Page 46 - DCOM202_COST_ACCOUNTING_I

Cost Accounting – I Gopika Juneja, Lovely Professional University

Notes Unit 3: Cost Sheet and Unit Costing

CONTENTS

Objectives
Introduction
3.1 Cost Sheet - Definition
3.2 Direct Cost Classification
3.3 Indirect Cost Classification
3.4 Summary

3.5 Keywords
3.6 Review Questions
3.7 Further Readings

Objectives

After studying this unit, you will be able to:
z z Explain the unit costing;
z z Understand the cost sheet;
z z Identify the direct cost classification;

z z Identify the indirect cost classification;
z z Describe the preparation of cost sheet.

Introduction

Under costing, the role of unit costing is an inevitable tool for the industries not only to identify
the volume of costs incurred at every level but also to determine the rational price on the
commodities in order to withstand among the competitors. The determination of the selling price
is being done through the process of determining the cost of the product. After having finalized
the cost of the product, the profit margin has to be added in order to derive the final selling price
of the product.
Cost sheet is a statement which is prepared periodically to provide detailed cost of a cost unit or
cost centre. A cost sheet not only shows the total cost but also the various components of the total
cost. Period covered by a cost sheet may be a year, a month or a week, etc. Cost sheet serves the
following purposes:
z z It discloses various elements of cost,

z z It discloses the per unit cost as well as total cost of production,
z z It facilitates preparation of tender price, and
z z It facilitates comparison of total cost.

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