Unit or output costing i

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Unit or output costing i

  1. 1. Unit or Output Costing-I (Cost Sheet ,Cost Statement and Production Account)
  2. 2. Meaning • Unit or Output costing is used in those industries or organisations where standard products are produced from a common process and all the units produced are more or less similar to each other. • This method is also known as “Single Costing Method”.
  3. 3. Definition of Unit or Output Costing “Unit Costing method is a Method of costing applied to ascertain the cost per unit or production where standard and identical products are manufactured. Walter W.Bigg.
  4. 4. Charachterstics of Unit Production • Production should be uniform or Homogeneous • Identical products • The cost unit should be physical /natural • Per Unit cost should be determined ,for eg.Per ton, per metre etc.
  5. 5. Objectives of Unit /Output Costing • To know the totsl cost of production • To classify cost under related categories such as prime cost,works cost etc. • To determine the effect of each element of cost • To compare cost during two or more periods • To determine proposed setting price to earn desired profit • To Determine tender price on the basis of Cost Data and Fututre prospects.
  6. 6. Elements of cost under Unit /Output costing • • • • Materials Labour Direct expenses Overheads
  7. 7. Methods of determining Unit Cost 1) Cost Sheet 2) Statement of Cost 3) Production Account
  8. 8. Cost Sheet • Cost sheet is a statement which is used to determine the total cost of goods produced in a specific Period and in which total cost,per unit cost and cost incurred at various stages from manufacturing a products to the stage of making it saleable are shown.
  9. 9. Definition of Cost sheet • “Cost Sheets are prepared for the use of management and consequently they must include all the essential details which may assist the manager in judging the efficiency of Production.”
  10. 10. Facts about Cost sheet • • • • Total Quantity of production Total cost of total quantity produced Per unit cost of total quantity produced Various components of cost at various stages of Production i.e. Prime cost,factory cost • Direct and Indirect cost of production • Comparative cost of two productsand its analysis • Proportion of each individual cost to total cost expressed in percentage.
  11. 11. Advantages of Cost sheet • • • • • Determination of selling Price Control on Expenses Help in Minimising the Expenses Comparative study of Cost Benefit to common man
  12. 12. Difference between Cost Account and Cost Sheet Cost Account • Double Entry System • Used in ProductionA/cs,Process A/cs • No help in making comparison • No ascertainment of Cost per unit • Helpful in Reconciliation • Based on cost sheet • Cost Accounts are not helpful in control and Guidance Cost Sheet • No Double Entry System • Used Monthly,weekly • Helpful in knowing Comparisons • Ascertain Cost per Unit • No help in Reconciliation • Cost sheet helps in cost control and guidance
  13. 13. Types of Cost Sheet 1) 2) 3) 4) Simple Cost Sheet Cost Sheet with Profit Cost Sheet with Statement of Profit Comparative Cost Sheet
  14. 14. 1.)Simple Cost Sheet (for Month---) Particulars Total Cost (Rs.) Cost Per Unit(Rs.) Direct Material Direct Wages Direct or Chargeable Expenses ------------ ------------- ------- ------ ------- ------ ------- ------- Office Overhead ------- ------- (C) Cost of Production ------- ------- Selling and Distribution Expenses ------- ------- (D) Total Cost ------ ------- (A) Prime Cost Work Overhead /Factory Overhead (B) Works Cost Units------
  15. 15. 2.)Cost Sheet with Profit Particulars Cont… Total Cost (Rs.) CostPerUnit(Rs.) ------- ------ ------- ------ Opening stock of Direct Raw Material ---Add: Purchases during the Year ---Add : Incidental Expenses(Carriage , Freight,Octroi , Custom Duty) ---Less: Closing Stock of Direct Raw Material ----Less: Defective Materials Returned Less: Residue used in other products Cost of direct raw material consumed Direct Wages/Labour Charges or Productive Wages Direct Expenses /Chargeable Expenses (A) Prime Cost Add: Work Overhead /Factory Overhead Factory Oncost/Un Productive Labour Indirect Wages/Unproductive Labour (Fuel,Power,coal,Light & water,Factory Insurance,Rent of factory,Dep. On Factory Building/machine Repairs on factory Building /machine
  16. 16. Cost Sheet with Profit Particulars cont… Total Cost (Rs.) CostPerUnit(Rs.) ------- ------ Add:Office and administrative Overheads/Office exp ------Legal Expenses,Office Expenses,Office salaries,office Lighting,Adm. Expenses,Printing and stationery,fees of Directors,telephone &Telegrams,Managing Director’s Salary(office),Dep.on Office building/furniture,Repairs to office building/Furniture ------ Add: Opening Stock of work in progress Less: Closing Stock of Work in Progress Add: Additional Overburden on Rectification Less: Sale of Scrap/Defective etc. Factory /Works Cost Office Cost or cost of Producion ------ ------ ------ ------ Add: opening stock of Finished Goods Less: Closing Stock of Finished Goods Cost of Goods Sold
  17. 17. Cost Sheet with Profit Particulars cont… Total Cost (Rs.) CostPerUnit(Rs.) ------- ------ ------- ------ ------- -------- Add: Selling & Distribution Overheads: Advertisement Discount Travelling Expenses Salesman Commission Dep.On Delivery Vans Packing and Distribution Charges Bad Debts Upkeep of Delivery Vans Warehouse Rent,etc. Cost of Sales Profit( certain % on total cost or sales) Selling Price
  18. 18. 3.)Cost Sheet with statement of profits Particulars Total cost (Rs.) Cost per unit ( Rs.) Direct Material Direct Wages Direct or Chargeable Expenses Prime Cost Factory /Works Overheads: Factory Expenses Light Rent of Factory Unproductive wages Factory/Works Cost Office and Administrative Overheads: Office Salaries,Office Rent Dep. On Office Building & EquipmentGeneral Expenses etc. Cost of Production ------- --------
  19. 19. Statement of profits Particulars Total cost (Rs.) Cost per unit (Rs.) Cost of Production for ---units@rs.---perunit --------- ------- Selling and distribution overheads: Selling Expenses Bad Debts Discount Advertisement etc. -------- ------- ------ -------- ------- -------- -------- --------- Cost of Sales Profit Sales/Selling Price
  20. 20. 4.)Comparative Cost Sheet Period/Product Period/Product Total Cost per Particulars cost(Rs.) unit(Rs.) Total cost (Rs.) ---- --------- ------- ----- Direct Material,Direct Wages,Direct or Chargeable Expenses (A) --------------------` Cost per unit (Rs.) Prime Cost Work Expenses:Fuel,Electric Power ,Repairs,Depreciation,Rent) (B) Work Cost Office Expenses,Office salaries,office lighting (C) Total Cost -------- ------- ------ -------- ------- -------- -------- --------- ------ ------- Profit(% on Cost Price or Sales Price) (D) Selling Price
  21. 21. Statement of Cost • Statement of Cost is a memorandum statement which is not made according to the double entry system. It is a statement which is made for calculating total cost, per unit cost and budget cost of product. All elements of cost in statement of cost are taken from financial accounting's historical records. In cost sheet per unit cost of each item of expense is calculated whereas in statement of Cost it is not done.
  22. 22. Components of Cost • • • • Prime Cost Factory/Works Cost Office and administration cost Total Cost
  23. 23. Prime Cost • Prime cost is the main element of cost of any product.It is also called “Direct cost”, “ First Cost”, “ Flat Cost”. • Prime Cost= Direct Material + Direct Wages +Direct Expenses
  24. 24. Factory Cost • Factory overheads includes the expenses which are of indirect nature and are incurred in factory or production process or in operating and controlling production activity. • Factory/Works Cost =Prime Cost + Factory Overheads
  25. 25. Office and administration cost • The expenses which are incurred in operating and controlling the business are included in Office and administration cost . Expenses incurred on effective functioning and maintenance of business ,policy creation and implementation are termed as office and administrative expenses. • Rent,rates and tax of office building,expenses on Light and Cleaning of office premises etc. • Cost of Production=Factory cost+Office and administration cost
  26. 26. Total Cost • When selling and distribution expenses are added in cost of production , then cost arrived is known as Total Cost. • Expenses of sales office , salary &commision allowed to sales manager ,travelling expenses of sales representative,Advertisement,Bad Debts,Price-List,Samples ,gifts,Discount allowed to customers etc.
  27. 27. Thanks

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