Element to be ignored while preparing Cost Sheet (a) Expenses not related to the product. Ex : Donation ,Gift etc. (b) Abnormal Expenses and Losses. Ex : Loss by fire, theft etc. (c ) Fictitious / Intangible Assets written off. Ex : Goodwill W/off, Preliminary exp. W/off etc.
(d) Expenses after Profit. Ex : Income tax etc. (e) Appropriation of Profits. Ex : Dividends, Transfer to G.R. etc (f) Financial Expenses / Losses. Ex : Interest payment, Cash discount, Bad debts etc. (g) Incomes other than Sales and Sale of Scrap. E.g.: Interest received, rent received, Dividend recd.etc.
To find out Qty.Mfg / Qty. SoldParticulars Units Opening Stock of finished goods xxx Add : Qty.Mfg. (Finished Goods) xxx Less : Closing stock of finished goods xxx Qty.Sold (Finished goods) xxx
Valuation of Opening & Closingstock of finished goods (a) Closing Stock Finished of Goods :- To be valued at current year’s cost of production per unit. (b) Opening Stock of Finished goods :- To be valued at previous year’s cost of production per unit. If previous year cost of production is not given →Assume it to be the same as current years
Valuation of finished goods byweighted average methodParticulars Units Total cpu CostCost of Production 1000 10000 (10)Add : Opening Stock of 200 2300finished goodsLess : Cl.stk.of finished 100 1025Goods 10000+2300 1000+200=10.25 Goods soldCost of 1100 11275 (10.25)
Types of Problems (1) Simple format based Problems. (2) Problems based on Reverse Working. (3) Problems based on estimated cost sheet (variable, fixed & Semi variable costs) (4) Problems where break up of semi variable cost not given. (5) Problems based on Total Cost Ratios.
(2) Problems based on ReverseWorking Some basic information missing. E.g : Purchase of raw material → Some other extra information given. E.g : Cost of goods sold Start with the extra information given in the Question.
(3) Problems based on estimatedcost sheets. Prepare Actual Cost Sheet of the previous year. →Give the effects of variable, fixed & semi variable cost in the estimated cost sheet as given below. (a) Variable cost : Change In Cost Per Unit Column →Give effect of change in price in the per unit column . If no change in the price Maintain the same amt. in the per unit column.
(b) Fixed Cost : Change In Total Cost Column →Give effect of change in price in the Total Cost column . If no change in the price. Maintain the same amt. in the Total cost column.
(C) Semi Variable Cost :- →Find the break-up of semi variable cost between fixed & variable cost. →Change in the variable portion →Effect should be given in per unit column. →Change in the fixed portion →Effect should be given in total cost column.
Bifurcation of Costs into Variable,Fixed & Semi variable →Direct material →Direct wages Always variable cost →Direct Expenses →Factory Overheads Can be variable or →Office Overheads fixed or even semi variable →Selling Overheads If specified → Follow the specifications. If not specified →Consider them as Fixed Cost
IMPORTANT POINTS (1)In case of a semi variable cost → Give break up of fixed & variable portion in previous years actual cost sheet. (2) Closing stocks of Actual Cost Sheet → Not to be included as opening stock in Estimated Cost Sheet.
(4) Problems where break up ofsemi variable cost not given . →Find out the variable cost per unit Variable Cost = Difference in cost Per Unit Difference in qty
→ Find out Total variable cost. Variable cost per unit X No.of units → Find out Fixed cost. F.C = Semi Variable cost – Total Variable cost
(5) Problems based on Total CostRatios Total cost (Consolidated cost) is given &Cost sheet to be prepared for two or morethan two products. Formula to Divide the Total Cost betweenthe various products.
A B Cost Per Unit Ratio X : X X Qty.Mfg. / Sold Ratio X : X Total Cost Ratio X : X Only for selling expenses qty.sold Ratio should be used.