Cost Sheet

Cost sheet is a document which provides for the assembly of the detailed cost of a cost centre or cost unit. It is a periodical statement of cost designed to show in detail the various components of cost of goods produced like prime cost, factory cost, cost of production, total cost and cost per unit. A specimen of a simple cost sheet is given below:

 Cost Sheet (or Statement of Cost) for the period………

No. of units produced……..

Particulars	Total Cost	Cost Per Unit
Direct Materials
Direct Labour
Direct (or Chargeable) Expenses   Prime cost
Add: Works Overheads
Works Cost
Add: Administrative Overheads   Cost of Production
Add: Selling and Distribution Overheads   Total Cost or Cost of Sales

The terms “direct expenses” have been excluded from prime cost as per CIMA terminology i.e. according to CIMA, prime cost is “the total cost of direct material and direct labour”.

If possible the cost sheet should have columns for (i) total cost; (ii) percentage to total cost; (iii) cost per unit; and (iv) corresponding figures of the previous period and clear figures for each element of cost.

Treatment of stock: Stock requires special treatment while preparing a cost sheet. Stock may be of raw materials, work-in-progress and finished goods.

Stock of Raw Materials: If opening stock of raw material, purchase of raw materials and closing stock of raw materials are given, then, raw material consumed can be calculated as follows:

Opening stock of raw materials

Add: Purchase of raw materials

Less: Closing stock of raw materials

Value of raw materials consumed

Stock of Work-in-Progress

Work-in-progress is valued at prime cost or works cost basis, but latter is preferred. If it is valued at works or factory cost then opening and closing stock will be adjusted as follows:

Prime cost

Add: Factory overheads

Work-in-progress (beginning)

Less: Work-in-progress (closing)

Works cost

Stock of Finished Goods

If opening and closing stock of finished goods are given, then these must be adjusted before calculating cost of goods sold:

Cost of production

Add: Opening stock of finished goods

Less: Closing stock of finished goods

Cost of goods sold

Uses of Cost Sheet

• It gives total cost and cost per unit for a particular period.
• It gives information to management for cost control.
• It provides comparative study of actual current costs with the cost of corresponding periods, thus causes of inefficiencies and wastage can be known and suitably corrected by management.
• It acts as a guide to manufacture in formulation of suitable and definite policies and in fixing up the selling price.

Items Excluded From Cost Sheet

The following items are of financial nature and thus not included while preparing a cost sheet.

• Cash discount
• Interest paid
• Preliminary expenses written off
• Goodwill written off
• Provision for taxation
• Provision for bad debts
• Transfer to reserves
• Donations
• Income tax paid
• Dividend paid
• Profit/loss on sale of assets
• Damages payable at law etc

Production Account

If the details of cost sheet or production statement are shown in the form of a ledger account, it is known as production account. Besides cost of production it also includes selling and distribution expenses. It is prepared in three parts – the first part gives the cost of production, the second part gives the cost of goods sold and the third part shows cost of sales or total cost for the period. A specimen of a Production Account is as follows:

Production Account

Particulars	Amount	Particulars	Amount
To Direct materials		By Prime Cost c/d
To Direct labour		By Cost of goods manufactured
To Direct expense
To Prime Cost b/d
To Works overheads   Add: Work in progress (Opening) Less: Work in progress (closing) Less: Sale of by-products or scrap
	xxxx		xxxx
To Cost of goods manufactured b/d		By Sales
To Opening stock of finished goods		By Closing stock of finished goods
To Gross Profit c/d
To Administration overhead		By gross profit
To Selling and distribution overheads
To Net profit
	xxxx		xxxx

Cost Sheet and Production Account

The following are the points of distinction between cost sheet and production account:

S. No	Cost sheet	Production Account
1	It is prepared as a statement.	It is prepared as an account.
2	Expenses are classified to ascertain prime cost, factory cost, total cost, etc.	Expenses are not classified.
3	To enable comparison, figures of previous period are provided.	No figures of previous period are provided. Hence no comparison is possible.
4	It is based on actual and estimated figures of expenses.	It is based on actual figures.
5	It is prepared for each job and sometimes for the whole factory.	It is prepared for each production department.