Cost Sheet – Overview

 

**Cost Sheet – Overview**  

A **cost sheet** is a detailed statement that records the total cost incurred to produce goods or services. It helps businesses analyze expenses, set pricing strategies, and improve cost control.  

**Format of a Cost Sheet**  

A cost sheet typically includes the following:  

**1. Prime Cost** (Direct Costs)  

✔ **Direct Materials** → Raw materials used in production  

✔ **Direct Labor** → Wages of workers directly involved in production  

✔ **Direct Expenses** → Costs directly tied to the production process  

\[

\text{Prime Cost} = \text{Direct Materials} + \text{Direct Labor} + \text{Direct Expenses}

\]  

**2. Factory Cost (Works Cost)**  

✔ **Prime Cost**  

✔ **Factory Overheads** → Indirect expenses like rent, depreciation, and machine maintenance  

\[

\text{Factory Cost} = \text{Prime Cost} + \text{Factory Overheads}

\]  

**3. Total Cost of Production**  

✔ **Factory Cost**  

✔ **Administrative Overheads** (office salaries, rent, etc.)  

\[

\text{Total Cost of Production} = \text{Factory Cost} + \text{Administrative Overheads}

\]  

 **4. Total Cost (Cost of Sales)**  

✔ **Total Cost of Production**  

✔ **Selling & Distribution Overheads** (advertising, delivery, commission, etc.)  

\[

\text{Total Cost} = \text{Total Cost of Production} + \text{Selling & Distribution Overheads}

\]  

--

**Example of a Cost Sheet**  

**XYZ Ltd. – Cost Sheet for 10,000 Units**  

| Cost Components                     | Amount ($) |

|--------------------------------------|------------|

| **Direct Materials**                 | 50,000     |

| **Direct Labor**                     | 30,000     |

| **Direct Expenses**                   | 10,000     |

| **Prime Cost** (A)                    | **90,000** |

| **Factory Overheads**                 | 20,000     |

| **Factory Cost** (A + B)              | **110,000** |

| **Administrative Overheads**          | 15,000     |

| **Total Cost of Production** (C + D)  | **125,000** |

| **Selling & Distribution Overheads**  | 10,000     |

| **Total Cost (Cost of Sales)** (E + F) | **135,000** |

| **Profit (20% on Cost)**              | 27,000     |

| **Selling Price** (G + H)             | **162,000** |

💡 **Cost per unit =**  

\[

\frac{135,000}{10,000} = 13.50

\]  

 **Advantages of a Cost Sheet**  

✅ Helps in cost control & reduction  

✅Facilitates better pricing decisions  

✅ Provides insights into profit margins