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Output Costing | Expenses or Income Excluded in Cost Sheet

Arjun EP

Published on: April 14, 2021

Expenses Items Excluded in Cost Sheet

Cost sheet involves all the direct and indirect expenses related to a particular cost center or cost units.

It does not involve unrelated expense.

The following expenses are excluded in cost sheet:

Capital expenditures

Loss of sale of fixed assets or investment

Provision for taxation or tax paid

Dividend paid

Discount on shares or debenture

Amortization of intangible assets

Underwriting commission

Transfer to reserve or sinking fund

Interest on capital, debenture or loan

Provision for bad debts

Donation to charitable institutions

Loss by fire, theft or accident

Incomes Items Excluded in Cost Sheet

Cost sheet excluded all the financial incomes gained from other external or irrelevant sources.

The following are the incomes excluded in cost sheet:

Capital gains

Profit on sales of fixed assets or investment

Transfer fee

Interest received, dividend received

Rent received, commission received

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country

PROBLEM: 2A

The following information of DK Manufacturing Company is provided to you ($/₹/Rs):

Cost of goods sold	11,00,000	Packaging (secondary)	2,500
Advertisement	30,000	Free samples	5,000
Carriage outward	25,000	Discount allowed	4,500
Rent of warehouse	15,000	Repairs of a delivery van	5,000
Commission to agent	7,500	Salary of salesmen	35,000
TA/DA of salesmen	3,500	Depreciation of delivery van	4,000
Dividend paid	7,000	Interest received	3,000

Required: Total cost and sales (if profit 20% on cost)

[Answer: Total cost = Rs 12,37,000; Profit = Rs 2,47,400; Sales = Rs 14,84,400]

SOLUTION

Statement of Cost

Particulars	Amount	Amount
Cost of goods sold		11,00,000
Add: Selling and distribution overheads:
Advertisement	30,000
Carriage outward	25,000
Rent of warehouse	15,000
Commission to agent	7,500
TA/DA of salesmen	3,500
Packaging (secondary)	2,500
Free samples	5,000
Discount allowed	4,500
Repairs of delivery van	5,000
Salary of salesmen	35,000
Depreciation of deliver van	4,000	1,37,000
Total cost		12,37,000
Add: Profit on cost (12,37,000 @ 20%)		2,47,400
Sales		14,84,400

*No entry for dividend paid and interest received

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country

PROBLEM: 2B

The following information of DK Manufacturing Company is provided to you ($/₹/Rs):

Cost of goods sold	11,47,000	Packaging (secondary)	5,000
Advertisement	20,000	Free samples	3,000
Carriage on sales	15,000	Discount and bad debts	7,000
Rent of godown	35,000	Repairs of the delivery van	13,000
Export duty	10,000	Salary of salesmen	36,000
Depreciation of delivery van	4,000	Dividend paid	4,000
Provision for bad debts	7,000

Required: Total cost and sales (if profit 20% on sales)

[Answer: Total cost = Rs 12,95,000; Profit = Rs 323,750; Sales = Rs 16,18,750]

SOLUTION

Statement of Cost Sheet

For ……. units

Particulars	Amount	Amount
Cost of goods sold		11,47,000
Add: Selling and distribution overheads:
Advertisement	20,000
Carriage on sales	15,000
Rent of godown	35,000
Export duty	10,000
Depreciation of deliver van	4,000
Packaging (secondary)	5,000
Free samples	3,000
Discount and bad debts	7,000
Repairs of delivery van	13,000
Salary of salesmen	36,000	1,48,000
Total cost		12,95,000
Add: Profit on sales (12,95,000 x 20/80*		3,23,750
Sales		16,18,750

*No entry for PBD and interest received

= 100 – Profit % = 100 – 20 = 80*

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country

PROBLEM: 2C

ABC Manufacturing Company provides following extracted data for the production of 20,000 units:

Particulars	Amount	Particulars	Amount
Ram material purchased	145,000	Haulage	7,000
Direct chargeable expenses	35,000	Bad debts	3,000
Productive wages	125,000	Advertisement	4,500
Indirect wage	7,500	Carriage outward	4,800
Factory cleaning	7,500	Salary of salesmen	12,000
Indirect materials	5,000	Bank charge	1,000
Motive power	10,500	Estimating expenses	4,000
Printing and stationery	5,400	Up-keep of delivery van	2,500
Rent and rates	12,000	Manager’s salary	15,000
Coal, gas, and water	7,500	Tax paid during the period	8,750
Legal expenses	5,000	Telephone and fax	3,200
Audit fee	4,000	Depreciation of office building	7,500
Depreciation of plan and machinery	15,000	Depreciation of furniture	2,500
Profit on cost	20%	Internet and email	2,000

Additional information:

60% of manager’s salary is related to factory and balance of office

Required: Cost sheet to show:

(a) Prime cost; (b) Factory cost; (c) Cost of production; (d) Total cost; (e) Profit; (f) Cost per unit;

[Answer: (a) PC = Rs 305,000; (b) FC = Rs 374,000;

(c) COP = Rs 426,600; (d) TC = Rs 453,400;

(e) Profit = Rs 90,680; (f) CPU = Rs 22.67]

Solution:

Cost Sheet

(For 20,000 units)

Particulars		Amount	Amount
Ram material purchased			145,000
Productive wages			125,000
Direct chargeable expenses			35,000
	a. Prime cost		3,05,000
Add:	Factory overheads:
	Indirect wage	7,500
	Factory cleaning	7,500
	Indirect materials	5,000
	Motive power	10,500
	Coal, gas, and water	7,500
	Depreciation on plan and machinery	15,000
	Haulage	7,000
	Manager’s salary (60% of 15,000)	9,000	69,000
	b. Factory cost		3,74,000
Add:	Office overheads:
	Printing and stationery	5,400
	Rent and rates	12,000
	Legal expenses	5,000
	Audit fee	4,000
	Bank charge	1,000
	Estimating expenses	4,000
	Manager’s salary (40% of 15,000)	6,000
	Internet and email	2,000
	Telephone and fax	3,200
	Depreciation on office building	7,500
	Depreciation on furniture	2,500	52,600
	c. Cost of production		4,26,600
Add:	Selling and distribution overheads:
	Bad debts	3,000
	Advertisement	4,500
	Carriage outward	4,800
	Salary of salesmen	12,000
	Repairs of delivery van	2,500	26,800
	d. Cost of sales or total cost		4,53,400
Add:	Profit on cost (e) [453,400 x 20/100]		90,680
	Sales		5,44,080

(f) Cost per unit = Total cost ÷ Total production units = Rs 453,000 ÷ 20,000 units = Rs 22.67

#####

PROBLEMS AND ANSWERS OF COST SHEET

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country

PROBLEM: 2A

The following information of a manufacturing company for the period of one year is provided to you:

Particulars	Amount	Particulars	Amount
Opening of stock of raw materials	1,00,000	Salary- salesmen	7,500
Purchase of raw materials	11,00,000	Commission to salesmen	12,500
Carriage on purchase	15,000	Traveling expenses of salesmen	5,500
Closing of stock of raw materials	80,000	Advertisement	10,000
Direct wage	3,50,000	Repairs of delivery van	1,500
Indirect wage	25,000	Carriage outward	5,250
Chargeable expenses	55,000	Loan repaid to bank	1,50,000
Rent and rates- office	21,000	Dividend received	5,350
Rent and rates- factory	16,000	Printing and stationery	4,500
Depreciation of plan and machinery	12,000	Manager’s salary	21,000
Depreciation of furniture	3,500	Coal and gas	12,000
Salary- office	15,000	Profit on sales	20%

Manager’s salary is to be apportioned Rs 9,000 to factory, Rs 8,000 to office and Rs 4,000 to selling department.

Required: Cost sheet to showing: prime cost, factory cost, cost of production, Total cost and profit.

[Answer: (a) PC = Rs 15,40,000; (b) FC = Rs 16,14,000; (c) COP = Rs 16,66,000;

(d) COS or Rs TC = Rs 17,12,250; (e) Profit = Rs 4,28,063]

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country

PROBLEM: 2B

The following information of PK Manufacturing Company is provided to you ($/₹/Rs):

Opening stock of raw materials	50,000	Supervisor’s salary	10,000
Purchase of raw materials	4,00,000	Coal, coke, gas and power	35,000
Carriage on purchase	20,000	Office rent and taxes	21,000
Import duty	50,000	Depreciation on equipment	3,500
Closing stock of raw materials	80,000	Office salary	45,000
Direct materials	50,000	Printing and stationery	4,500
Direct wages	90,000	Phone and internet	9,000
Chargeable (direct) expenses	70,000	Carriage outward	10,000
Indirect wages	25,000	Advertisement	25,000
Factory rent	16,000	Commission to salesmen	35,000
Depreciation on plant	12,000	Travelling expenses for selling	20,000
Profit on sales of machinery	2,300

Profit is charged 20% on cost.

Required: Cost sheet showing (a) Value of material consumed; (b) Prime cost; (c) Factory cost;

(d) Cost of production; (e) Total cost; (f) Profit

[Answer: (a) Rs 440,000, (b) Rs 650,000; (c) Rs 748,000;
(d) Rs 831,000; (e) Rs 921,000; (f) Rs 184,200]

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country

PROBLEM: 2C

The following information of EP Manufacturing Company is provided to you ($/₹/Rs):

Opening stock of raw materials	60,000	Internet expenses	1,000
Purchase of raw materials	5,00,000	Depreciation on furniture	2,000
Carriage on purchase	50,000	Audit fee	5,000
Custom duty	12,000	Staff salary	19,500
Closing stock of raw materials	72,000	Printing and stationery	7,500
Direct wages	200,000	Establishment expenses	3,000
Chargeable (direct) expenses	70,000	Carriage outward	15,000
Indirect materials	10,000	Rent of warehouse	10,500
Indirect wages	12,000	Commission to agent	7,500
Factory rent	15,000	TA/DA of salesmen	3,500
Power and fuel	12,000	Packaging	2,500
Factory insurance	25,000	Advertisement	10,000
Repair to plant	7,000	Discount allowed	4,500
Depreciation on plant	27,000	Repair to delivery van	1,500
Coal, gas and water	10,000	Salary to salesmen	16,000
Work’s manager salary	15,000	Depreciation on delivery van	4,000
Telephone expenses (office)	1,500	Loss on sales of furniture	5,000
Legal fee	3,500