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Preparation Of Cost Sheet

Cost Sheet Preparation: Autocomp Ltd

1. Cost Sheet Overview

  • Definition: Final output of the costing department showing cost of production per unit.
  • Service Industry: Analogous cost sheet shows cost of delivering each service.

2. Company & Products

  • Company: Autocomp Ltd.
  • End Products:
    • P‑101
    • P‑102
    • P‑103
  • Materials / Components (R‑101 to R‑105)
  • Production Facilities:
    • Machine Shops: M‑101, M‑102, M‑103
    • Assembly Shops: A‑101, A‑102

3. Material Requirements & Costs

  • Per‑unit material mix:
    • P‑101 uses 4 materials
    • P‑102 uses 2 materials
    • P‑103 uses 3 materials
  • Compute per‑unit material cost:
    • Multiply quantity of each material × cost per unit.
    • Results:
      • P‑101: ₹1,840
      • P‑102: ₹1,120
      • P‑103: ₹1,760

  • Monthly material cost:
    • P‑101: 10,000 × ₹1,840 = ₹18.40 million
    • P‑102: 15,000 × ₹1,120 = ₹16.80 million
    • P‑103: 60,000 × ₹1,760 = ₹105.60 million

4. Machine & Assembly Hour Requirements

  1. Throughput rates (units/hour) per machine center vary by product.
  2. Compute hours required:
    Hours = Units produced / Units per hour
  3. Capacity vs. Usage (per month = 200 hrs):
    • M‑101: 200 hrs used (full)
    • M‑102: 150 hrs used (idle 50 hrs)
    • M‑103: 125 hrs used (idle 75 hrs)
    • A‑101: 25 hrs used (idle 175 hrs)
    • A‑102: full utilization for those products that require it

5. Allocating Production Center Costs & Idle Capacity

  • Cost pools per center:
    • Labor
    • Power & fuel
    • Depreciation
  • Idle capacity treatment options:
    1. Charge full cost (including idle hours) → customer bears all expenses.
    2. Charge only utilized hours → exclude idle‑time cost from product.
  • Assumption for this exercise: Option 1 (charge full cost).

6. Machine / Assembly Hour Rates

  1. Rate per hour = (Total center cost) ÷ (Actual hours worked)
  2. Example (M‑101):
    • Total cost ₹2,450,000 ÷ 200 hrs = ₹12,250/hr
  3. Note: Higher rates result from low utilization (idle time).

7. Assigning Production Center Cost to Products

  • Formula:
    Cost allocated = Hours required x Rate per hour
  • Example (P‑101):
    • M‑101: 50 hrs × ₹12,250 = ₹612,500
    • M‑103: 50 hrs × ₹72,000 = ₹3,600,000
    • A-102: 25hrs x ₹142,400 = ₹3,560,000
    • A‑102: 100 hrs × ₹23,846 = ₹2,384,600
    • Total production center cost for P‑101: ₹10.16 million
  • Similar computations yield:
    • P‑102: ₹8.61 million
    • P‑103: ₹4.99 million

8. Labor Cost Allocation (for support of common‑cost allocation)

  1. Compute labor rate per center:
    • Center labor cost ÷ hours worked
    • E.g., M‑101: ₹300,000 ÷ 200 hrs = ₹1,500/hr
  2. Product‑wise labor cost:
    • Multiply product labor hours × labor rate
    • E.g., P‑101 labor = 1,087 hrs × ₹1,500 = ₹1.63 million
    • Results:
      • P‑101: ₹1.63 million
      • P‑102: ₹0.97 million
      • P‑103: ₹0.45 million

9. Support Department Cost Allocation

  • Departments: Purchase, Stores, Quality Control, Maintenance, Accounting & Admin, Canteen
  • Allocation bases:
    Department Allocation Base
    Purchase Material cost
    Stores Material cost
    Maintenance Machine hours
    Quality Control Units produced
    Canteen & Personnel Product labor cost
    Accounting & Admin Units produced
  • Process:
    • Compute each department’s total cost share per product using its chosen base ratio.

10. Final Cost Sheet & Unit Costs

  • Cost categories:
    1. Material
    2. Production center (machine + assembly)
    3. Support center (all service departments)
  • Per‑unit costs:
    Product Total Cost/Unit (₹)
    P‑101 3,009
    P‑102 1,782
    P‑103 1,886
  • Cost structure (% of unit cost):
    • Material cost: largest share
    • Production center cost: next largest
    • Support center cost: relatively small
    • P‑103 is highly material‑intensive (≈ 93 % material).
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