Page 52 - DCOM202_COST_ACCOUNTING_I

Cost Accounting – I

Notes The last but most important stage in the unit costing is determining the selling price of the
commodities. The selling price of the commodities is fixed by way of adding both the cost of
sales and profit margin out of the product sales.

Sales = Cost of Sales + Margin of Profit

Example:
In the example continued, if we add the profit that can be earned to be ` 48,900. Calculate the
product sales expected.
Solution:
Sales = Cost of Sales + Margin of Profit
= 5,99,750 (from the previous example) + 48,900

= ` 6,48,650
Under the unit costing, the selling price of the product can be determined through the statement
form.

Example: Calculate the prime cost, factory cost, cost of production cost of sales and profit
form the following particulars:

` `
Direct materials 2,00,000 Office stationery 1,000
Direct wages 50,000 Telephone charges 250
Direct expenses 10,000 postage and telegrams 500
Wages of foreman 5,000 Salesmen’s’ salaries 2,500
Electric power 1,000 Travelling expenses 1,000
Lighting: Factory 3,000 Repairs and renewal plant 7,000
Office 1,000 Office premises 1,000
Storekeeper’s wages 2,000 Carriage outward 750
Oil and water 1,000 Transfer to reserves 1,000
Rent: Factory 10,000 Discount on shares written off 1,000
Office 5,000 Advertising 2,500
Depreciation plant 1,000 Warehouse charges 1,000
Office 2,500 Sales 3,79,000
Consumable store 5,000 Income tax 20,000
Managers’ salary 10,000 Dividend 4,000
Directors’ fees 2,500
Solution:

Cost Statement/Cost Sheet
Particulars ` `
Direct Materials 2,00,000
Direct wages 50,000
Direct expenses 10,000
Prime Cost 2,60,000
Factory Overheads:
Contd…

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