CONCEPT BUILDING APPROACH TO COST ACCOUNTING

Prof. Rajiv Kumar Goel

CHAPTER − 6
SINGLE OUTPUT COSTING

ANSWER 1
Cost Sheet for the year ended 31st December, 2020
Particulars Total Cost Per Unit
Direct materials cost (20,000 × 100) 20,00,000
+ Expenses on purchases :
Cartage 15,000
Insurance 5,000
GST 10,000
Direct employee cost (10,000 × 80) 8,00,000
Direct expenses :
Royalty for production (20,000 × 10) 2,00,000
Design charges 30,000
Hiring charges for equipment 16,000
Prime Cost 30,76,000 153.80
Manufacturing overheads 1,10,000
Administration overheads relating to production (80,000 × 2/5) 32,000
(−) government incentives (20,000 × 50) (10,00,000)
Cost of Production 22,18,000 110.90
(−) Closing Stock of Finished Goods (4,43,600)
Cost of Goods Sold 17,74,400 110.90
th
Administration overheads (3/5 of ₹ 80,000) 48,000
Selling expenses (16000 × ₹ 15) 240,000
Financial Charges (Interest on loan) 25,600
Royalty paid on sales (16,000 × 20) 3,20,000
Cost of Sales 24,08,000 150.50
Profit (balancing figure) 3,92,000 24.50
Sales (16,000 × 175) 28,00,000 175.00
Working notes:
1. Royalty for production is a direct expense.
2. Royalty for sale is a selling overhead cost.
3. Penalty for patent violation is not taken as part of cost of production.
4. Any incentive received from government is reduced from the cost.
 ANSWER 2
Statement showing Cost of Production
for the year ending 31st December 2020
Particulars Amount
Direct Material Consumed :
Opening 172,800
Add: Purchases 3,840,000
Less: Closing (267,600) 3,745,200
Direct Employee Cost 1,392,000
Direct Expenses 30,000
Prime Cost 5,167,200
Manufacturing Overheads
Repairs & Maintenance for Plant and Machinery 588,300
Insurance Premium paid for Plant and Machinery 57,600
Add: Opening Work in Progress 243,600
Less: Closing Work in Progress (361,260)
Quality Control Cost 51,600
Research and Development Cost 55,560
Administrative Overheads Relating to Production 540,000
Packing Cost (Primary) 6,120
Less: Scrap Realised (5,520)
Cost of Production 6,343,200
Working Notes:
(a) Other administrative overhead does not form part of cost of production.
(b) Salary paid to director is an administrative cost.

ANSWER 3
Statement of Cost and Profit
for the year ending 31st December 2020
(Output = 10,000 Units)
Particulars Total Cost Per Unit
Direct Material Consumed
Opening 10,000
Add: Purchases 220,000
Less: Closing (30,000) 200,000 20.00
Direct Employee Cost 180,000 18.00
Carriage Inward 1,200 0.12
Chargeable Expenses 3,800 0.38
Prime Cost 385,000 38.50
Manufacturing Overheads :
Depreciation on Plant and Machinery 10,000 1.00
Oil & Waste 500 0.05
Motive Power 5,000 0.50
Lighting & Heating 800 0.08
Rent -Factory 6,200 0.62
Gas & Water- Factory 1,500 0.15
Repairs- Factory 7,200 0.72
Packing Cost (Primary) - -
Administrative Overheads relating to Production - -
Unproductive Wages 14,000 1.40
Stationery -Works 1,200 0.12
Cost of Production 431,400 43.14
Add: Opening Stock of Finished Goods -
Less: Closing Stock of Finished Goods -
Cost of Goods Sold 431,400 43.14
Administrative Overheads
Depreciation -Office Furniture 800 0.08
Office Salaries 15,000 1.50
Rent -Office 1,000 0.10
Gas & Water- Office 600 0.06
Director's Fees 7,000 0.70
Administrative Overheads not relating to Production 5,000 0.50
Stationery - Office 800 0.08
Manager's Salary 30,000 3.00
Selling & Distribution Overheads
Rent -warehouse 1,500 0.15
Discount Allowed 2,100 0.21
Packing Expenses 2,100 0.21
Travelers' Commission 4,000 0.40
Bad Debts 2,000 0.20
Advertising 5,000 0.50
Carriage Outward 3,200 0.32
Cost of Sales 511,500 51.15
Profit 102,300 10.23
Sales 613,800 61.38

ANSWER 4
Statement of Cost and Profit
for the year ending 31st March 2021
(Output = 20,000 Units)
Particulars Total Cost Per Unit
Direct Material Consumed 500,000 25.00
Direct Employee Cost 300,000 15.00
Direct Expenses 50,000 2.50
Prime Cost 850,000 42.50
Manufacturing Overheads
Indirect Wages 100,000 5.00
Depreciation on Plant 80,000 4.00
Supervisors' Salary 24,000 1.20
Drawing Office Salaries 24,000 1.20
Contribution to P.F. 20,000 1.00
Wages to Watchman 12,000 0.60
Subscription to Technical Journal 200 0.01
Cost of Production 1,110,200 55.51
Administrative Overheads :
Director's Fees 30,000 1.50
Depreciation on office furniture 800 0.04
Manager’s salary 30,000 1.50
Audit Fees 2,000 0.10
Salary of P.R.O. 18,000 0.90
Rent -Office 24,000 1.20
Office Salaries 60,000 3.00
Selling & Distribution Overheads :
Wages of Packers 30,600
Price Lists 300
Packing expenses Secondary 2,100
Bad Debts 2,000 34,900 1.75
Cost of Sales 13,09,900 65.50
Profit 327,475 16.37
Sales 16,37,375 81.87
Note : Annual Dividend, Income tax, Donations, Loss on sale of plant, bank charges and
cash discount are not recorded in cost-sheet as these are financial nature items.

ANSWER 5

Statement of Cost and Profit

for the year ending 31st March 2021
(Units produced – 5,600 units)
Particulars Total Cost Per Unit
Raw materials purchased 1,690,000
Add: Freight Inward 40,000
Add: Opening value of raw materials 91,200
Less: Closing value of raw materials (122,000)
Less: Sale of scrap of material (3,200)
Materials consumed 1,696,000 302.86
Direct Wages (502400 + 60,000) 562,400
Prime Cost 2,258,400 403.29
Factory overheads (20% of Prime Cost) 451,680
Add: Opening value of W-I-P 77,000
Less: Closing value of W-I-P (56,280)
Add: Administrative overheads (relating to production) 69,200
Cost of Production (for 5,600 units) 28,00,000 500
Add: Opening stock of finished goods 1,92,000
Less: Closing stock of finished goods 300 units @ ₹ 500
(150,000)
(500 + 5,600 – 5,800 = 300 units)
Cost of Goods Sold (for 5,800 units) 28,42,000 490
Add: Administrative overheads (General) 58,000
Distribution expenses (₹ 5.40 × 5,800 units) 31,320
Cost of Sales 29,31,320 505.4
Profit (Balancing figure) 664,680 114.6
Sales (₹ 620 × 5,800 units) 35,96,000 620

ANSWER 6
Statement of Cost and Profit
for the year ending 31st December 2020
(Output = 16,000 units)
Particulars Total Cost Per Unit
Raw Materials consumed
Opening Stock 50,000
Add: Purchases 2,50,000
Less: Closing Stock (60,000) 2,40,000
Direct wages 2,00,000
Carriage Inward 8,000
Prime Cost 4,48,000 28.00
Factory Rent 28,000
Factory Supervision 44,000
Add : Opening WIP 12,000
Less : Closing WIP (20,000)
Cost of Production 5,12,000 32.00
Add : Opening stock of finished goods 39,500
Less : Closing stock of finished goods2 (64,000)
Cost of Goods Sold 4,87,500 32.50
Administration overheads1 80,000
Selling overheads 30,000
Cost of Sales 5,97,500 39.85
Profit 1,52,500 10.15
Sales 7,50,000 50.00
Notes :
1. Administration overheads are charged on the basis of number of units produced.
2. Selling overheads are charged on the basis of number of units sold.
3. First in First Out (FIFO) Method
Opening Stock 1,000
+ Current production 16,000
– Closing stock 2,000
Units Sold 15,000
According to FIFO assumption, the entire closing stock must be out of current production
Value of closing stock = (5,12,000 ÷ 16,000) × 2,000 = 64,000
(b) Last In First Out (LIFO) Method
The sale of 15000 units is out of current production. Therefore, the closing stock includes
1000 units out of current production and another 1000 units out of opening stock.
Value of closing stock is :
1000 units (opening) 39,500
Plus 1000 units = 5,12,000 ÷ 16,000 × 1000 = 32,000
71,500
(c) Average Cost Method
Value of closing stock = (512,000 + 39,500) ÷ (16000+1,000) × 2000 = ₹ 64,882

ANSWER 7
Estimated Statement of Cost and Profit
for the year ending 31st March 2022
(Output = 1,200 Heaters)
Particulars Total Cost Per Unit
Materials (80,000 × 120% × 120%) 115,200 96.00
Direct wages (120,000 × 120% × 105%) 151,200 126.00
Prime Cost 266,400 222.00
Manufacturing expenses (50,000 × 120% × 111%) 66,600 55.50
Cost of Production 333,000 277.50
Add. Opening stock of finished goods --- ---
Less. Closing stock of finished goods --- ----
Cost of Goods Sold 333,000 277.50
Administration overhead :
Rent, rates and insurance 10,000
Management and staff salaries 60,000
General expenses 20,000
Selling expenses 36,000 30.00
Cost of Sales 459,000 382.50
Profit (10% on selling price)2 51,000 42.50
Sales 510,000 425.00

Working Notes :
1. 2016 2017
Materials 80,000 1,15,200
Direct Wages 1,20,000 1,51,200
Prime Cost 2,00,000 2,66,400
Prime cost per unit 200 222
The prime cost per unit has increased by 11% over the year. Therefore manufacturing
expenses will also increase by 11%.
2. Profit of 10% or 1/10 on selling price = 1/9 of total cost i.e. 382.50 × 1/9 = ₹ 42.50 per
machine.

ANSWER 8
Statement of Cost and Profit
for the year ending 31st December 2020
Particulars Leather Shoes Sports Shoes
Total Per
Total Cost Per pair
Cost pair
Direct materials 300,000 7.50 450,000 3.75
Direct wages 150,000 3.75 270,000 2.25
Prime Cost 450,000 11.25 7,20,000 6.00
Production overhead 45,000 1.13 1,35,000 1.13
Cost of Production 495,000 12.38 8,55,000 7.13
Less : Closing stock (49,500) (12.38) (142,500) (7.13)
Cost of Goods Sold 445,500 12.38 7,12,500 7.13
Administrative expenses 450,000 12.50 8,10,000 8.10
Selling expenses 54,000 1.50 1,50,000 1.50
Cost of Sales 949,500 26.38 16,72,500 16.73
Profit 130,500 3.62 3,27,500 3.27
Sales 10,80,000 30.00 20,00,000 20.00
Working Notes :
1. Materials cost :
Let, Sports shoes material cost is = x
Leather shoe material cost = 2x
1,20,000 x + 80,000 x = 750,000
2,00,000 x = 750,000
x = 3.75
2. Wages:
Let labour charged for leather shoe = x
60
Then labour charges for sports = 100 x or 0.6x
40,000 x + (1,20,000 × 0.6 x) = 420000
 1,12,000x = 420000
x = 3.75
Leather shoes labour charges = 3.75 per pair
Sports shoe’s labour charges = 3.75 × 60% = 2.25 per pair

ANSWER 9
Statement of Cost and Profit
for the year ending 31st December 2020
Particulars Total Cost (₹)
Direct Materials 240,000
Wages 200,000
Prime Cost 440,000
Factory Overheads 120,000
Cost of production /Cost of Goods Sold 560,000
Administration Charges 134,400
Selling Charges 89,600
Distribution Charges 56,000
Cost of Sales 840,000
Profit 168,000
Sales 1,008,000
Working Notes :
1. Factory overhead as a percentage of wages = (120,000 ÷ 200,000) × 100
= 60%
2. Administration charges as a percentage of factory cost = (134,400 ÷ 560,000) × 100
= 24%
3. Selling charges as a percentage of factory cost = (89,600 ÷ 560,000) × 100
= 16%
4. Distribution charges as a percentage of factory cost = (56,000 ÷ 560,000) × 100
= 10%
5. Profit as a percentage of total cost = (168,000 ÷ 840,000) × 100
= 20%
Estimated Statement of Cost and Profit
for the year ending 31st December 2021
Particulars Total Cost (₹)
Materials 32,000
Wages 20,000
Prime Cost 52,000
Factory Overheads (20,000 × 60% × 120%) 14,400
Cost of Production / Cost of Goods Sold 66,400
Administration Charges (66,400 × 24% × 112.5%) 17,928
Selling Charges (66,400 × 16% × 112.5%) 11,952
Distribution Charges (66,400 × 10% × 90%) 5,976
Cost of Sales 102,256
Profit (20% on cost of sales) 20,451
Selling Price to be quoted 122,707