## Cost Sheet
A Cost Sheet (or Cost Statement) is a document providing detailed cost information, typically classified on a functional basis.
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## Functional Classification of Costs
| # | Element |
|---|---|
| 1 | Direct Material Cost |
| 2 | Direct Employee (Labour) Cost |
| 3 | Direct Expenses |
| 4 | Production / Manufacturing Overheads |
| 5 | Administration Overheads |
| 6 | Selling Overheads |
| 7 | Distribution Overheads |
| 8 | Research & Development Costs |
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## Cost Heads (Cumulative Build-Up)
```
Direct Material + Direct Labour + Direct Expenses
= PRIME COST
+ Production/Manufacturing Overheads
− Scrap/Waste Recovery
= COST OF PRODUCTION
+ Opening WIP − Closing WIP (if applicable)
= COST OF GOODS MANUFACTURED
+ Opening Finished Goods − Closing Finished Goods
= COST OF GOODS SOLD
+ Selling Overheads + Distribution Overheads
+ Interest & Finance Charges (shown separately)
= COST OF SALES
```
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## Key Cost Categories — What's Included
### Direct Expenses
Costs directly traceable to a cost object (not material/labour):
- Power, fuel, steam
- Royalty for production
- Hire charges for specific equipment
- Technical assistance fees
- Amortised moulds, patterns, patents
- Product-specific design/software
### Factory (Production) Overheads
- Consumable stores and spares
- Depreciation — plant, machinery, factory building
- Lease rent of production assets
- Repair & maintenance of plant/factory
- Indirect employee costs (production)
- Drawing & Designing department
- Insurance on plant, factory, raw material & WIP stocks
- Jigs, fixtures, tooling (amortised)
- Service department costs (Tool Room, Maintenance, Pollution Control)
### Administration Overheads
- Depreciation/maintenance of corporate office building/furniture
- Salaries — admin staff, accountants, directors, secretaries
- Rent, rates, taxes, insurance, lighting, office expenses
- Printing & stationery, office supplies
- Legal charges, audit fees, directors' sitting fees
### Selling Overheads
- Sales dept. salaries & wages
- Rent, depreciation, maintenance of sales dept.
- Advertisement, website maintenance, market research
- Secondary packing (for transport/marketability)
### Distribution Overheads
- Wages of distribution staff
- Transportation and insurance (distribution)
- Depreciation, hire charges, maintenance of distribution vehicles
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## Treatment of Special Items
| Item | Treatment |
|---|---|
| Scrap / Waste recovery | Deducted from cost of production (reduces cost) |
| Abnormal costs (e.g., COVID-19 costs, pandemic lockdown costs) | Excluded from cost of production — shown separately |
| Subsidy / Grant / Incentive received | Deducted from the relevant cost object |
| Penalty, fine, damages, demurrage | Excluded from cost — not part of production cost |
| Interest & finance charges | Not included in cost of production — shown as separate line item in cost of sales |
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## Advantages of a Cost Sheet
1. Shows total cost and cost per unit
2. Enables cost comparison across periods/products
3. Assists in preparing tender estimates
4. Helps determine selling price
5. Facilitates cost control by revealing operational efficiency