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.

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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. Production Volumes

Product	Units Produced
P‑101	10,000
P‑102	15,000
P‑103	60,000

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4. 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

5. 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. Example (M‑101):
   • P‑101: 10,000 units ÷ 200 u/hr = 50 hrs
   • P‑102: 15,000 units ÷ 300 u/hr = 50 hrs
   • P‑103: 60,000 units ÷ 600 u/hr = 100 hrs
4. 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

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6. 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).

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7. 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).

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8. Assigning Production Center Cost to Products

• Formula:
  [ \text{Cost loaded} = (\text{Hours required}) \times (\text{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: 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

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9. 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

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10. 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.

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11. 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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