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CHAPTER VI

UNIT COSTING
SOLUTION TO SELF EVALUATION PROBLEMS
SOLUTION 1
Syams cost sheet for the month of November 2007
(Unit
Produced 10,000)
Cost of Material
Opening Stock
+ Purchase
+ Carriage, Freight, Octroi, Custom
duty, Dock charges on material

5,000
1,00,000
5,000
1,10,000

Less: Material return

2,000
1,08,000

Less: Closing Stock of material

4,000

1,04,000

+ Direct Wages

70,000

+ Direct Expenses

30,000

Prime Cost

2,04,000

Add: Factory Overheads


Rent, rate, taxes, insurance,lighting,
supervision

15,000

Motive Power

10,000

Fuel, Oil, Grease, Steam

5,000

Depreciation
On Plant and Machinery

2,500

20.40

On Factory Building

1,000

Year 12,000 / 12
Repairs to Machinery

1,000

Indirect Wages

15,000

Haulage

1,000

Royalty p.a 6,000 /12

500

Work managers salary

4,000

Factory cleaning

100

Drawing office salary

55,100
1,000
2,60,100

Less: scrap sold

1,000
2,59,000

+ Opening Stock of work in progress

2,000
2,61,000

- Closing stock of work in progress

1,000

Factory cost
Add:
Office
Expenses

2,60,100
and

26.01

Administrative

Rent,rate insurance of office

15,000

Printing and Stationery

250

Depreciation on office Building p.a


6,000 / 12

500

Depreciation on Furniture

100

Counting office salary


Cost of production
Opening Stock of Finished Goods

1,000

16,850
2,76,950

27.695

10,000
2,86,950

- Closing stock of Finished Goods


Cost of Goods sold

5,000
2,81,950

24.63

Add: Selling and Distribution Expenses


Advertising, publicity, free sample,
salesman salary, commission
Salesman
traveling
discount, bad debts

10,000

expenses,

5,000

After sales service, packing charges,


loading, carriage outward

11,000

Rent of warehouse, insurance


Expenses of
Rs.2,81,950

delivery

van

Salary of packing department


Total cost or cost of sales

750
2%

of

5,639
1,000

33,389
3,15,339

Profit

31,536

Sales

3,46,875

28.667

Tutorial Notes
Student should take in to accounts the period of cost sheet. Here it
is one month. Any expenditure given for a period should be taken
proportionately for the cost sheet period, e.g. Depreciation of
factory, building, royalty etc.
2 Student should note the different ways of giving expenses. When
they are given as percentage or per unit they should be carefully
calculated.
3 Prime cost, factory cost, cost of production are calculated by
dividing the respective cost by the units produced i.e.10,000 But
cost of goods sold and cost of sales are calculated by dividing the
respective cost by unit
Opening stock of finished goods (unit)
2,000
1

+ Unit Produced

10,000

12,000
- Closing stock of finished goods
1,000
Unit sold

11,000

SOLUTION 2
Cost sheet for four weeks ended on 28th November 2007
(Unit
produced19030)

Total cost
Raw Material consumed
Direct wages
Prime cost
+ Factory overhead on basis of Machine
hour i.e.
2,300
x
30
1
100
Works cost
+ Office on cost (10% of works cost)
Cost of production
Opening stock of finished goods

15,000
9,800
24,800
690

25,490
2,549
28,039
Nil
28,039

- Closing stock of Finished Goods valued


at cost of production i.e. 28,039
x
7612
19030

11,216

Cost of Goods sold

16,823

Add Selling on cost Rs. 0.10 per unit on


unit sold i.e. 11,418 x 0.10 (approx.)
Total cost or cost of sale
Profit
Sales = 11,418 x Rs. 2

1,142
17,965
4,871
22,836

Cost of production per unit = Cost of production


Unit produced
= 28,039
19,030
= Rs.1.473
Per unit cost of goods sold = Cost of goods sold
Unit sold
= 16,823 =1.473 (approx)
11,418
Tutorial Notes:
Opening stock of finished goods is not given, so it is assumed as
nil.
Unit produce are

19,030

Less Unit sold

11,418

Closing stock of finished goods

7,612

The valuation of these 7,612 units is to be made at


Cost of production

x 7,612

Unit produce
So when the value of closing stock is not given this value to be
calculated by the above formula. Secondly when machine hours
are given and rate per hour is given then the factory overhead
to be calculated as follows
Factory overheads =Machine hours worked x Rate per hour.

SOLUTION 3
Cost Sheet for the year ending 31-3-2001
(Production 1,200 bicycles)

Cost of Material
Rs.80,000 = Rs.80 per unit

1,000

Rs. 80 x 120 = Rs 96 per unit Rs.96 x 1,200


1

1,15,200

100

Cost of Wages

1.51.200

Rs1,20,000 = Rs.120, 120 x 105 =126


1,000

100

Rs.126 x 1,200 bicycles


Prime cost

2,66,400

Add Factory (Manufacturing) overheads


Old combined cost of material + wages
Rs,80,000 + 1,20,000 = Rs.2,00,000
New combined cost
Rs.1,15,200 + 1,51,200 = 2,66,400
New 2,66,400 x Rs.50,000

66,600

Old 2,00,000
Work cost

3,33,000

Add Office and Administrative overheads


Management and Staff Salary

60,000

Rent, Rate and Insurance

10,000

General expenses

20,000

90,000

(They are unaffected i.e. no change)


Cost of production

4,23,000

Add Selling expenses

36,000

Rs. 30,000 + Rs.30 per unit


1,000
Rs.30 x 1,200
Cost of Sale

4,59,000

Add Profit ( Rs.45,900 cost x 100 )

51,000

90

Sales

5,10,000

Tutorial Notes
Material and labour are variable cost, so firstly the old rate
calculated. Then the % increase in rate is calculated and new
rate is multiplied by new quantity of production.
The same method is follow whenever there is change in price
level.
In case of manufacturing cost, it is increased in proportion to
increase in the combined cost of material and labour.
So new combined cost is to be divided by the old combined cost
and multiplied by manufacturing cost already given.
In case of other expenses no change. They are taken at old
figures, selling expenses rate is calculated so it is multiplied by
new quantity of production profit so 10% on selling price the
selling price is not given so it is assumed Rs.100 10% of this is
Rs. 10 profit so cost = sales - profit = 100 - 10 = 90 so on 90
cost the profit is 10 the ratio 10 = 1
90 9

SOLUTION 4
Cost sheet for the month of January 2002
10,200)

(Unit produced

Total cost

Per units

18,360

1.80

Cost of material
Opening stock

600

+ Purchase of material

19,270
19,870

- closing stock of material

1,510

+ wages

19,380

Prime cost
Add works
overhead

on

cost

or

5,916

Factory rent and taxes

3,468

Repairs and depreciation on plant


and machinery

2,040

Works cost
on

cost

or

37,740

3.70

11,424

1.12

49,164

4.82

works

Coal consumed

Add Office
overheads

1.90-

office

Office salary, rent and rates

2,448

0.24

Printing and stationery

1,836

0.18

53,448

5.24

Cost of production
Add Closing stock of finished goods

3,500

(56.948/10,700 available for sale)


Less Closing
goods

stock

of

56,948

finished

5.3222

3,726

(Weighted average method)


Cost of goods sold
Profit
Sales 10000 Rs.6

53,222

5.3222

6,778

0.6778

60,000

6.0000

Note 1
When units produced are not given but the
units of raw materials are given. Then units produced are
calculating as under.
Units
Opening starch materials
+ Purchase of raw materials

500
10,000
10,500

- Closing stock material

300
10,200

Units produced or production during the period.


2.
Once you get units produced you can easily calculate
units sold and using the following statement.
Opening stock of finished goods
+ Units produced (as calculate above)

500
10,200
10,700

- Closing stock of finished goods


Units sold

700
10,000

3.
The cost of goods sold per unit be calculate by dividing
the cost of goods sold by unit sold i.e. 10,000 so also profit per

unit other per unit costs are to calculate by dividing the cost by
unit produced i.e. 10,200.