Page 30 - DMGT202_COST_AND_MANAGEMENT_ACCOUNTING
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Unit 2: Unit and Output Costing
Notes
Factory Cost = Prime cost + Factory Overheads
Prime costs include direct labour, materials, bought-outs and sub-contracts, while factory
overheads are nothing but the indirect expenses incurred during the individual process.
Example: Calculate the factory cost from the following data:
`
Cost of Direct Materials 2,00,000
Direct Wages 50,000
Direct Expenses 10,000
Wages of Foreman 5,000
Electric Power 2,000
Lighting of the Factory 4,000
Storekeeper’s Wages 2,500
Oil and Water 1,000
Rent of the Factory 10,500
Depreciation in Plant 1,000
Consumable Store 5,000
Repairs and Renewal Plant 7,000
Solution:
Factory Cost = Prime Cost + Factory Overheads
Prime Cost = Cost of Direct Materials + Direct Wages + Direct Expenses
= ` 2,00,000 + ` 50,000 + ` 10,000
= ` 2,60,000
Factory Overheads = Wages of Foreman + Electric Power + Lighting of the Factory
+ Storekeeper’s Wages + Oil and Water + Rent of the Factory
+ Depreciation in Plant + Consumable Store + Repairs and
Renewal Plant
= 2,00,000 + 50,000 + 10,000 + 5,000 + 2,000 + 4,000 + 2,500 + 1,000
+ 10,500 + 1,000 + 5,000 + 7,000
= ` 2,98,000
Hence, Factory Cost = 2,60,000 + 2,98,000
= ` 5,58,000
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