2. Preparation of Unit Cost Sheet

 

2. Preparation of Unit Cost Sheet

  • Definition: A unit cost sheet is a statement that shows the cost per unit of production, breaking down all components of cost.
  • Components of a Cost Sheet:
    • Direct Materials: Raw materials used.
    • Direct Labor: Wages paid to workers involved in production.
    • Factory Overheads: Indirect production costs, like depreciation and electricity.
    • Selling & Distribution Overheads: Costs for selling and delivering products.

Example Format of a Cost Sheet

Cost ElementsTotal Cost ($)Cost per Unit ($)
Direct Material10,00010
Direct Labor8,0008
Factory Overheads2,0002
Selling & Distribution1,0001
Total Cost21,00021

Solved Example:

  • Problem: A company produces 500 units, incurring $4,000 in direct materials, $3,000 in direct labor, $1,000 in factory overheads, and $500 in selling expenses. Prepare the cost sheet and determine the cost per unit.
  • Solution:
    • Total Cost = $4,000 + $3,000 + $1,000 + $500 = $8,500
    • Cost per Unit = $8,500 / 500 units = $17 per unit

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