# Preparing a Cost Sheet
## Components of a Cost Sheet
1. Prime Cost
2. Factory Cost
3. Cost of Production
4. Cost of Sales
## Complete Format
| Particulars | Amount (₹) |
|---|---|
| Direct Material | xx |
| + Direct Labour | xx |
| + Direct Expenses | xx |
| = PRIME COST | xxx |
| + Factory OH / Production OH | xx |
| = GROSS FACTORY COST | xxx |
| + Opening WIP | xx |
| − Closing WIP | (xx) |
| = NET FACTORY COST | xxx |
| + Quality Control Cost | xx |
| + Research & Development Cost | xx |
| + Admin OH related to production | xx |
| + Only Primary Packaging | xx |
| − Sale of scrap or By-product | (xx) |
| = COST OF PRODUCTION | xxx |
| + Opening Finished Goods | xx |
| − Closing Finished Goods | (xx) |
| = COST OF GOODS SOLD | xxx |
| + General Admin OH | xx |
| + Selling OH | xx |
| + Distribution OH | xx |
| + Secondary Packaging | xx |
| = COST OF SALES | xxx |
| + Profit | xx |
| = SALES | xxx |
## Important Notes
(i) Sometimes the question may club Selling & Distribution OH together.
(ii) Cost per unit calculation:
- For items up to Cost of Production → divide by No. of units PRODUCED.
- For items after Cost of Production → divide by No. of units SOLD.
(iii) Quality Control and R&D Cost are always given in the question (not computed).
(iv) Items NOT included in cost (financial costs):
- Fines, penalties, demurrage are financial costs and not included.
- However, ICAI includes Interest cost even though it is technically a financial cost — follow ICAI treatment in exam.
(v) Closing Stock valuation using FIFO:
Closing stock (₹) = (Total Cost of Production / Units Produced) × Closing Stock Units