Stock is also known as inventory or merchandise.
For cost purpose, stocks are classified into raw materials, work-in-progress and finished goods.
These have opening and closing stock.
In cost sheet, these stocks are adjusted in different accounting heads.
The opening and closing stocks of raw materials are adjusted to find out actual value of raw material consumed.
The value of opening stock of raw material is added to the value of material purchased.
Closing value of raw material is deducted from it.
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 4A
The following information of F Ltd is provided to you:
|
Amount |
|
Stock of raw materials as on 1st January |
1,20,000 |
|
Purchase of raw materials during the year |
9,00,000 |
|
Carriage inward |
55,000 |
|
Custom duty and octroi |
10,000 |
|
Stock of raw materials as on 31st December |
1,50,000 |
|
Required: Value of raw materials consumed
[Answer: Value of raw materials consumed = 935,000]
Solution: 4A
Cost Statement
Particulars |
Amount |
Amount |
|
Opening stock of raw materials |
|
1,20,000 |
|
Add: |
Purchase of raw materials during the year |
|
9,00,000 |
Add: |
Carriage inward |
|
55,000 |
Add: |
Custom duty and octroi |
|
10,000 |
Less: |
Closing stock of raw materials |
|
(150,000) |
|
Value of material consumed |
|
9,35,000 |
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Work-in-progress is also known as semi-finished goods.
These are units of commodities, which are still in process on the date of preparing cost sheet.
Generally, the value of stock of work-in-progress is adjusted at the calculation of factory cost.
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 4B
The following information of a manufacturing industry is provided to you: ($/₹/Rs):
Direct materials |
100,000 |
|
Direct wages |
75,000 |
Direct expenses |
25,000 |
|
Factory expenses |
50,000 |
Opening stock of WIP Rs 10,000 Closing stock of WIP Rs 8,000
Required: Factory cost
[Answer: Factory cost = Rs 252,000]
SOLUTION: 4B
Cost Statement
Particulars |
Amount |
Amount |
Direct materials |
|
1,00,000 |
Direct wages |
|
75,000 |
Direct expenses |
|
25,000 |
Prime cost |
|
200,000 |
Add: Factory expenses |
|
50,000 |
Factory cost incurred |
|
250,000 |
Add: Opening stock of WIP |
|
10,000 |
Less: Closing stock of WIP |
|
(8,000) |
Factory cost |
|
252,000 |
Or
Cost Statement
Particulars |
Amount |
Amount |
Direct materials |
|
1,00,000 |
Direct wages |
|
75,000 |
Direct expenses |
|
25,000 |
Prime cost |
|
200,000 |
Add: Factory expenses |
50,000 |
|
Add: Opening stock of WIP |
10,000 |
|
Less: Closing stock of WIP |
(8,000) |
52,000 |
Factory cost |
|
252,000 |
The value of opening and closing stock of finished goods are adjusted to cost of production.
The value of opening stock of finished goods is added to cost production.
But, value of closing stock of finished goods is deducted to find out cost of goods sold.
In some cases, number of units of opening and closing stock of finished goods has been given but the value of such stocks is not given in the question.
In such a condition, the value of stock is calculated according to cost of production per unit.
Formula of cost of production per unit
Cost of production per unit = Cost of production ÷ Production units
Where:
Sold units = Opening stock of FG + Production units – Closing stock of FG
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 4C
The following information of a manufacturing industry is provided to you ($/₹/Rs):
Direct materials |
200,000 |
|
Direct wages |
85,000 |
Direct expenses |
15,000 |
|
Factory expenses |
60,000 |
Office expenses |
40,000 |
|
|
|
Other information:
Production units 10,000
Opening finished goods 2,000 units
Closing finished goods 1,000 units
Required: Cost of goods sold
[Answer: COGS = Rs 440,000]
Solution: 4C
Particulars |
Units |
Amount |
Direct materials |
|
2,00,000 |
Direct wages |
|
85,000 |
Direct expenses |
|
15,000 |
Prime cost |
|
3,00,000 |
Add: Factory expenses |
|
60,000 |
Factory cost |
|
3,60,000 |
Add: Office expenses |
|
40,000 |
Cost of production |
10,000 units |
4,00,000 |
Add: Opening stock of finished goods |
2,000 units |
80,000 |
Less: Closing stock of finished goods |
1,000 units |
(40,000) |
Cost of goods sold |
11,000 units |
440,000 |
Given and working note:
Cost of production per unit = Rs 400,000 ÷ 10,000 units = Rs 40
Sold units |
= Opening stock + Production units – Closing stock |
|
= 2,000 + 10,000 – 1,000 |
|
= 11,000 units |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 4D
The following information of a manufacturing company is given to you:
Direct materials |
10,00,000 |
Selling and distribution expenses |
1,50,000 |
Direct wages |
5,75,000 |
Opening stock of finished goods |
5,000 units |
Direct expenses |
1,25,000 |
Production during the year |
20,000 units |
Factory expenses |
2,00,000 |
Closing stock of finished goods |
4,000 units |
Office expenses |
1,50,000 |
|
|
Required: Prime cost, factory cost, cost of production, cost of goods of sold, total cost, selling price if profit is 20% on cost
[Answer: (a) PC = Rs 17,00,000; (b) FC = Rs 19,00,000;
(c) COP = Rs 20,50,000; (d) COGS = Rs 21,52,500;
(e) COS or TC = Rs 23,02,500; (f) Profit = Rs 460,500;
(g) Sales = Rs 27,63,000]
Solution: 4D
Cost Sheet
For 20,000 units
Particulars |
Units |
Amount |
Direct materials |
|
10,00,000 |
Direct wages |
|
5,75,000 |
Direct expenses |
|
1,25,000 |
Prime cost |
|
17,00,000 |
Add: Factory expenses |
|
2,00,000 |
Factory cost |
|
19,00,000 |
Add: Office expenses |
|
1,50,000 |
Cost of production @Rs102.50* |
20,000 |
20,50,000 |
Add: Opening stock of finished goods @Rs 102.50 |
5,000 |
5,12,500 |
Less: Closing stock of finished goods @Rs 102.50 |
(4,000) |
(4,10,000) |
Cost of goods sold |
21,000 |
21,52,500 |
Add: Selling and distribution expenses |
|
1,50,000 |
Total cost |
|
23,02,500 |
Add: Profit ( 20% of 23,02,500) |
|
4,60,500 |
Selling Price |
|
27,63,000 |
Given and working note:
Cost of production per unit = Total cost ÷ Production units = Rs 20,50,000 ÷ 20,000 units = Rs 102.50
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 4E
The following information of MC Manufacturing Company for six months period is provided to you for preparing cost statement ($/₹/Rs):
|
Opening |
Closing |
Raw materials in ($/₹/Rs |
1,00,000 |
1,25,000 |
Work-in-progress in ($/₹/Rs |
71,000 |
61,000 |
Finished goods in ($/₹/Rs |
? |
? |
Finished goods in units |
6,500 units |
7,000 units |
Production during the period is 215,365 units
Other information:
Direct wages |
7,50,000 |
|
Depreciation on plant and machinery |
32,150 |
Chargeable expenses |
1,10,000 |
|
Depreciation on office furniture |
4,750 |
Purchase of raw materials |
10,25,000 |
|
Advertisement |
13,000 |
Factory rent and insurance |
62,000 |
|
Salary |
1,05,000 |
Coal, gas and water |
26,000 |
|
Salesmen commission |
12,000 |
Carriage inward |
18,000 |
|
Office rent and rates |
16,250 |
Motive power |
12,250 |
|
Carriage outward |
14,250 |
Printing and stationery |
7,250 |
|
Sales price per unit |
12 |
Required: (a) Value of materials consumed; (b) Prime cost; (c) Factory cost; (d) Cost of production;
(e) Total cost; (f) Profit; (g) Sales
[Answer: (a) VOMC = Rs 10,18,000; (b) PC = Rs 18,78,000; (c) FC = Rs 20,20,400;
(d) COP = Rs 21,53,650; (e) COGS = Rs 21,48,650; (f) COS or TC = Rs 21,87,900;
(g) Profit = Rs 3,90,480; (h) Sales = Rs 24,78,380]
Solution: 4E
Cost Sheet
For 215,365 units
Particulars |
Amount |
Amount |
Cost per Unit |
|
|
Opening of stock of raw materials |
|
1,00,000 |
|
|
Purchase of raw materials |
|
10,25,000 |
|
|
Carriage inward |
|
18,000 |
|
Less: |
Closing of stock of raw materials |
|
(1,25,000) |
|
|
Value of materials used |
|
10,18,000 |
|
Add: |
Direct wage |
|
7,50,000 |
|
Add: |
Chargeable expenses |
|
1,10,000 |
|
|
Prime cost |
|
18,78,000 |
8.72 |
Add: |
Factory overheads: |
|
|
|
|
Factory rent and insurance |
62,000 |
|
|
|
Coal, gas and water |
26,000 |
|
|
|
Motive power |
12,250 |
|
|
|
Depreciation of plant and machinery |
32,150 |
|
|
Add: |
Opening stock of work-in-progress |
71,000 |
|
|
Less: |
Closing stock of work-in-progress |
(61,000) |
142,400 |
0.66 |
|
Factory cost |
|
20,20,400 |
9.38 |
Add: |
Office overheads: |
|
|
|
|
Printing and stationery |
7,250 |
|
|
|
Depreciation of office furniture |
4,750 |
|
|
|
Salary |
1,05,000 |
|
|
|
Office rent and rates |
16,250 |
1,33,250 |
00.62 |
|
Cost of production |
2,15,365 |
21,53,650 |
10.00 |
Add: |
Opening stock of finished goods |
6,500 |
65,000 |
|
Less: |
Closing stock of finished goods |
(7,000) |
(70,000) |
|
|
Cost of goods sold |
214,865 |
21,48,650 |
10.00 |
Add: |
Selling and distribution overheads: |
|
|
|
|
Advertisement |
13,000 |
|
|
|
Salesmen commission |
12,000 |
|
|
|
Carriage outward |
14,250 |
39,250 |
|
|
Total cost |
|
21,87,900 |
10.18 |
|
Profit (Selling price – Total cost) |
|
3,90,480 |
01.82 |
|
Selling Price [214,865 x Rs 12] |
|
25,78,380 |
12.00 |
COP per unit = Cost of production/Production units = Rs 21,48,650/214,865 units = Rs 10
Keep in mind (KIM)
Prime cost, work cost, cost of production should be divided by production units. |
But cost of goods sold, total cost, profit and selling price should be divided by sales units to find out per unit cost. |
#####
PROBLEMS AND ANSWERS OF COST SHEET |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 4A
The following information of KL Manufacturing Company is provided to you ($/₹/Rs):
Purchase of raw materials |
6,00,000 |
|
Direct labour |
1,50,000 |
Carriage on purchase |
15,000 |
|
Direct expenses |
70,000 |
Sundry factory expenses |
40,000 |
|
Stationery expenses |
5,250 |
Depreciation on plant |
21,000 |
|
Depreciation on office furniture |
3,000 |
Supervisor’s salary |
11,250 |
|
Office salary |
1,05,000 |
Coal, gas and power |
30,150 |
|
Sundry office expenses |
16,250 |
Sundry selling expenses |
14,100 |
|
Carriage outward |
15,000 |
Sales for the period |
12,00,000 |
|
Advertisement |
12,000 |
Other information:
Stocks |
Opening balance |
Closing balance |
Raw materials |
85,000 |
120,000 |
Work-in-progress |
50,000 |
60,000 |
Finished goods |
65,000 |
60,000 |
Required: (a) Material consumed; (b) Prime cost; (c) Factory cost; (d) Cost of production; (e) Cost of goods sold;
(f) Total cost; (g) Profit
(Ans. (a) Rs 580,000, (b) Rs 800,000; (c) 892,400; (d) 10,21,900;
(e) Rs 10,26,900; (f) Rs 10,68,000; (g) Rs 132,000]
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 4B
The following information of BN Manufacturing Company is provided to you ($/₹/Rs):
Purchase of raw materials |
120,000 |
|
Depreciation on plant |
4,000 |
Carriage on purchase |
2,000 |
|
Stationery expenses |
2,600 |
Sundry factory expenses |
6,000 |
|
Depreciation on office furniture |
5,000 |
Direct labour |
50,000 |
|
Sundry office expenses |
7,600 |
Direct expenses |
62,000 |
|
Selling expenses per unit |
1 |
Supervisor’s salary |
7,000 |
|
Production for the period |
32,000 kg |
Coal, gas and power |
3,000 |
|
|
|
Other information:
Stocks |
Opening balance |
Closing balance |
Raw materials |
Rs 20,000 |
Rs 22,000 |
Work-in-progress |
Rs 4,800 |
Rs 16,000 |
Finished goods |
2,000 kg |
4,000 kg |
Profit is charged 20% on cost.
Required: (a) Material consumed; (b) Prime cost; (c) Factory cost; (d) Cost of production;
(e) Cost of goods sold; (f) Total cost; (g) Profit
[Answer: (a) Rs 120,000, (b) Rs 232,000; (c) 240,800; (d) 256,000;
(e) Rs 240,000; (f) Rs 270,000; (g) Rs 54,000]
*COP per unit (Rs 256,000 ÷ 30,000 kg) = Rs 8
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 4C
The following information of BN Manufacturing Company is provided to you ($/₹/Rs):
Opening stock of raw materials |
60,000 |
|
Closing stock of raw materials |
20,000 |
Purchase of raw materials |
150,000 |
|
Carriage on purchase |
10,000 |
Productive wages |
120,000 |
|
Power and heating |
20,000 |
Opening stock of WIP |
30,000 |
|
Sundry factory expenses |
40,000 |
Preliminary expenses are written off |
8,000 |
|
Closing stock of WIP |
10,000 |
Depreciation on office equipment |
5,000 |
|
Sundry office expenses |
15,000 |
Other information:
Closing stock of finished goods |
1,000 units |
Selling expenses |
Rs 4 per unit |
Production |
12,000 units |
Profit |
10% on sales |
Sold units |
15,000 |
|
|
Required: (a) Material consumed; (b) Prime cost; (c) Factory cost; (d) Cost of production;
(e) Cost of goods sold; (f) Total cost; (g) Profit
(Ans. (a) Rs 200,000, (b) Rs 320,000; (c) 400,000; (d) 420,000;
(e) Rs 525,000; (f) Rs 585,000; (g) Rs 65,000]
*COP per unit (Rs 420,000 ÷ 12,000 kg) = Rs 35
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country
PROBLEM: 4D
The following information is related to spare parts for the six months period:
Stock as on 1st Jan: |
|
Stock as on 30th Jun: |
|
Raw materials |
35,250 |
Raw materials |
25,000 |
Work-in-progress |
15,750 |
Work-in-progress |
21,000 |
Finished goods (4,000 units) |
64,000 |
Finished goods (5,000 units) |
? |
Raw materials purchased |
6,66,700 |
Productive wages |
5,52,550 |
Carriage on purchase |
12,500 |
|
|
Work on cost |
62,500 |
|
|
Office on cost |
72,500 |
|
|
Selling and distribution expenses Rs 1.25 per sold unit sold
Production during the six months is 49,680 units
Required: Cost sheet showing total and per unit cost of:
Cost of materials consumed, prime cost, work cost, cost of production,
Total cost and profit, if charged 20% of selling price.
[Answer: (a) COMC = Rs 6,89,450; (b) PC = Rs 12,42,000; (c) WC = Rs 12,99,250;
(d) COP = Rs 13,71,750; (e) COGS = Rs 13,55,750; (f) COS or TC = Rs 14,16,600;
(g) Profit = Rs 3,54,150; (h) Sales = Rs 17,70,750]
Per unit: PC = Rs 25; WC = Rs 26.15; COP = Rs 27.61; COGS = Rs 27.85;
COS = Rs 29.10; Profit = Rs 7.28; SPPU = Rs 36.38]
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