Cost sheet, tenders and quotations
Cost and Management Accounting · Foundations · Topic 2 of 18 · 5 min read
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1. Meaning
A cost sheet is a statement that sets out the elements of cost of a product for a period, building up from prime cost to cost of sales, usually with a column for total cost and one for cost per unit. It shows the cost of each stage, helps fix the selling price, allows comparison with earlier periods, and is the basis for tenders and quotations.
2. Format
| Particulars | Rs. |
|---|---|
| Opening stock of raw material | xxx |
| Add: Purchases + carriage inwards | xxx |
| Less: Closing stock of raw material | (xxx) |
| Raw material consumed | xxx |
| Direct wages + direct (chargeable) expenses | xxx |
| Prime cost | xxx |
| Factory overheads (factory rent, power, supervision, depreciation of plant) | xxx |
| Add opening WIP, less closing WIP, less scrap sale | xxx |
| Works (factory) cost | xxx |
| Office and administration overheads | xxx |
| Cost of production | xxx |
| Add opening finished goods, less closing finished goods | xxx |
| Cost of goods sold | xxx |
| Selling and distribution overheads | xxx |
| Cost of sales | xxx |
| Profit (balancing figure) | xxx |
| Sales | xxx |
Items kept out of a cost sheet because they are purely financial: interest on capital, income tax, dividends, discount on issue of shares, goodwill written off, loss on sale of fixed assets, donations. For the “10 imaginary items” question, fill the format with round figures (material 50,000, wages 30,000, direct expenses 5,000, factory overheads 20,000, office overheads 10,000, selling overheads 8,000 and so on) and check every sub-total.
3. Solved: detailed cost sheet (January 2025, B.Com)
Sales 1,96,000; purchases of raw material 60,000; direct wages 60,000; rent, rates and insurance 21,000; carriage inwards 1,000; opening raw material 10,000; opening finished goods (200 tons) 12,000; closing raw material 11,000; supervision 3,000; advertising 4,000; office overheads 30,000; selling expenses 8,000. Output 3,000 tons; closing finished goods 400 tons, to be valued at works cost. Rent, rates and insurance are taken as factory expenses.
| Particulars | Total Rs. | Per ton Rs. |
|---|---|---|
| Raw material (10,000 + 60,000 + 1,000 − 11,000) | 60,000 | 20 |
| Direct wages | 60,000 | 20 |
| Prime cost | 1,20,000 | 40 |
| Rent, rates, insurance 21,000 + supervision 3,000 | 24,000 | 8 |
| Works cost | 1,44,000 | 48 |
| Office overheads | 30,000 | 10 |
| Cost of production (3,000 tons) | 1,74,000 | 58 |
| Add opening finished goods (200 tons) | 12,000 | |
| Less closing finished goods (400 tons × 48) | (19,200) | |
| Cost of goods sold (2,800 tons) | 1,66,800 | |
| Advertising 4,000 + selling expenses 8,000 | 12,000 | |
| Cost of sales | 1,78,800 | |
| Net profit | 17,200 | |
| Sales | 1,96,000 |
4. Solved: short cost statement (January 2025, B.Com)
Raw material 30,000; direct labour 18,000; 1,800 machine hours at Rs. 10; administration 20% of works cost; selling Re. 1 per unit sold; produced 26,400 units, sold 25,000 at Rs. 8.
- Prime cost 48,000 + machine overheads 18,000 = works cost 66,000.
- Administration 20% = 13,200, so cost of production = 79,200, i.e. Rs. 3 per unit.
- Closing stock 1,400 units × 3 = 4,200; cost of goods sold = 75,000.
- Selling 25,000; cost of sales = 1,00,000 (Rs. 4 per unit).
- Sales 2,00,000; profit 1,00,000, or Rs. 4 per unit.
The January 2026 problem of the same type (material 10,000, wages 6,000, 4,500 machine hours at Rs. 2, office 20% of works cost, selling 50 paise a unit, 20,000 units) works out to works cost 25,000, cost of production 30,000 and cost of sales 40,000, i.e. Rs. 2 per unit. The paper as printed gives no selling price; state that and show cost per unit.
5. Tenders and quotations
A quotation for a future job uses last year’s cost sheet to find overhead percentages, then applies them to the job’s prime cost. The paper tells you the bases; follow them exactly.
Solved (January 2026, B.Com). Year 2022: raw material 3,00,000, direct wages 1,68,000, works overhead 1,50,000, office overhead 1,68,000, selling 1,12,000, distribution 70,000, net profit 1,10,000. Job in 2023: material 9,000, wages 4,000. Factory overhead as % of wages; office, selling and distribution as % of works cost.
- 2022 works cost = 3,00,000 + 1,68,000 + 1,50,000 = 6,18,000; cost of sales = 6,18,000 + 1,68,000 + 1,82,000 = 9,68,000.
- Factory overhead rate = 1,50,000 / 1,68,000 = 89.29% of wages.
- Office rate = 1,68,000 / 6,18,000 = 27.18% of works cost; selling and distribution = 1,82,000 / 6,18,000 = 29.45%.
- Profit = 1,10,000 / 9,68,000 = 11.36% of cost of sales.
| Job quotation | Rs. |
|---|---|
| Material | 9,000.00 |
| Wages | 4,000.00 |
| Prime cost | 13,000.00 |
| Factory overhead (89.29% of 4,000) | 3,571.43 |
| Works cost | 16,571.43 |
| Office overhead (27.18%) | 4,504.85 |
| Selling and distribution (29.45%) | 4,880.26 |
| Total cost | 25,956.54 |
| Profit (11.36% on cost) | 2,949.61 |
| Price to quote | 28,906.15 |
Estimate for a smaller output (January 2026, 100 marks). Treat each element as the paper directs: material and labour per unit raised by the given percentages, factory overheads in proportion to wages, administration fixed in total, selling fixed per unit, and profit at last year’s percentage of cost. With last year’s cost of sales 6,00,000 and profit 25,000 on 2,000 units, the 1,500-unit estimate comes to cost of sales 5,27,812.50, profit (4.17%) 21,992.19, and a price of 5,49,804.69, or Rs. 366.54 a unit.
How this is examined
A 10-mark cost sheet and a 6-mark cost statement alternate with the installation essay in Unit I of the 80-mark B.Com paper; the 100-mark paper sets the estimate problem for 16 marks and the imaginary cost sheet in Q. 9. Show the working of raw material consumed, label every sub-total, give per-unit figures, and state any assumption (for example, that rent is a factory cost).
Now try the real questions: Cost and Management Accounting past question papers.