Cost Sheet Format | Expenses Excluded from Cost Sheet

[Cost Sheet Format, Statement of Cost Format, Cost Accounting, Cost Sheet Problems and Solutions]

In this article, I am going to explain about a comprehensive Cost sheet Format. What is the format of cost sheet? How do you prepare a cost sheet? These are the common questions in the mind of students of Commerce Stream. 

Main reasons of these doubts are that there are various classes of overheads and it is very difficult to classify any particular expenses as factory or office or selling & distribution overheads. Also, there are some expenses which are excluded from cost. 
In the absence of a clear cut idea about the overheads and expenses excluded from cost, it is not possible to prepare cost sheet format correctly. After going through this post, i am sure all of you will understand cost sheet format. Also read Cost Sheet Practical Problems and Solutions: Part 1Part 2, Part 3 and Part 4.

Cost Sheet Format or Statement of Cost Format
For B.Com / BBA/ MBA /CS/CA/CMA Exam

Table of Contents

1. Meaning of Cost Sheet

2. Components of Total Cost

3. Advantages of Cost Sheet

4. Comprehensive Cost sheet Format

5. Examples of Overheads

a) Factory Overheads

b) Office and Administrative Overheads

c) Selling and Distribution Overheads

6. Expenses Excluded from Cost Sheet

7. Key Important Points While Preparing Cost Sheet

8. Comprehensive Video on Cost Sheet

9. Cost Sheet Practical Problems and Solutions


Meaning of Cost Sheet

Cost Sheets are statements setting out the costs of a product giving details of all the costs. Presentation of costing information depends upon the method of costing. A cost sheet can be prepared weekly, monthly, quarterly, or annually. In a cost sheet besides total expenditure incurred, cost per unit of output in case of each element of cost can be shown in a separate column. The cost sheet should give the cost per unit in the previous period for the purposes of comparison.

Walter & Bigg define, “The expenditure which has been incurred upon production for a period is extracted from the financial books and the store records, and set out in a memorandum or a statement. If this statement is confined to the disclosure of the cost of the units produced during the period, it is termed as a cost sheet”. In other words cost sheet is a statement showing the total cost under proper classification in a logical order.

Components of Total Cost

1. Prime Cost: Prime cost consists of costs of direct materials, direct labour and direct expenses. It is also known as basic, first, or flat cost.

2. Factory Cost: Factory cost comprises prime cost and, in addition, works or factory overheads that include costs of indirect materials, indirect labour and indirect expenses incurred in a factory. It is also known as works cost, production, or manufacturing cost.

3. Office Cost: Office cost is the sum of office and administration overheads and factory costs. This is also termed as administration cost or the total cost of production.

4. Total Cost: Selling and distribution overheads are added to the total cost of production to get the total cost or the cost of sales.

Advantages of Cost Sheet

a)    Cost sheet helps in ascertainment of total cost of goods produced.

b)   It also helps in ascertaining the cost per unit of goods produced.

c)    It helps in fixation of selling price.

d)   Unlike financial accounting, it can be prepared weekly, monthly, quarterly, and half yearly.

e) It is helpful in drafting tender.

Comprehensive Cost Sheet Format

Particulars

Units

Rate per Unit

Amount

Opening Stock of raw material

Add: Purchases Less return of raw materials

Add: Carriage or Carriage inward

Add: Octroi, Freight, Insurance of Raw material and Duty

Add: Primary packing material of raw material

Less: Closing stock or raw materials

Less: Sale value of Scrap of Raw Material (Normal loss)

Less: Abnormal loss of material (Cost)

a) Raw Material Consumed

Add: Direct labour/Productive Labour/Manufacturing wages

(Both Skilled and Unskilled labour)

Add: Chargeable expenses/direct expenses/ hire of crane for job/ royalty on production or royalty/cost of blueprint/fees paid to architect and surveyors/ license fees/

b) Prime Cost

Add: Factory overheads/Works overheads (Refer working note below)

Less: Sale of Factory Scrap (Normal Loss)

Less: Cost of abnormal loss of stores and factory materials

c) Factory/Works/Manufacturing cost incurred

Add: Opening work-in-progress

Less: Closing Work-in-progress

d) Factory/Works/Manufacturing cost

Add: Office and Administrative Overheads (Refer working note below)

e) Cost of Production

Add: Opening Stock of finished product

Less: Closing stock of finished goods

f) Cost of goods sold

Add: Selling and distribution overheads (Refer working note below)

g) Cost of Sales/Cost of Turnover

Add Profit margin

h) Sales value

Working Notes: List of Various types of overheads

1. Factory Overheads: Example of Factory overheads are listed below:

·      Indirect or unproductive Material and Wages,

·      Leave wages,

·      Bonus to workers,

·      Overtime wages,

·      Fuel and power,

·      Gas, coal and water,

·      All factory expenses,

·      Property tax on factory building,

·      Works stationery,

·      Canteen and welfare expenses,

·      All works expenses,

·      Technical director fees,

·      Repairs and maintenance,

·      Depreciation of plant, machinery and factory building,

·      Works manager salaries,   

·      Supervisor and foremen salaries,

·      Laboratory expenses,

·      Drawing office salaries,

·      Factory power and light,

·      Storekeeping expenses,

·      Consumable store,

·      Cotton waste,

·      Unproductive expenses,

·      Storekeeper and timekeeper,

·      Tools used,

·      Grease oil,

·      Crane expenses,

·      Sandpaper,

·      Haulage,

·      Cost of idle time,

·      Internal transport,

·      Defective works – the cost of rectification.

2. Office and Administrative overheads: Examples of Office and Administrative overheads are listed below:

·      Office rent, rates and taxes,

·      Printing and stationery,

·      Staff salaries and bonus,

·      Consultation fees,

·      Counting or compting house salary,

·      Office lighting and electricity,

·      Sundry and general expenses,

·      Director’s fees and other expenses,

·      Contribution to provident fund and employees state insurance,

·      Legal and bank charges,

·      Audit fees,

·      Depreciation on office equipment's and furniture,

·      Subscription of journal and magazines,

·      Postage and telephone,

·      Executives expenses,

·      Clerks, secretaries and accountant salaries and other expenses,

·      R&D Expenses (Research and Development expenses),

·      Estimating expenses.

3. Selling and distribution overheads: Examples of Selling and Distribution overheads are listed below:

·      Warehouse expenses,

·      Showroom expenses,

·      Salesmen expense,

·      Shop expenses,

·      Delivery van expenses,

·      Branch expenses,

·      Advertisement and bad debts,

·      Collection charges,

·      Sales office expenses,

·      Cost of tenders and catalogues, price lists,

·      Travelling expenses,

·      Carriage outward, packing expenses,

·      Quotations,

·      After-sales service,

·      Free sample,

·      Royalty on sales,

·      Marketing research expenses.

4. Expenses excluded from cost sheet: Items which recorded in Financial Accounting but excluded from Cost sheet are listed below:

·  Donation,

·  Income tax,

·  Profit or loss on the sale of assets,

·  Provision for income tax and bad debts, etc.,

·  Transfer to reserves,

·  Goodwill and intangible assets written off,

·  Preliminary expenses,

·  Discount of issue of shares and debentures,   

·  Dividend,

·  Cash discount,

·  Advance income tax,

·  Debenture interest, interest on loan and overdrafts,

·  Any income received,

·  Over depreciation,

·  Abnormal bad debt,

·  Interest on capital,

·  Capital losses,

·  Fines and penalties,

·  Discount allowed and received,

·  Brokerage and underwriting commission,

·  Guesthouse expenses and incomes,

·  Sales Tax.

Important points: Key Points you must remember while preparing Cost Sheet

Particulars

Treatment

1. Normal loss of raw materials

Excluded from the cost sheet, only scrap value (Sale value) of normal loss is deducted from raw material

2. Normal loss of stores and factory indirect material

Excluded from cost sheet, only scrap value (Sale value) of normal loss is deducted from factory overheads

2. Abnormal loss of raw material

The cost of abnormal loss is deducted from raw material consumed.

4. Abnormal loss of stores and factory indirect material

The cost of abnormal loss is deducted from factory overheads.

5. Units of Opening and closing stock of raw material

Valued at purchase price per unit or given value is considered.

6. Units of opening and closing stock of finished goods

Valued at cost of production per unit

7. Production during the year (Units)

Sales +closing stock – opening stock

8. Sales during the year (Units)

Production + opening stock – closing stock

9. LIFO Method of valuation of stock

Opening stock balance + Units unsold during the year = closing stock

10. FIFO method of valuation of stock

Units unsold during the year + Remaining balance of opening stock = closing stock

Conclusion: After going through this article, I am 100% sure that now you are familiar with cost sheet format and are able to solve any practical problem on cost sheet. Visit our website regularly for more articles. Thanking You.





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