Management Accounting for Engineers Lecture 1

Cost Sheet

Why?

To analyze a report on the production of a service/product. This allows for accurate budget forecasting and is essential for applying for loans, as it helps demonstrate to banks that the business idea is viable.

Direct Costs + Indirect Costs

The total cost includes direct expenses related to production and indirect expenses such as administrative and overhead costs.

Factory Overheads

These include expenses incurred within the factory that are not directly tied to the production process, such as maintenance, utilities, and indirect labor.

Depreciation

The reduction in value of assets over time, such as machinery or equipment, which is factored into the total production cost.

Questions

Polar Energy (Example)

Particulars	₹
Opening Stock of raw materials	20,000
Opening Stock of Work-in-progress	10,000
Opening Stock of Finished goods	50,000
Raw material purchase	5,00,000
Direct Wages	3,80,000
Sales for the year	12,00,000
Closing stock of raw material	75,000
Closing stock of work-in-progress	15,000
Factory overhead	80,000
Direct Expenses	50,000x
Office and Administrative overhead	60,000
Selling & Distribution expenses	30,000
Closing stock of finished goods	50,000

Answer

Particulars	Amount ($)	Total ($)
Opening Stock of Raw Materials	20,000
Add: Purchase	5,00,000
Less: Closing Stock of Raw Material	75,000
Cost of Raw Materials Consumed		4,45,000
Add: Direct Wages	3,80,000
Add: Direct Expenses	50,000	4,30,000
Prime Cost		8,75,000
Ad Factory Overheads	80,000
Add Opening Stock of Work In Progress	10,000
	90,000
Less Closing Stock of work in progress	15,000	75,000
Work Cost or Factory Cost		9,50,000
Add Office & Administrative Over Head		60,000
Cost of production		10,10,000
Add Opening stock of finished Goods		50,000
		10,60,000
Closing Stock of finished goods		50,000
Cost of goods Sold		10,10,000
Add: Selling and distribution Overhead		30,000
Cost of sales		10,40,000
Profit		1,60,000
Sales for the year		12,00,000

Gems Ltd.

Particulars	₹
Stock of raw materials (1.1.2018)	50,000
Purchase of raw materials	1,70,000
Stock of raw materials (31.12.2018)	80,000
Carriage Inward	10,000
Direct Wages	1,50,000
Indirect Wages	20,000
Other Direct Charges	30,000
Office rent and rates	1,000
Factory rent and rates	10,000
Indirect consumption of materials	1,000
Depreciation On Plant	3,000
Depreciation on office furniture	2000
Salesmen salary	4,000
Salary to office supervisor	5,000
Other factory expenses	11,400
General Manager’s Remuneration:
Office	4,000
Factory	8,000
Selling Dept.	12,000
Other selling expenses	2,000
Travelling expenses of salesmen	2,200
Carriage and Freight outward Advertisement	2,000 4,000
Sales	5,00,000

Answer

Particulars	Amount ( $ )	Amount ( $ )
Opening Stock of Raw Materials	50,000
Add Purchase of Raw Materials	1,70,000	2,20,000
Carriage Inwards	10,000	2,30,000
	2,30,000
Less: Closing stock of raw materials	80,000
Raw Materials consumed		1,50,000
Wages		1,50,000
Other Direct Charges		30,000
Prime Cost		3,30,000
Add: Factory Overhead
Indirect Wages	20,000
Factory rent and rates	10,000
Indirect materials	1,000
Depreciation on plant	3,000
Other Factory Expenses	11,400
General Manager’s Remuneration	8,000	53,400
Work Cost		3,83,400
Add Administration Overheads
Salary to Office Supervisors	5,000
Office Rent	1,000
Office Furniture Depreciation	2,000
General Managers Remuneration	4,000	12,000
Cost of Production		3,95,400
Selling Distribution & Overheads
Sales Man Salary	4000
Overheads	2000
Travelling Expenses	2200
Advertising Expenses	4000
Other Selling Expenses	12,000
Carriage Freight Outwards	2000	26200
Cost Of Sales		4,21,600
Sales		5,00,000

Question 3

Particulars	₹
Stock of finished goods (1.4.2018)	50,000
Work-in-progress (1.4.2018)	40,000
Raw materials (1.4.2018)	1,00,000
Direct materials	8,00,000
Direct Wages	3,00,000
Carriage inward	40,000
Indirect wages	90,000
Factory Overheads	2,75,000
Stock of Raw material (31.03.2019)	80,000
Stock of Work-in-progress (3103.2019)	70,000
Sales (1,20,000 units)	25,00,000
Office and Administrative overhead	80,000
Selling and Distribution overhead	1,00,000
Stock on finished goods (31.03.2019)	60,000

Answer

Particulars	Amount	Amount
Purchase	1,00,000
Direct material	8,00,000
Closing Stock	80,000	8,20,000
Raw Materials Consumed		820000
Add Direct Wage	3,00,000
Carriage Inwards	40,000
Prime Cost	11,60,000
Factory Overheads	2,75,000
Indirect Wages	90,000
Opening Stock	40,000
Subtract	70,000
	335000
	415000
Work Cost or Factory Cost		14,95,000
Office Overheads	80,000
Cost of Productions		15,75,000
Add Opening FG	50,000
Subtract Closing FG	60000
Cost of goods sold	4,05,000
Cost of Sales	19,95,000
Sales	25,00,000

Question 4

Particulars	Amount (₹)
Raw Material Consumed	80,000
Direct Wages	48,000
Machine Hours Worked	8,000 hours
Machine Hour Rate	4 per hour
Office Overheads (10% of Works Cost)	Calculated
Selling Overheads (1.50 per unit)	Calculated
Units Produced	4,000 units
Units Sold (3,600 @ 50 each)	Calculated

Answer

Particulars	Amount	Amount
Raw Materials Consumed	80,000
Direct Wages	48,000
	1,28,000	1,28,000
Factory Costs
Factory Machine Hours	32,000
		32,000
Office Costs
Office Overheads	16000
Closing Stock of units	17600
Selling Overheads	5400
Cost Of Sales	158400
Sales	180000
Profit	21,600

• References

---

Information

• Date: 2025.01.14

• Time: 10:06