Académique Documents
Professionnel Documents
Culture Documents
OUTPUT COSTING
Output costing (or unit costing or single costing) is a method of cost
ascertainment which is used in those industries which have the following
features :
((i) Production consists of a single
) g
product or a few varieties of the
same product with variations in
size, shape, quality, etc.
(ii) Production is uniform and on
continuous basis.
COSTING PROCEDURE
Cost Sheet: Cost sheet is defined as ‘a document which provides for the assembly of the
detailed cost of a cost centre or cost unit.’
Purposes Cost sheet serves the following purposes:
• 1. It reveals the total cost and cost per unit of goods produced.
• 2. It discloses break‐up of total cost into different elements of cost.
• 3. It provides a comparative study of the cost of current period
3 It provides a comparative study of the cost of current period
with that of the corresponding previous period.
• 4. It acts as a guide to management in fixation of selling prices
and quotation of tenders.
TREATMENT OF STOCKS
Stocks may be of the following three types:
Stocks of Raw Materials In order to calculate the value of raw materials
St k f R M t i l I d t l l t th l f t i l
consumed during the period, opening stock of raw materials is added to
the raw materials purchased and closing stock is subtracted.
Stocks of Work‐in‐progress This is the stock of semi‐finished goods.
In cost sheet, opening stock of work‐in‐progress is added in prime cost
along with factory overhead and closing stock of work‐in‐progress in
subtracted therefrom.
Stock of Finished Goods In cost sheet, finished goods are adjusted after
calculating cost of production. Opening stock of finished goods is added
to cost of production and closing stock of finished goods is subtracted
therefrom. The resultant figure is called cost of goods sold.
ITEMS EXCLUDED FROM COST
Following items are of financial nature and not included while preparing a cost sheet:
1. Cash discount
2. Interest paid
3. Preliminary expenses written off
4 Goodwill written off
4. Goodwill written off
5. Provision for taxation
6. Provision for bad debts
7. Transfer to reserves
8. Donations
9. Income tax paid
10. Dividend paid
11. Profit/loss on sale of fixed assets
P fit/l l f fi d t
12. Damages payable at law, etc.
TREATMENT OF SCRAP
Scrap may be defined as an unavoidable residue material arising in certain types of
manufacturing processes. Examples of scrap are trimmings, turnings or boring from metals
or timber, on which operations are performed. Scrap usually has a small realizable value.
Such realizable value of scrap is deducted from either factory overheads or factory cost while
preparing a cost sheet.
PRODUCTION ACCOUNT
PRODUCTION ACCOUNT
When information shown in a cost sheet is presented in the form of a T‐shape
account, it is known as Production Account.
In this account, debit side shows the various item of cost while credit side shows
the sales of finished goods.
Opening stock is written on the debit side while closing stock is written on the
credit side.
Alternatively, closing stock may be shown as a deduction from the items in debit
side.
In this way this account shows the total cost.
The balance in this account shows profit or loss, as the case may be.
PRICE QUOTATIONS AND ESTIMATED
COST SHEET
¾ Quite often the management has to quote prices of its products in advance or has to submit
tenders for goods to be supplied. For this purpose an estimated cost sheet has to be
prepared. Such an estimated cost sheet is prepared to show the estimated cost of products to be
manufactured.
¾ In this cost sheet,
sheet cost of direct materials,
materials direct wages and various types of overheads are
predetermined on the basis of past costs after taking into account the present conditions and
also the anticipated changes in the future price level.
¾ Overheads are absorbed on the basis of a suitable method of absorption like percentage
of direct materials,
materials or wages or machine hour rate,rate etc.
etc
Calculation of profit
¾ After the total cost has been estimated, a desired percentage of profit is added
to arrive at the price to be quoted.
¾ Such profit may be given as a percentage of cost or percentage of selling price.
¾ In order to calculate the amount of profit,
profit it is easy to assume that figure as 100
on which profit percentage is given and then calculate the amount of profit.