. 5
20% on works cost
Rs. 0.50 per unit
17,100
16,000 at Rs. 4 per unit
You are required to prepare a Cost Sheet from the above showing: (a) the cost of production per unit; (b) profit per unit sold and profit for the period.
Ans:
Statement of Cost Sheet
PARTICULARS
UNIT
AMOUNT
Raw Material Consumed
Wages

15,000
9,000
(a) Prime Cost
Factory Overheads (900 x 5)

24,000
4,500
(b) Work’s cost
Administrative Overheads (28,500 x 20%)

28,500
5,700
(c) Cost of Production
Less: Closing Stock of finished goods
(34,200/17,100 = 2*1,100)
17,100

1,100
34,200

2,200
(d) Cost of goods sold
Selling & Distribution Overheads (16,000*0.5)
16,000
32,000
8,000
(e) Total Cost
Net Sales
16,000
40,000
24,000
Sales
16,000
64,000
Working Note: 
Cost of production per unit = (34,200/17,100 = 2)
Profit per unit = (24,000/16,000 = 1.50)

30. Prepare the Cost Sheet to show the total cost of production and cost per unit of goods manufactured by a company for the month of July, 2012. Also find the cost of sales and profit.

Rs.

Rs.
Stock of Raw Materials 1-7-2012
Raw Materials purchased
Stock of Raw Material 31-7-2012
Manufacturing Wages
Depreciation on Plant
Loss on sale of a part of Plant
3,000
28,000
4,500
7,000
1,500
300
Factory Rent and Rates
Office Rent
General Expenses
Discount on Sales
Advertisement Expenses to be charged fully
Income-tax paid
Sales
3,000
500
400
300

600
2,000
50,000
The number of units produced during July, 2012 was 3,000. The stock of finished goods was 200 and 400 units on 1-7-2012 and 31-7-2012 respectively. The total cost of the units on hand on 1-7-2012 was Rs. 2,800. All these had been sold during the month.
Ans:
Statement of Cost
PARTICULARS
UNIT
AMOUNT
Raw Materials Consumed:
Opening Stock
Purchases
Less: Closing Stock of Raw Material


3,000
28,000
4,500
(a) Raw Material consumed during the year
Manufacturing wages

26,500
7,000
(b) Prime Cost
Work’s Overheads:
Factory rent & rates
Depreciation on plant

33,500

3,000
1,500
(c) Work’s Cost
Administrative Overheads:
Office rent
General Expenses

38,000

500
400
(d) Cost of production
Add: Opening stock of finished goods
Less: Closing Stock of finished goods  (38,900/3,000 = 12.97 * 400)
3,000
200
400
38,900
2,800
5,187
(e) Cost of goods sold
Selling & Distributive Overheads:
Advertisement Expenses
2,800

-
36,513

600
(f) Total Cost
Add: Net Profit
2,800
-
37,113
12,887
Sales
2,800
50,000
Working Note:  Total cost per ton = (Total Cost / Output during the year)

31. In a factory two types of radios are manufactured, viz, Orient and Sujon Models. From the following particulars prepare a statement showing cost and profit per radio sold. There is no opening or closing stock.

Orient
Rs.
Sujon
Rs.
Materials
Labour
27,300
15,600
1,08,680
62,920
Works overhead is charged at 80% on labour and office overhead is taken at 15% on works cost. The selling price of both radios is Rs. 1,000. 78 Orient radios and 286 Sujon radios were sold.
Ans:
Statement of Cost Sheet
PARTICULARS
Orient (78)
Sujon (287)

Unit
Total
Unit
Total
Material
Wages
350
200
27,300
15,600

1,08,680
62,920
(a) Prime Cost
Add: Factory Overheads (80% on labour)
550
160
42,900
12,480


50,336
(b) Work’s Cost
Add: Office & Administrative Overhead
710
106.50
55,380
8,307


(c) Cost of production
Profit
816.5
183.50
63,687
14,313


(d) Sales
1,000
78,000


32. Your company is an export-oriented organization manufacturing Internal-communication equipment of a standard size. The company is to send quotations to foreign buyers of your product. As the Cost Accounts Chief; you are required to help the management in the matter of submission of the quotation by the preparation of a cost estimate based on the following figures relating to the year 2012. Total Output (in units) 20,000
Expenses Incurred
Rs.

Rs.
Local Raw Materials Consumed
Imports of Raw Materials (actual consumption)
Direct Labour in Works
Indirect Labour in Works
Storage of Raw Materials and spares
Fuel
Tools Consumed
Depreciation on Plant
Salaries of works Personnel
10,00,000

1,00,000
10,00,000
2,00,000
50,000
1,50,000
20,000
1,00,000
1,00,000
Excise Duty on Production
Administrative Office Expenses
Salary of the Managing Director
Salary of the Joint Managing Director
Fees of Directors
Expenses on Advertising
Selling Expenses
Sales Depots
Packaging and Distribution
2,00,000
2,00,000
60,000

40,000
20,000
1,60,000
1,80,000
1,20,000
1,20,000
Prepare a statement of Cost.
Ans:
Cost Sheet
For the year 2012
PARTICULARS
AMOUNT
AMOUNT
Raw Materials Consumed during the year
Add: Direct Wages

12,00,000
10,00,000
Prime Cost
Add: Factory Overheads:
Indirect Labour in works
Storage of raw materials and spares
Fuel
Tools consumed
Depreciation on Plant
Salaries of works personnel
Excise duty on production


2,00,000
50,000
1,50,000
20,000
1,00,000
1,00,000
2,00,000








8,20,000
Factory Cost/Work’s Cost
Add: Office and Administrative Overhead:
Administrative office expenses
Salary of Managing Director
Fees of directors
Salary of joint Managing Director


2,00,000
60,000
20,000
40,000
30,20,000




3,20,000
Cost of Production
Add: Selling and Distributive Overheads:
Expenses on advertising
Selling Expenses
Sales depots
Packaging and distribution


1,60,000
1,80,000
1,20,000
1,20,000
33,40,000




5,80,000
Cost of sales
Add: Profit margin (20% on sales or 25% on cost)

39,20,000
9,80,000
Sales

49,00,000
Working Note:
Selling Price per unit before subsidy by government = (49,00,000/20,000) = Rs. 245
Selling price per unit after subsidy by government = Rs. 245 – Rs. 100 = Rs. 145
IMPORTANT NOTE: Selling price to be estimated, we have to convert profit margin from sales to cost.
33. The Government of India has instituted the dual pricing system in the industry in which your organization operates. You are the head of the Costing Division of Raja Textiles Co. Ltd. Your company produces a standard type of cloth, 50% of which is procured by the Government at a price of Rs. 4 per metre. You are required by the Managing Director of your company to suggest a suitable price for the cloth to be sold in the open market. Production during 2011-12 has been 20,00,000 metres of cloth. Relevant information is given below:
Expenditure Head
Amount (Rs.)
Expenditure Head
Amount (Rs.)
Cotton Consumed
Direct Labour in Factory
Carriage Inward
Indirect Labour in Factory
Salary of Works Director and other Staff in Factory
Water, power, Local Taxes (Factory)
Dyeing, Bleaching, etc.
Depreciation (Factory)
Excise and other Taxes on Production
Misc. Expenses (Factory)
Office Salaries
Salary of Managing Director
10,00,000
10,00,000
50,000
4,00,000

2,50,000
5,00,000
10,00,000
2,00,000
30,00,000
1,00,000
10,00,000
1,00,000
Expenditure on Sales Depot
Depreciation of Machines (Office)
Misc. Office Expenditure
Purchase of Computer for Office
Misc. Purchases of Furniture and Machines for Office
Dividends paid
Director’s Fees
Advertising and Publicity
Commission paid on Sales
Commission paid to Foreign Buyer
Packing and Forwarding (on sales)
4,00,000
1,00,000
1,00,000
2,00,000

5,00,000
12,00,000
2,00,000
10,00,000
10,00,000
1,00,000
2,00,000
Following further information is made available: (i) The company expects a fair return of 20% on its paid-up capital which is Rs. 1,00,00,000, (ii) Marketing Expenses outstanding are Rs. 1,00,000. Suggest the open market price after preparing a Cost Analysis Sheet in columnar form.
Ans:
Cost Sheet of Raja Textiles Co. Ltd.
For the year ended on 2011 – 12
PARTICULARS
AMOUNT
AMOUNT
Cotton Consumed
Add: Carriage Inward
10,00,000
50,000

10,50,000
(a) Raw Material Consumed during the year
Add: Direct Wages

10,50,000
10,00,000
Prime Cost
Add: Factory Overheads:
Indirect labour
Salary of work director and staff in factory
Water, power and local taxes
Dyeing, Bleaching
Depreciation
Excise and other taxes
Misc. Expenses


4,00,000
2,50,000
5,00,000
10,00,000
2,00,000
30,00,000
1,00,000
20,50,000







54,50,000
Work’s Cost
Add: Office and Administrative Overheads:
Salary of Managing Director
Depreciation of Machines (Office)
Misc. Office expenses
Director Fees
Office salaries


1,00,000
1,00,000
1,00,000
2,00,000
10,00,000
75,00,000





15,00,000
Cost of production
Add: Selling & Distributive Overheads:
Advertising and Publicity
Commission paid on sales
Commission paid to foreign buyers
Packaging and forwarding
Expenditure of sales depot
Marketing expenses out


10,00,000
10,00,000
1,00,000
2,00,000
4,00,000
1,00,000
90,00,000






28,00,000
Cost of Sales
Add: Profit margin
(20% on paid up capital which is Rs. 1,00,00,000)

1,18,00,000

20,00,000
Expected Sales
Less: Sales to government (10, 00, 000 mtrs)

10,00,000
1,38,00,000
40,00,000
Expected sales in open market (10, 00, 000 mtrs)

98,00,000
Working Note : Estimated selling price per unit for the open market = (expected sales in open market/ no. of units to be sold in open market)  = 98,00,000/10,00,000
34. The cost of sale of product A is made up as follows:

(Rs.)

(Rs.)
Materials used in manufacturing
Materials used in primary packing
Materials used in selling the product
Materials used in the factory
Materials used in the office
Labour required in producing
Labour required for factory supervision
Indirect Expenses – Factory
60,000
10,000
1,500
750
1,250
10,000
2,000
1,000
Administration Expenses
Depreciation on Office Building and Equipment
Depreciation on Factory Building
Selling Expenses
Freight on materials purchased
Advertising
1,250

750
1,750
3,500
5,000
1,250
Assuming that all the products manufactured are sold, what should be the selling price to obtain a profit of 20% on selling price?
Ans:
Cost Sheet of Product A
PARTICULARS
AMOUNT
AMOUNT
Materials used in manufacturing
Primary packing material
Freight on materials purchased
60,000
10,000
5,000


75,000
(a) Raw Material Consumed during the year
Add: Direct Labour

75,000
10,000
(b) Prime Cost
Add: Factory Overheads:
Material used in the factory
Labour required to factory supervision
Indirect Expenses
Depreciation on Factory Building


750
2,000
1,000
1,750
85,000




5,500
(c) Work’s Cost
Add: Office and administrative Overheads:
Materials
Administrative Expenses
Depreciation on office Building


1,250
1,250
750
90,500



3,220
(d) Cost of Production
Add: Selling and Distributive Overheads:
Selling expenses
Material used in selling price
Advertisement


3,500
1,500
1,250
93,750



6,250
(e) Total Cost
Add: Profit @ 20% on selling price [Note – 1]

1,00,000
25,000
Sales

1,25,000
Working Note: Since profit is 20% sales, therefore required profit is = 1,00,000 * 20/80 = 25,000
35. Vindhyachal Industries manufacture a Product X. On 1st January, 2012, there were 500 units of finished product in stock. Other stocks on 1st January 2012, were as under:

Rs.
Work-in-Progress
Raw Materials
5,740
11,620
The information available form cost records for the year ended 31st December, 2012 was as follows:

(Rs.)

(Rs.)
Indirect Labour
Direct Labour
Freight on Raw Material Purchased
Stock of Raw Materials on 31-12-2012
Other Factory Expenses
12,160
32,640
5,570
9,640
31,730
Work-in-Progress on 31-12-2012
Sales – 15,000 units
Indirect Materials
Total Manufacturing Cost Incurred
7,820
3,60,000
21,390
1,94,080
There are 1,500 units of product in finished goods stock on 31st December, 2012. You are required to: (i) Prepare a statement of cost for 2012 giving all details of cost and their break up, and (ii) Determine the unit cost at which finished goods stock is to be properly valued at the beginning and at the end of 2012 (assuming the same cost used for both.)
Ans:
Cost Sheet of Vindhyachal Industries
For the year ended on 31st December, 2012
PARTICULARS
UNIT
AMOUNT
Opening of Raw Material
Add: Purchases of Raw material [Note – 1]
Freight on Raw Material purchased

11,620
88,610
5,570

Less: Closing Stock of Raw Material

1,05,800
9,640
(a) Raw Material Consumed during the year
Add: Direct Labour

96,160
32,640
(b) Prime Cost
Add: Factory Overheads:
Indirect Labour
Other Factory Expenses
Indirect materials

1,28,800

12,160
31,730
21,390
(c) Factory cost incurred
Add: Opening Stock of work-in-progress
Less: Closing Stock of work-in-progress

1,94,080
5,740
7,820
(d) Factory Cost or Cost of Production
Add: Opening Stock of finished goods [12 x 500]
Less: Closing stock of finished goods [12 x 1,500]
16,000
500
1,500
1,92,000
6,000
18,000
(e) Cost of goods sold
Add: Profit
15,000
1,80,000
1,80,000
(f) Sales
15,000
3,60,000

Working Note:
Note – 1: Calculation of Purchases:
PARTICULARS
AMOUNT
Factory cost incurred
Less: Factory Overheads:
Indirect Labour
Other Factory Expenses
Indirect materials
1,94,080

12,160
31,730
21,390

Less: Direct Labour
1,28,800
32,640

Less: Opening Stock of Raw Materials
Add: Closing Stock of Raw Materials
Less: Freight on Raw Material Purchased
96,160
11,620
9,640
5,510
Purchase of Raw Materials
88,610

36. The books of Adarsh Manufacturing Company present the following data for the month of April, 2012. Direct labour cost Rs. 17,500 being 175% of the works overhead; cost of goods sold excluding administration expenses Rs. 56,000. Inventory accounts showed the following opening and closing balances:

April 1
Rs.
April 30
Rs.
Raw materials
Work-in-Progress
Finished goods
8,000
10,500
17,600
10,600
14,500
19,000

Rs.
Selling expenses
General and administration expenses
Sales for the month
3,500
2,500
75,000
You are required to: (i) Compute the value of materials purchased, (ii) Prepare a statement of cost showing the various elements of cost and also the profit.
Ans:
Cost Sheet of Adarsh Manufacturing Company
For the month of April, 2012
PARTICULARS
AMOUNT
Opening Stock of Raw Materials
Add: Purchases [Note – 1]
Less: Closing Stock of Raw Materials
8,000
36,500
10,600
(a) Raw Materials during the year
Add: Wages
33,900
17,500
(b) Prime Cost
Add: Factory Overheads:
51,400
10,000
(c) Work’s Cost incurred
Add: Opening Stock of work-in-progress
Less: Closing Stock of work-in-progress
61,400
10,500
14,500
(d) Work’s Cost
Add: Office and administrative Overheads:
57,400
2,500
(e) Cost of Production
Add: Opening Stock of finished goods
Less: Closing Stock of finished goods
59,900
17,600
19,000
(f) Cost of goods Sold
Add: Selling and Distributive Overheads:
58,500
3,500
(g) Cost of Sales
(h) Profit
62,000
13,000
Sales
75,000
Working Notes:
Note – 1: Calculation of Purchases of Raw Material
PARTICULARS
AMOUNT
Cost of goods sold
Less: Opening Stock of finished goods
Add: Closing Stock of finished goods
56,000
17,600
19,000

Less: Opening Stock of work-in-progress
Add: Closing Stock of work-in-progress
57,400
10,500
14,500

Less: Works/Factory Overheads (17,500*100/175)
61,400
10,000

Less: Direct Labour
51,400
17,500

Less: Opening Stock of Raw Materials
Add: Closing Stock of Raw Materials
32,900
8,000
10,600
Purchase of Raw Materials
36,500

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