Unit Costing and Cost Sheet

Unit Costing and Cost-sheet
Unit Costing
 Unit costing is a method of costing based on
units of production.
 It is also known as output costing or single
costing.
 The output is measured in physical units.
Total Cost
Cost per unit 
Number of units produced
The cost sheet Previous
prepared under period’s
Cost per
single or output Total Cost total cost
costing method unit
and cost per
shows: unit
Procedur Collectio Cost of
Cost of
e of Unit n of Material
Labour
Costing: costs s
Treatment of Stocks
[A.] Stock of Raw Materials
Rs.
Opening of raw materials xxxx
Add: Purchase of raw Materials xxxx
xxxx
Less: Closing Stock of raw materials xxxx
Cost of raw material consumed xxxx
[B.] Treatment of WIP

(a) VALUATION AT PRIME COST Rs.
Direct materials xxxx
Add: Direct wages xxxx
Add: Direct expenses xxxx
Add: Opening WIP xxxx
xxxx
Less: Closing WIP xxxx
Prime Cost xxxx
(b) VALUATION AT WORK COST Rs.
Prime cost xxxx
Add: Factory overheads xxxx
Add: Opening WIP xxxx
xxxx
Less: Closing WIP xxxx
Work Cost xxxx
 [C] Stock of Finished goods
Rs
Works costs xxxx
Add: Admin and Establishment OH
xxxx
Cost of Production xxxx
Add: Opening stock of FGs xxxx
xxxx
Less: Closing stock of FGs xxxx
Cost of finished goods sold xxxx
Divisions of Cost
 1. Prime Cost: it comprises of all direct
materials, direct labour, and direct expenses.
It is also known as Flat Cost.
 Prime cost = Direct Materials + Direct labour +
Direct Expenses
 2. Work Cost: it is known a factory cost or
cost of manufacture. It is the cost of
manufacturing an article. It includes prime
cost and factory expenses.
 Work cost = Prime Cost + Factory OH
 3. Cost of production: it represents factory
costs plus administration expenses.
 Cost of production = Factory cost + Admn exp.
 4. Total Cost: it is the aggregate of cost of
production plus selling and distribution
expenses.
 Total Cost = Cost of production + Selling and Dist.
Exp.
 5. Selling price: it is the price which includes
the total cost plus the margin of profit
 Selling price = Total Cost + Profit/margin
1. M/s. Ram Manufacturing Co. Ltd intends to submit a tender. You are given the
following particulars:
Rs.
Stock of finished goods as on 31 Dec 2006 72,800
Stock of raw materials as on 31 Dec 2006 33,280
Purchase of Raw materials 7,59,200
Productive wages 5,16,880
Sales of Finished goods 15,39,200
Works overhead charges 1,29,220
Office overhead expenses 70,141
Stock of finished goods as on 31 Dec 2007 78,000
Stock of raw materials as on 31 Dec 2007 35,360
(I) From the foregoing detail, prepare:
1. The cost of material consumed
2. Prime Cost
3. Works cost
4. Total Cost
5. The percentage of work on cost to productive wages, and
6. The percentage of office on cost to works cost.
(II) Based on the above mentioned percentages, prepare a statement
showing the amount of tender for manufacturing a plant, considering the
following information.
1. Cost of raw materials to be consumed Rs.25,000
2. Wages to be paid Rs.31,200
3. The company intends to earn the net profit of 20% on selling price
 Ans Key:
 1. Cost of Raw Material consumed Rs.
7,57,120
 2. Prime Cost Rs. 12,74,000
 3. Works Cost Rs. 14,03,220
 4. Cost of Production Rs. 14,73,361
 5.Total Cost Rs. 14,68,161
 6. Works OH Rate = 25% (rounded)
 7. Office OH Rate = 5% (rounded)
 8. Tender Price Rs. 84,000, Margin =25%, of
Total Cost
2. Mr. Ravi Furnishes the following data relating to the manufacturing of X-
standard products during the month of April.
Raw materials consumed Rs. 15,000
Direct Labour charges Rs. 9,000
Machine hours worked 900
Machine hour rate Rs 5
Admin OH 20% on works cost
Selling OH Re 0.50 per unit
Units produced 17,100
16,000 @ Rs. 4 per
Units sold unit
You are required to prepare a cost sheet from the above , showing:
(a) Cost Per Unit
(b) Profit per unit sold and profit for the period.
 Ans Keys:
 1. Cost of Production 34,200, Per unit cost =
34,400/17100 = Rs. 2.00
 2. Cost of Production of 16000 units @ Rs. 2,
Rs.32000
 Selling OH 50 paise for 16000 units (i.e. Rs.8000)
 3. Cost of Sales Rs40,000
 4. Sales @ Rs.4 , 16,000*4 = Rs. 64,000
 Profit Per unit sold = 24000/16000 = Rs.1.50
3. Some selected sales and cost data for job order 515 are given below.
Direct materials used Rs. 100,000
Direct labor 150,000
Factory overhead 75,000
(all indirect, 40% variable)
Selling and administrative expenses
120,000
(50% direct, 60% variable)
Compute the following:
( A ) PRIME COST,
( B )CONVERSION COST,
(C) DIRECT COST,
( D )INDIRECT COST,
(E)PRODUCT COST,
(F)PERIOD EXPENSE,
(G) VARIABLE COST, AND
(H) FIXED COST.
 Ans Key
 A. Prime cost = 100000 +150000 = 250000
 B. Conversion Cost = 150000+75000 = 225000
 C. Direct Cost = 100000+150000+60000 =
310000
 D. Indirect Cost = 75000+60000= 135000
 E. Product Cost = 100000+150000+75000 =
325000
 F. Period expenses = Sell and Adm = 120000
 G. Variable cost =
100000+150000+30000+72000 = 352000
 H. Fixed Cost = 45000+48000= 93000

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[B.] Treatment of WIP

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