Variable cost: this cost varies according to the output.

In other words, it is a
cost which changes according to the changes in output. It tends to vary in
direct proportion to output. If the output is decreased, variable cost also will
decrease. It is concerned with output or product. Therefore, it is called as a
“product” cost. If the output is doubled, variable cost will also be doubled. For
example, direct material, direct labour, direct expenses and variable
overheads. It is shown in the diagram below.

Semi-variable cost: This is also referred to as semi-fixed or partly variable

cost. It remains constant up to a certain level and registers change
afterwards. These costs vary in some degree with volume but not in direct or
same proportion. Such costs are fixed only in relation to specified constant
conditions. For example, repairs and maintenance of machinery, telephone
charges, supervision professional tax, etc.

On the basis of elements of cost:

Elements means nature of items. A cost is composed of three elements,

material, labour and expenses. Each of these elements can be direct and
indirect.

Direct cost: It is the cost which is directly chargeable to the product

manufactured. It is easily identifiable. Direct cost consists of three elements
which are as follows:
 COST SHEET

PROFORMA OF COST SHEET

PARTICULARS TOTAL COST COST PER

Rs. UNIT
Rs.
Opening Stock Raw Materials
Add : Purchase
Add : Carriage Inward XXX XXX
Add : Octroi and Customs Duty
Less : Closing Stock of Raw Materials XXX XXX
Cost of Direct Material Consumed
Direct Wages XXX XXX
Direct or Chargeable Wages
XXX XXX
PRIME COST
XXX XXX
Add : Works of Factory Overheads :
Indirect Materials XXX XXX
Indirect Wages
Leave Wages XXX XXX
Bonus to Workers
Overtime Wages XXX XXX
Fuel and Power
Rent and Taxes
Insurance XXX XXX
Factory Lightings
Supervision
Works Stationary XXX XXX
Canteen and Welfare Expenses
Repairs XXX XXX
Works Salaries
Depreciation of Plant and Machinery XXX XXX
Works Expenses
Gas and Water XXX XXX
Technical Director’s Fees
Laboratory Expenses XXX
Works Transport Expenses
Works Telephone Expenses XXX
Add : Opening Stock of Work-in-Progress
Less : Closing Stock of Work-in-Progress XXX
Less : Sale of Waste
XXX
WORKS COST
XXX
 XXX
Add: Office and Administration
Overheads : XXX
Office Salaries
Directors Fees XXX
Office Rents And Rates
Office Stationary and Printing XXX
Sundry Office Expenses
Depreciation on Office Furniture XXX XXX
Subscription to Trade Journals
Office Lightings XXX XXX
Establishment Charges
Directors Travelling Expenses XXX XXX
Consultants Fees
Contribution to Provident Fund XXX
Postage XXX
Legal Charges XXX
Audit Fees
Bank Charges XXX
Depreciation And Repairs of Office
Equipments XXX
Bonus to Staff
XXX
COST OF PRODUCTION
Add :Opening Stock of Finished Goods XXX
Less : Closing Stock of Finished Goods
XXX
COST OF GOODS SOLD
XXX
Add: Selling and Distribution Overheads
Advertising XXX
Show Room Expenses
Salesman’s Salaries and Expenses
Packing Expenses XXX
Carriage Outward
Commission of Sales Agents
Cost of Catalogues
Expenses of Delivery Vans
Collection Charges
Travelling Expenses XXX
Cost Tenders XXX
Warehouse Expenses XXX
Cost of Mailing Literature XXX
Sales Manager’s Salaries XXX
Insurance of Showroom XXX
Sales Director’s Fees XXX
Sales Office Expenses
Rent of Sales Office XXX XXX
Depreciation of Delivery Vans
Expenses of Sales Branch XXX
 Establishments
Branch Office Expenses XXX

TOTAL COST/TOTAL OF XXX

SALES
Profit or Loss XXX

SALES XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX
XXX

XXX XXX

XXX
XXX
XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX
XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX

XXX
 CLASSIFICATION OF
OVERHEADS
A. on the basis of functions
1.Factory overheads: It is the aggregate of
all the factory expenses incurred in
connection with manufacture of a product.
These are incurred in connection with
running of factory. It includes the items of
expenses viz…,factory salary, work
managers salary, factory repairs, rent of
factory premises, factory lighting,
lubricants, factory power, drawing office
salary, haulage (cost of internal transport)
depreciation of plant and machinery
unproductive wages, estimation expenses,
royalties, loose tools w/ off, material
handling charges, time office salaries,
counting house salaries etc.
2.Administrative overheads or office
overheads: It is the aggregate of all the
expenses as regards administration. It is
the cost of office service or decision
making. It consists of the following
expenses: Staff salaries, printing and
stationery, postage and telegram,
telephone charges, rent of office premises,
office conveyance, printing and stationery
and repairs and depreciation of office
premises and furniture etc.
3.Selling and Distribution Overheads: It is
the aggregate of all the expenses incurred
in connection with sales and distribution of
finished product and services. It is the cost
of sales and distribution services.
Selling expenses are such expenses
which are incurred acquiring and retaining
customers. It includes the following
expenses:

(a)Advertisement (b) Show room

expenses (c) Traveling expenses (d)
Commission to agents (e) Salaries of Sales
office (f) Cost of catalogues (g) Discount
allowed (h) Bad debts written off (i)
Commission on sales (j) Rent of Sales Room
(k) Sample and Free gifts (L) After sales
service expenses (m) Expenses on
demonstration and technical advice to
prospective customers (n) Free repairs and
servicing expenses (o) Expenses on market
research (p) Fancy packing and
demonstration.

Distribution expenses include all those

expense which are incurred in connection
with making the goods available to
customers these expense includes the
following (a) Packing charges (b) Loading
charges (c) Carriages on sales (d) Rent on
warehouse (e) Insurance and lighting of
warehouse (f) Insurance of delivery van (g)
Expense on delivery van (h) Salaries of
Godownkeeper, drivers and packing staff.