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Cost Sheet is a statement of cost showing the total cost of production and profit or loss from a particular product or service. A Cost Sheet shows the cost in a systematic manner and element wise.
A
cost sheet document can be prepared either by using historical cost or by
referring to estimated costs. A historical cost sheet is prepared based on the
actual cost incurred for a product. An estimated cost sheet, on the other hand,
is prepared based on estimated cost just before the production begins.
A
cost sheet is a statement which represents the various costs incurred at
different stages of business operations, in a tabular format. It determines the
total cost or expenditure made by the organization, along with the cost
incurred on each unit of a product or service in a particular period.
Related Important Topics
👆Difference between Cost Accounting and Financial Accounting
👆Methods and Techniques of Costing
Types
of cost
Costs
are broadly classified into four types: fixed cost, variable cost, direct
cost, and indirect cost.
Fixed cost: These
are costs that do not change based on the number of items produced. For
example, the depreciating value of a building or the price of a piece of
equipment.
Variable cost: These
costs are tied to a company’s level of production. For example, a bakery spends
$10 on labor and $5 on raw materials to produce each cake. The variable cost
changes based on the number of cakes the company bakes.
Operating costs: These
are those expenses incurred by an organisation to maintain the product on a day
to day basis. Traveling cost, telephone expenses, office supplies are
some of things that come under operating costs.
Direct costs: These
costs can be directly associated with production. For example, if a
furniture manufacturing company takes five days to produce a
couch, then the direct cost of the finished product
includes the raw material cost and labor charges for five days.
Method or Formula
of Cost Sheet
Prime Cost
= Direct material + Direct Wages + Direct expenses
Material Consumed
= Material purchased + Opening stock of material – Closing stock of material
Factory Cost
= Prime cost + Factory overheads
Total Cost of
production = Factory Cost + office and
administration overheads
Cost of goods
sold = Total cost of production + Opening stock of
Finished goods – Closing stock of finished goods
Total Cost = Cost of Goods sold + Selling and distribution overheads
Sample
of Cost Sheet
| Particulars | Amount (Rs.) | Total Cost (Rs.) | Cost Per Unit (Rs.) |
| Direct Materials: | |||
| Opening Stock of Materials | ₹ - | ||
| Add: Purchase of Materials | ₹ - | ||
| ₹ - | |||
| Less: Closing Stock of Materials | ₹ - | ||
| Material Consumed | ₹ - | ₹ - | |
| Direct Wages | ₹ - | ₹ - | |
| Direct Expenses | ₹ - | ₹ - | |
| Prime Cost | ₹ - | ₹ - | |
| Factory (Works) Overheads: | |||
| Fuel - Power and Water | ₹ - | ||
| Lighting and Heating | ₹ - | ||
| Indirect Materials | ₹ - | ||
| Wages of Foremen | ₹ - | ||
| Factory Rent, Taxes and Insurance | ₹ - | ||
| Depreciation on Factory Land, Buildings and Plant | ₹ - | ||
| Drawing Office and Works Expenses | ₹ - | ||
| ₹ - | |||
| Less: Scrap Value & Defective Works | ₹ - | ||
| ₹ - | ₹ - | ||
| Add: Opening Work in Progress | ₹ - | ₹ - | |
| ₹ - | ₹ - | ||
| Less: Closing Work in Progress | ₹ - | ₹ - | |
| Factory (Works) Cost | ₹ - | ₹ - | |
| Office and Adminstrative Overheads: | |||
| Office Rent, Insurance and Cleaning | ₹ - | ||
| Office Salary | ₹ - | ||
| Telephone Expenses and Audit Expenses | ₹ - | ||
| Depreciation on office building and furniture | ₹ - | ||
| Director's Remunaration | ₹ - | ||
| Printing and Stationary | ₹ - | ₹ - | ₹ - |
| Cost of Production | ₹ - | ₹ - | |
| Add: Opening Stock of Finished Products | ₹ - | ₹ - | |
| ₹ - | ₹ - | ||
| Less: Closing Stock of Finished Products | ₹ - | ₹ - | |
| ₹ - | ₹ - | ||
| Selling and Distribution Overheads: | |||
| Show Room Expenses | ₹ - | ||
| Salesmen's Salary and Commission | ₹ - | ||
| Bad Debts | ₹ - | ||
| Discount to Distributors | ₹ - | ||
| Carriage Outwards | ₹ - | ||
| Warehouse Rent and Other Expenses | ₹ - | ||
| Advertising | ₹ - | ||
| Delivery Expenses | ₹ - | ₹ - | ₹ - |
| Cost of Sales | ₹ - | ₹ - | |
| Add: Profit | ₹ - | ₹ - | |
| Sales | ₹ - | ₹ - |
A glance at the above cost sheet will reveal that it works out the total cost of production/service in a phased manner. In other words, total costs are segregated into elements like Prime Cost, Factory or Works Cost, Cost of Production, Cost of Sales and finally the profit/loss is worked out by comparing the total cost with the selling price. Appropriate adjustments are made for opening and closing stock of Work in Progress and also opening and closing stock of finished goods. The format of cost sheet may be suitably changed according to the requirements of each firm but the basic form remains the same
Importance
of cost sheet
Cost sheets help with a number of essential business processes:
Determining cost: The
main objective of the cost sheet is to obtain an accurate product
cost. It gives you both the total cost and cost per unit of a product.
Cost
control: The cost sheet is an
important document for a manufacturing unit, as it helps in
controlling production costs. Using an estimated cost
sheet aids in monitoring labour, material and overhead costs at each step
of production.
Cost
comparison: It helps the management
compare the current cost of a product with a previous per unit cost for
the same product. Comparing the costs helps management take corrective
measures if costs have increased.
Decision-making: Some
of the most important decisions management makes are
based on the cost sheet. Whenever a business needs to produce or buy a
component, or quote prices for its goods on a tender, managers refer
to the cost sheet.
Fixing selling price: In order to fix the selling price of a product, you need to create a cost sheet so you can see the details of its production cost.
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