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Cost and Management Accounting
Notes 14. Production cost is the summation of
(a) Direct and indirect costs
(b) Product and administrative costs
(c) Cost of sales and profi t margin
(d) Direct materials, direct labour and direct expenses
15. The statement prepared for the computation of a product/service cost is known as
(a) Standard Costing
(b) Marginal Costing
(c) Prime Costing
(d) None of these
Task Mr Anand provides the following information which is related to the
product of his enterprise for the month of December 2005.
`
Raw materials consumed 30,000
Direct labour charges 18,000
Machine hours worked 1,800
Machine hour rate 10
Administrative overheads 20% on works cost
Selling overheads ` 1 per unit
Units produced 26,400 units
Units sold 25,000 units ` 8 per unit
Draft the cost statement and determine the cost per unit, profit per unit sold and profi t
during the period.
2.4 Summary
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.
During the preliminary stage of preparing the cost statement of the product, there are two
things to be borne in our mind at the moment of classifi cation.
Direct cost classifi cation
Indirect cost classifi cation
Under this classification, the direct costs of the product or service are added together to
know the volume of total direct cost. The total volume of direct cost is known as “Prime
Cost.”
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