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Unit 3: Cost Sheet and Unit Costing
Immediate next stage to determine in the process of unit costing is the component of cost of sales. Notes
The cost of sales is the blend of both, selling overheads and cost of production.
Whatever the cost involved in the production process in the factory as well in the administrative
proceedings are clubbed with the selling overheads to determine the cost of sales.
Cost of Sales = Cost of production + Selling Overheads
Selling overheads are nothing but the indirect expenses incurred by the firm at the moment of
selling products. In brief, whatever the expenses in relevance with the selling and distribution
are known as selling overheads.
Example:
In the example continued, if we add the following data,
`
Salesman’s Salary 10,500
Travelling Expenses 1,000
Carriage Outward 750
Advertising 3,500
Warehouse Charges Calculate the cost of sales. 1,000
Solution:
Cost of Sales = Cost of production + Selling Overheads
Cost of production = ` 5,83,000 (from the previous example)
Selling Overheads = Salesman’s Salary + Travelling Expenses + Carriage Outward +
Advertising + Warehouse Charges
= 10,500 + 1,000 + 750 + 3,500 + 1,000
= ` 16,750
Hence, Cost of Sales = 5,83,000 + 16,750
= ` 5,99,750 Figure 2.7
Cost of Sales
Selling Overheads Cost of production
Salesman salary
Carriage outward
Salesmen commission
Travelling expenses
Advertising
Free samples
Warehousing
Delivery charges
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