A Complete Cost Sheet, Worked
Chapter Five
Syllabus topic 3, "Prepare Cost sheet/statement for production of goods and providing of services"
Pages 12 to 13 of 82
How this question is marked
One statement, worked downward, with every stage labelled. The four bold lines are worth marks in themselves.
Show the raw material build-up. Opening stock, purchases, carriage inward, closing stock, then the consumed figure. Writing the consumed figure alone earns the figure and not the method.
Say nothing about the financial items - but leave them out. A one-line note that they are excluded shows the marker it was a decision rather than an oversight.
The question
Vaibhav Industries gives the following for the year ended 31 March 2027.
| Rs | |
|---|---|
| Stock of raw material, 1 April 2026 | 1,84,000 |
| Stock of raw material, 31 March 2027 | 2,12,000 |
| Purchases of raw material | 24,60,000 |
| Carriage inward | 46,000 |
| Direct wages | 9,40,000 |
| Hire of a special machine for one order | 62,000 |
| Indirect wages | 1,26,000 |
| Factory rent | 2,40,000 |
| Power and fuel | 1,84,000 |
| Depreciation of plant | 1,50,000 |
| Consumable stores | 38,000 |
| Work-in-progress, 1 April 2026 | 96,000 |
| Work-in-progress, 31 March 2027 | 1,28,000 |
| Office and administration overhead | 3,64,000 |
| Finished goods, 1 April 2026 | 2,10,000 |
| Finished goods, 31 March 2027 | 2,84,000 |
| Selling and distribution overhead | 3,92,000 |
| Interest on a bank loan | 74,000 |
| Loss of material by fire, abnormal | 55,000 |
| Sales | 56,00,000 |
Prepare a cost sheet.
Working note: raw material consumed
| Particulars | Amount, Rs |
|---|---|
| Stock of raw material, 1 April 2026 | 1,84,000 |
| Add: Purchases of raw material | 24,60,000 |
| Add: Carriage inward | 46,000 |
| Less: Stock of raw material, 31 March 2027 | (2,12,000) |
| Total, being raw material consumed | 24,78,000 |
Working note: factory overhead
| Particulars | Amount, Rs |
|---|---|
| Indirect wages | 1,26,000 |
| Factory rent | 2,40,000 |
| Power and fuel | 1,84,000 |
| Depreciation of plant | 1,50,000 |
| Consumable stores | 38,000 |
| Total, being factory overhead | 7,38,000 |
The cost sheet
Stage 1, prime cost.
| Particulars | Amount, Rs |
|---|---|
| Raw material consumed, as computed above | 24,78,000 |
| Direct wages | 9,40,000 |
| Hire of a special machine, a direct expense | 62,000 |
| Total, being PRIME COST | 34,80,000 |
Stage 2, factory cost.
| Particulars | Amount, Rs |
|---|---|
| Prime cost, from Stage 1 | 34,80,000 |
| Add: Factory overhead, as computed above | 7,38,000 |
| Add: Work-in-progress, 1 April 2026 | 96,000 |
| Less: Work-in-progress, 31 March 2027 | (1,28,000) |
| Total, being FACTORY COST | 41,86,000 |
Stage 3, cost of production.
| Particulars | Amount, Rs |
|---|---|
| Factory cost, from Stage 2 | 41,86,000 |
| Add: Office and administration overhead | 3,64,000 |
| Total, being COST OF PRODUCTION | 45,50,000 |
Stage 4, cost of goods sold and cost of sales.
| Particulars | Amount, Rs |
|---|---|
| Cost of production, from Stage 3 | 45,50,000 |
| Add: Finished goods, 1 April 2026 | 2,10,000 |
| Less: Finished goods, 31 March 2027 | (2,84,000) |
| Total, being COST OF GOODS SOLD | 44,76,000 |
| Particulars | Amount, Rs |
|---|---|
| Cost of goods sold, as above | 44,76,000 |
| Add: Selling and distribution overhead | 3,92,000 |
| Total, being COST OF SALES | 48,68,000 |
Stage 5, profit.
| Particulars | Amount, Rs |
|---|---|
| Sales | 56,00,000 |
| Less: Cost of sales | (48,68,000) |
| Total, being PROFIT | 7,32,000 |
Note. Interest on the bank loan of Rs 74,000 and the abnormal loss of material by fire of Rs 55,000 are purely financial items and are excluded from the cost sheet. Both are charged in the financial accounts, and both will appear in the reconciliation.
A Complete Cost Sheet, Worked
The six checks to run on your own answer
Did the three stocks go to three different places? Raw material inside direct material, work-in-progress at factory cost, finished goods after cost of production. This question moves all three so that a misplacement shows.
Did you put carriage inward at the top? It is Rs 46,000 of direct material cost, not an overhead.
Did you treat the machine hire as a DIRECT expense? It was hired for one order, so it is traceable to that order and belongs in prime cost. Put into factory overhead it would give the same cost of sales but the wrong prime cost, and prime cost is a marked line.
Did you exclude the interest? Rs 74,000 is a financial charge and enters no stage.
Did you exclude the abnormal loss? Rs 55,000 by fire is abnormal, and cost accounting excludes abnormal losses so that the product does not appear dearer for a reason unconnected with making it.
Does the arithmetic close? Cost of sales of Rs 48,68,000 plus profit of Rs 7,32,000 is Rs 56,00,000, the sales figure given. If it does not, the error is above.
In short
- Work downward, labelling all four stages.
- Three stocks, three places. Raw material, work-in-progress, finished goods.
- Carriage inward is direct material; carriage outward is selling and distribution.
- An expense hired for one order is a direct expense.
- Interest, abnormal losses and every financial item stay out, and say so in a note.
- Check by adding cost of sales to profit and matching sales.
Answer in one sentence
How is a cost sheet prepared? By computing raw material consumed from opening stock, purchases and carriage inward less closing stock, adding direct wages and direct expenses to reach prime cost, adding factory overhead and adjusting opening and closing work-in-progress to reach factory cost, adding administration overhead to reach cost of production, adjusting opening and closing finished goods to reach cost of goods sold, adding selling and distribution overhead to reach cost of sales, and deducting that from sales to reach profit, every purely financial and abnormal item being excluded.
The rest of this subject
These notes are cut from the University's printed syllabus. Open the syllabus itself, or the past papers, for the same subject.