Page 35 - DMGT202_COST_AND_MANAGEMENT_ACCOUNTING

Cost and Management Accounting

Notes Selling and distribution overheads:
Carriage outward 750
Salesmen’s salaries 2500
Travelling expenses 1,000
Advertising 2500
Warehouse charges 1000
7,750
Cost of Sales 3,26,500
Profi t 52,500
Sales 3,79,000
The next stage in the preparation of the cost statement is to induct the stock of raw materials,
work in progress and fi nished goods.

2.3.1 Stock of Raw Materials

The raw materials stock should be taken into consideration for the preparation of the cost sheet.
The cost of the raw materials is nothing but the direct materials cost of the product. The cost of
the materials is in other words cost of the materials consumed for the production of a product.

Particulars ` `
Opening stock of raw materials XXXXX
(+) Purchases of raw materials XXXXX
(–) Closing stock of raw materials XXXXX
Cost of materials consumed XXXXX

2.3.2 Stock of Semi-fi nished Goods

The treatment of the stock of semi-finished goods is mainly depending upon the two different

approaches, viz.
1. Prime cost basis, and
2. Factory cost basis.
The factory cost basis is considered to be predominant over the early one due to the consideration

of factory overheads at the moment of semi finished goods treatment. The indirect expenses are
the expenses converting the raw materials into semi-fi nished goods which should be relatively
considered for the treatment of the stock valuation rather than on the basis of prime cost.
Particulars `
Prime cost XXXXXX
(+) Factory overheads incurred XXXXXX
(+) Opening work in progress XXXXXX
(–) Closing work in progress XXXXXX
Factory cost XXXXXX
2.3.3 Stock of Finished Goods

The treatment of the stock of finished goods should carried over in between the opening stock

and closing stock and adjusted among them before the finding the cost of goods sold.

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