Page 27 - DMGT202_COST_AND_MANAGEMENT_ACCOUNTING

Cost and Management Accounting Manpreet Kaur, Lovely Professional University

Notes Unit 2: Unit and Output Costing

CONTENTS

Objectives
Introduction
2.1 Cost Sheet – Defi nition
2.2 Direct Cost Classifi cation

2.3 Indirect Cost Classifi cation
2.3.1 Stock of Raw Materials
2.3.2 Stock of Semi-fi nished Goods
2.3.3 Stock of Finished Goods

2.4 Summary
2.5 Keywords
2.6 Review Questions
2.7 Further Readings

Objectives

After studying this unit, you will be able to:
Make direct and indirect cost classifi cation

Prepare 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 fi nalized

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:
It discloses various elements of cost,

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

22 LOVELY PROFESSIONAL UNIVERSITY