This document discusses unit or output costing. Unit or output costing is used when standard, identical products are mass produced through a common process. It is also known as single costing. The key characteristics are uniform, homogeneous production of identical products where the cost unit is a physical measure like per ton or meter. The objectives include determining total, unit, and element costs to compare costs over time, set prices, and tender prices. Cost elements include materials, labor, direct expenses, and overheads. Common methods to determine unit costs are cost sheets, statements of cost, and production accounts.

2. Unit or Output
Costing

3. Meaning
• Unit or Output costing is used in those
industries or organisations where
standard products are produced from a
common process and all the units produced
are more or less similar to each other.
• This method is also known as “Single
Costing Method”.

4. Definition of Unit or
Output Costing
“Unit Costing method is a Method of costing
applied to ascertain the cost per unit or
production where standard and identical
products are manufactured.
Walter W.Bigg.

5. Characteristics of Unit
Production
• Production should be uniform or Homogeneous
Identical products
• The cost unit should be physical /natural
• Per Unit cost should be determined ,for eg.Per
ton, per metre etc.

6. Objectives of Unit /Output
Costing
• To know the total cost of production
• To classify cost under related categories such as prime
cost, works cost etc.
• To determine the effect of each element of cost
• To compare cost during two or more periods
• To determine proposed setting price to earn desired profit
• To Determine tender price on the basis of Cost Data and
Future prospects.

7. Elements of cost under
Unit /Output costing
• Materials
• Labour
• Direct expenses
• Overheads

8. Methods of determining
Unit Cost
1) Cost Sheet
2) Statement of Cost
3) Production Account

9. Cost Sheet
• Cost sheet is a statement which is used to
determine the total cost of goods produced in a
specific Period and in which total cost, per
unit cost and cost incurred at various stages
from manufacturing a products to the stage
of making it saleable are shown.

10. Definition of Cost sheet
• “Cost Sheets are prepared for the use of
management and consequently they must
include all the essential details which may
assist the manager in judging the
efficiency of Production.”

11. Facts about Cost sheet
• Total Quantity of production
• Total cost of total quantity produced
• Per unit cost of total quantity produced
• Various components of cost at various stages of Production i.e.
Prime cost, factory cost
• Direct and Indirect cost of production
• Comparative cost of two products and its analysis
• Proportion of each individual cost to total cost expressed in
percentage.

12. Advantages of Cost sheet
• Determination of selling Price
• Control on Expenses
• Help in Minimising the Expenses
• Comparative study of Cost
• Benefit to common man

13. Difference between Cost Account and
Cost Sheet
Cost Account Cost Sheet
• Double Entry System
• Used in Production A/c,
Process A/c
• No help in making
comparison
• No ascertainment of Cost per
unit
• Helpful in Reconciliation
• Based on cost sheet
• No Double Entry System
• Used Monthly,weekly
• Helpful in knowing
Comparisons
• Ascertain Cost per Unit
• No help in Reconciliation
• Cost sheet helps in cost
control and guidance

14. Format of Cost Sheet
A cost sheet is prepared to know the outcome and breakup of costs for a particular accounting period.
Columnar form is most popular. Although cost sheets are prepared as per the requirements of the
management, the information to be incorporated in a cost sheet should comprise of cost per unit and
the total cost for the current period along with the cost per unit and the total cost of preceding period.
Data of financial statement is used for preparation of cost sheet. Therefore, reconciliation of cost
sheet and financial statement should be done on a regular interval.
COST SHEET OR STATEMENT OF COST
Total Units………Opening Stock of Raw material ... ... ... ..
.
... ... ... ..
.Add: Purchases ... ... ... ..
.
... ... ... ..
.... ... ... ..
.
... ... ... ..
.Less: Closing Stock ... ... ... ..
.
... ... ... ..
.Cost of material Consumed → ... ... ... ..
.
... ... ... ..
.Add: Direct Labor/Wages ... ... ... ..
.
... ... ... ..
.Prime Cost → ... ... ... ..
.
... ... ... ..
.Add: Works overheads ... ... ... ..
.
... ... ... ..
.Works Cost → ... ... ... ..
.
... ... ... ..
.Add: Administration overheads ... ... ... ..
.
... ... ... ..
.Cost of Production → ... ... ... ..
.
... ... ... ..
.Add: Selling and distribution overheads ... ... ... ..
.
... ... ... ..
.Total Cost or Cost of Sale → ... ... ... .. ... ... ... ..

15. Statement of Cost
• Statement of Cost is a memorandum
statement which is not made according to the
double entry system. It is a statement which is
made for calculating total cost, per unit cost
and budget cost of product. All elements of cost
in statement of cost are taken from financial
accounting's historical records. In cost sheet per
unit cost of each item of expense is calculated
whereas in statement of Cost it is not done.

16. Components of Cost
• Prime Cost
• Factory/Works Cost
• Office and administration cost
• Total Cost

17. Prime Cost
• Prime cost is the main element of cost of any
product.It is also called “Direct cost”, “ First Cost”, “
Flat Cost”.
• Prime Cost= Direct Material + Direct Wages
+Direct Expenses
Factory Cost
• Factory overheads includes the expenses which are of
indirect nature and are incurred in factory or
production process or in operating and controlling
production activity.
• Factory/Works Cost =Prime Cost + Factory Overheads

18. Office and administration cost
• The expenses which are incurred in operating and controlling the
business are included in Office and administration cost . Expenses
incurred on effective functioning and maintenance of business ,policy
creation and implementation are termed as office and administrative
expenses.
• Rent, rates and tax of office building, expenses on Light and
Cleaning of office premises etc.
• Cost of Production=Factory cost+Office and administration cost
Total Cost
• When selling and distribution expenses are added in cost of
production , then cost arrived is known as Total Cost.
• Expenses of sales office , salary & commission allowed to
sales manager ,travelling expenses of sales
representative,Advertisement,Bad Debts,Price-
List,Samples ,gifts,Discount allowed to customers etc.

19. Thank You