COST ACCOUNTING

COST SHEET FORMAT:

Particulars Total Cost Cost per Unit
Rs Rs

Direct Costs
Direct Material xxx xxx
Direct Labour xxx xxx
Direct Expenses xxx xxx
Prime Cost xxx xxx
Add: Works Overhead
Indirect Materials xxx
Indirect Wages xxx
Factory Rent and Rates xxx
Factory Lighting and Heating xxx
Power and Fuel xxx
Repairs and Maintenance xxx
Drawing Office Expenses xxx
Depreciation of Plant and Machinery xxx
Factory Stationery xxx
Insurance of Factory xxx
Factory/Works Manager Salary xxx
Water Consumption in Factory xxx
Total Works Overhead xxx xxx
Works Cost / Factory Cost / xxx xxx
Add: Office or Administration Overheads
Office Rent and Rates xxx
Office Lighting xxx
Office Stationery xxx
Office Furniture Depreciation and Repair xxx
Office Salaries xxx
Legal Charges xxx
Bank Commission xxx
Telephone and Postages xxx
Office Cleaning xxx
Total Administration Overheads xxx xxx
Cost of Production xxx xxx
Add: Selling and Distribution Overheads
Salesmen’s Salaries xxx
Salesmen’s Commission xxx
Showroom Rent xxx
Showroom Expenses xxx
Advertisement xxx
Sales Office Rent xxx
Travelling Expenses xxx
Warehouse Rent and Rates xxx
Warehouse Staff Salaries xxx
Repairs and Depreciation of Delivery Vans xxx
Carriage Outward xxx
Total Selling & Distribution Overheads xxx xxx
Cost of Sales xxx xxx xxx
Profit / Loss xxx xxx
Sales xxx xxx

FORMULA:

1. Percentage of factory overheads to direct wages:

= (Factory Overheads / Direct Wages) × 100

2. Percentage of office overheads to works cost

= (Office Overheads / Works Cost) × 100

3. Percentage of selling and distribution overheads to works cost

= (Selling and Distribution Overheads / Works Cost) × 100
(or calculated on cost of production as)
= (Selling and Distribution Overheads / Cost of Production) × 100

4. Estimation of Profit for a Tender or Quotation

If profit is given as a percentage of cost:

Profit = (Cost of Sales × Percentage of Profit) / 100

If profit is given as a percentage of the selling price:

Profit = (Cost of Sales × Rate of Profit on Sales) / (100 - Rate Percentage on
sales)
Format for Preparing a Tender:

The following elements are analyzed:

1. Raw Materials
2. Direct Labour
3. Chargeable Expenses
4. Works Overhead
5. Office Overhead
6. Selling Overhead
7. Estimated Profit
 MATERIAL COSTING

FORMULAS:
1. Reorder Level = Maximum Consumption × Maximum Reorder Period

2. Minimum Level = Reorder Level - (Normal Consumption × Normal

Reorder Period)

3. Maximum Level = Reorder Level + (Reorder Quantity × Minimum

Consumption × Reorder Period)

4. Average Level = Minimum Level + ½ of Reorder Quantity

(OR)

Average Level= ½ (Maximum Level + Minimum Level)

5. Danger Level= Average Consumption × Maximum Reorder Period of

Emergency Purchases

6. EOQ=√2ab/cs

FORMAT:
DAT PARTICULAR RECEIPT ISSUE BALANCE
E S OR
REFRENCES
QT RAT AMOUN QT RAT AMOUN QT RAT AMOUN
Y E T Y E T Y E T
 LABOUR COSTING

Labour Turnover Formulas:

1. Separation Method:

Labour Turnover=
No. of employees left from the organization during a period/
Average no. of employees during a period

2. Replacement Method:

Labour Turnover= (No. of employees replaced during a period/ * 100%

Average no. of employees during a period)

3. Flux Method:

Labour Turnover= No. of employees left + No. of employees replaced/

Average no. of employees during a period

4. Additions Method:

Labour Turnover= (No. of employees during a period/ * 100%

Average no. of workers during a period)
PREMIUM AND BONUS PLAN:
Halsey’s Premium Plan:

Total Earnings= T×R +50%×(S−T)×R

T = Time taken
S = Standard time

R = Rate per hour

Rowan’s Plan:

Total Earnings= T×R+ (S−T/S) ×T×R

T = Time taken
S = Standard time

R = Rate per hour

Emerson’s Efficiency Plan:

1. 66 * 2/3%

2. 66 * 2/3% To 100%

3. 100%
METHODS OF REMUNERATION:

Time Wage System

Total Wages = Total Hours Worked × Rate Per Hour

Piece Wage System

Piece Wages = No. of Pieces × Rate Per Piece

Total Wages under Piece Wage System = No. of Pieces Produced × Piece
Rate

Individual Wages under Time Wage System

Wages = No. of Days Worked in a Month × Hours Per Day × Wages Per
Hour

Taylor’s Differential Piece Rate System

Taylor’s Piece Rate= Production of Workers × Piece Rate

Low Piece Rate (Below Standard Performance)* = Straight Piece Rate ×

Lower Differential

High Piece Rate (Above Standard Performance)* = Straight Piece Rate ×

Higher Differential

Gantt’s Task and Bonus Plan

Level of Performance = (Actual Output / High Task Output) × 100

Total Earnings = Performance at Standard = Time Wages + 20% Bonus

Performance Calculation
Level of Performance = (Actual Output / Standard Output) × 100

Incentive System

Time Basis

Time Rate= Timely Wages × No. of Units Expected to Produce

Total Wages = Hours Worked × Rate Per Hour

Piece Basis

Piece Rate = Timely Rate + Normal Piece Rate

 MARGINAL COSTING

FORMULAS:
1. Total Marginal Cost = Prime Cost + Total Variable Overheads

2. Total Cost = Fixed Cost + Total Marginal Cost

Equations of Marginal Costing:

1. Sales - Variable Cost = Fixed Cost + Profit

2. Sales - Variable Cost = Contribution

3. Contribution = Fixed Cost + Profit/Loss

Marginal Cost Statement Format:

Sales

(-) Variable Cost

= Contribution

(-) Fixed Cost

= Profit/Loss

Break-Even Point (B.E.P):

B.E.P (in units) = Fixed Cost / Contribution per unit

B.E.P (in ₹) = Fixed Cost / P/V Ratio

B.E.P (in ₹) = B.E.P (in units) × Selling Price per unit

Profit/Volume (P/V) Ratio:

P/V Ratio = (Contribution × 100) / Sales

P/V Ratio = [(Sales - Variable Cost) × 100] / Sales

Margin of Safety (MOS):

MOS (in units) = Profit / Contribution per unit

MOS (in ₹) = Profit / P/V Ratio

MOS (in ₹) = Actual Sales - Break-Even Sales

Required Sales for Given Profit:

In units = (Required Profit + Fixed Cost) / Contribution per unit

In ₹ = (Required Profit + Fixed Cost) / P/V Ratio

Profit:

Profit = (Given Sales × P/V Ratio) - Fixed Cost