320EL29a - MODULE 6B Cost Sheet Elementary Cost Accounting...

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MODULE - 6B Elementary Cost Accounting Notes 121 ACCOUNTANCY You are running a factory which manufactures electronic toys. You incur expenses on raw material, labour and other expenses which can be directly attibuted to cost and which cannot be directly attributed but are incurred upto their sales. You need to know the composition of cost at different stages. This will help you in the analysis of cost of a product so that same can be used for its proper management. In this lesson you will learn about cost sheet and its various components. OBJECTIVES After studying this lesson, you will be able to: state the meaning and type of Cost Sheet; state the importance of Cost Sheet; explain the components of total cost; prepare the cost sheet as per format. 29.1 COST SHEET : MEANING AND ITS IMPORTANCE Cost sheet is a statement, which shows various components of total cost of a product. It classifies and analyses the components of cost of a product. Previous periods data is given in the cost sheet for comparative study. It is a statement which shows per unit cost in addition to Total Cost. Selling price is ascertained with the help of cost sheet. The details of total cost presented in the form of a statement is termed as Cost sheet. Cost sheet is prepared on the basis of : 1. Historical Cost 2. Estimated Cost 29 COST SHEET
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ACCOUNTANCY MODULE - 6B Notes Cost Sheet Elementary Cost Accounting 122 Historical Cost Historical Cost sheet is prepared on the basis of actual cost incurred. A statement of cost prepared after incurring the actual cost is called Historical Cost Sheet. Estimated Cost Estimated cost sheet is prepared on the basis of 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. Importance of Cost Sheet The importance of cost sheet is as follows: Cost ascertainment The main objective of the cost sheet is to ascertain the cost of a product. Cost sheet helps in ascertainment of cost for the purpose of determining cost after they are incurred. It also helps to ascertain the actual cost or estimated cost of a Job. Fixation of selling price To fix the selling price of a product or service, it is essential to prepare the cost sheet. It helps in fixing selling price of a product or service by providing detailed information of the cost. Help in cost control For controlling the cost of a product it is necessary for every manufacturing unit to prepare a cost sheet. Estimated cost sheet helps in the control of material cost, labour cost and overheads cost at every point of production. Facilitates managerial decisions It helps in taking important decisions by the management such as: whether to produce or buy a component, what prices of goods are to be quoted in the tender, whether to retain or replace an existing machine etc.
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MODULE - 6B Elementary Cost Accounting Notes 123 Cost Sheet ACCOUNTANCY INTEXT QUESTIONS 29.1 I. State the meaning of cost sheet.
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