A Cost sheet is a periodic accounting document which is prepared to know the outcome and breakup of costs for a particular accounting period.
It shows various components of total cost of a product. It will classify and analyze the components of cost of a product.
This document helps in ascertaining the selling price of a product. In other words, the bifurcation of total cost presented in the form of a statement is called a Cost Sheet.
Cost Sheet is prepared on the basis Historical Costs and Estimated Costs.
Historical Cost: A statement of cost prepared after incurring the actual cost is called Historical Cost Sheet.
Estimated Cost: The statement prepared before the commencement of production is called estimated cost sheet. Such cost sheet is useful in quoting the tender price of a job or a contract.
Data from the financial statement is used to prepare cost sheet. Thus, reconciliation of cost sheet and financial statement is a must on a regular interval.
I have created an easy to use Cost Sheet Template with predefined formulas. Just by entering data you can estimate or calculate your cost with the help of this template.
This template can be an effective tool for General Managers, Higher management of production units for defining the product prize and keep the monitor the cost.
The template can be useful for new startups, production units or any other small business for cost management purposes.
Let’s discuss the template contents in detail.
Contents of Cost Sheet Template
This template consists of Six major sections:
- Prime Cost
- Factory or Works Cost
- Cost of Production
- Cost of Good Sold (COGS)
- Cost of Sales and
- Total Sales
1. Prime Cost:
Prime cost represents the aggregate of the cost of material consumed, productive wages and direct expenses.
Thus, Prime Cost = Direct material + Direct Wages + Direct expenses
Direct material = Material purchased + Opening stock of material – Closing stock of material.
2. Factory Cost or Works Cost:
Factory overheads consist of cost of indirect material, indirect wages, and indirect expenses incurred in the factory.
Factory cost is also known as works cost, production or manufacturing cost.
Hence, Factory Cost = Prime cost + Factory overheads.
Factory Overheads = Rent + Salaries + Depreciation + Other Factory related expenses.
In the process of production, some units remain to be completed at the end
of a period. These incomplete units are known as work-in-progress.
Hence, at the time of computing factory cost, it is necessary to make an adjustment of opening and closing stock of work in progress.
3. Cost of Production:
Office and administrative overheads are added to the factory cost or works cost to get the total cost of production.
Cost of Production = Factory Cost + office and administration overheads.
Office Overheads = Administration and other office related charges which will include Rent, Office expenses, General Charges etc.
4. Cost of Goods Sold (COGS):
It is not necessary, that all the goods produced in a period are sold in the same period.
Usually, we have stock of finished goods in the opening and at the end of the period.
The cost of opening stock of finished goods should be added to the total cost of production in the current period. The cost of closing stock of finished goods is deducted.
COGS = Total cost of production + Opening stock of the Finished goods – Closing stock of the finished goods.
5. Cost of Sales:
Adding the selling and distribution overheads to the COGS will give you the Cost of Sales.
Cost of Sales= Cost of Goods sold + Selling and distribution overheads.
Excess of sales over total cost is termed as profit. When total cost exceeds sales, it is termed as Loss. The profit margin is added to the total cost will give you the Sales figure.
Sales = Total Cost + Profit
The main objective of the cost sheet is to ascertain the cost of a product. It also helps to fix the selling price of a product or service.
It is also helpful in controlling the cost of a product it is necessary for every manufacturing unit.
It will help in taking important decisions by the management such as to make changes in product or raw material, deciding prices or to retain/replace an existing machine etc.
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