Page 32 - DMGT202_COST_AND_MANAGEMENT_ACCOUNTING

Unit 2: Unit and Output Costing

= 6,000 + 1,250 + 3,500 + 2,500 + 10,000 + 1,000 + 500 + 250 Notes

= ` 25,000
Hence, Production Cost = 5,58,000 + 25,000
= ` 5,83,000

Figure 2.3

Cost of Production

Administrative Overheads Factory Overheads
Office Rent

Repairs-office
Office lighting

Depreciation-office
Manager salary

Telephone charges
Postage and telegram

Stationery

Immediate next stage to determine in the process of unit costing is the component of cost of sales.
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 ` 1,000
Calculate the cost of sales.
Solution:
Cost of Sales = Cost of Production + Selling Overheads
Cost of Production = ` 5,83,000 (from the previous example)

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