Accountants define cost as resources sacrificed or forgone to achieve an objective. Cost is usually measured monetarily and includes direct materials and advertising. Process costing collects information on all costs during an accounting period and divides the total costs by the quantity produced. Process costing is used by industries like oil refining and involves direct material, direct labor, direct expenses, and production overheads. The two basic costing methods are job costing and process costing. A cost sheet systematically presents the various cost components and classifications like prime cost, factory cost, cost of production, total cost, and sales. It helps ascertain costs, provide management information, and estimate profit or loss.

2. Accountants define cost as a resource
sacrificed or forgone to achieve a specific
objective. A cost (such as direct materials
or advertising) is usually measured as the
monetary amount that must be paid to
acquire goods or services.

3. Measures, analyzes and reports financial
and non-financial information relating to
the costs of acquiring or using recourses in
an organization.
For Example: Oil Refining. The process
costing collects information about all costs
during an accounting period and divides
those costs by total quantity output

4. Following are the main elements involved
in the manufacturing process where
process costing method is adopted.
 Direct Material
 Secondary Material
 Primary Material
 Direct Labor
 Direct Expenses
 Production Overheads

5. The methods of costing refer to the
techniques and processes employed in the
ascertainment of costs. Many methods
have been designed to suit the needs
of different industries. These methods can
be summarized as follows:
It should be noted that two basic methods
of costing are
1. Job costing
2. Process Costing

6. Cost Sheet is a presentation of cost
data incorporating its various components
in a systematic way.
Cost Sheet or a cost statement is a
document which provides for the assembly
of the detailed cost of a cost Centre or
cost unit.

7.  Fixation of Selling Price
 Help in cost control
 Cost ascertainment
 Facilities the managerial decisions
 Break-up of total cost by elements and
sub-divisions

8. Prime cost = Direct Material + Direct Labor +
Direct expenses
Factory Cost = Prime Cost + Factory Overheads
Cost of Production = Works cost + office and
Administrative overhead
Total cost = Cost of Production + Selling and
Distributive Overhead
Sales = Total cost + profit

14. The various components of cost explained
above are presented in the form of a
statement. Such a statement of cost
consists of prime cost, works/factory cost,
cost of production, total cost and sales, is
termed as cost sheet.

16.  It helps us to ascertain the costs of goods
produced.
 It provides required information to the
management
 It classifies the cost into material, labor,
fixed overhead or variable overhead.
 Cost sheet is the main format of cost
accounting.
 Profit or loss estimated on specific product,
branch, department or job.
 It is an effective control device.