How to approach it
- Lay out the cost sheet skeleton first: materials consumed, prime cost, factory cost, cost of production, cost of goods sold, cost of sales, profit, sales.
- Where a figure is missing, work backwards from the next known total.
- Adjust work-in-progress at factory cost and finished goods after cost of production.
- If profit is a percentage of sales, sales = cost of sales ÷ (1 − margin).
Key rules to apply
- Raw material consumed = opening stock + purchases (incl. carriage inwards) − closing stock.
- Opening and closing WIP adjust works cost; opening and closing finished goods adjust cost of production.
- Production-related administration belongs in cost of production; selling and distribution sits below cost of goods sold.
Answer layout
| Cost sheet | ₹ |
|---|---|
| Raw materials consumed | |
| Direct wages and direct expenses | |
| Prime cost | |
| Factory overheads ± WIP | |
| Works cost | |
| Production administration | |
| Cost of production ± finished goods | |
| Cost of goods sold | |
| Selling and distribution | |
| Cost of sales | |
| Profit | |
| Sales |
Common mistakes
Drawn from the examiners' comments for this sitting (summarised in our words) and from typical errors on this topic.
- Deriving raw material consumed from cost of production instead of the materials data (examiners' point).
- Adjusting WIP after cost of production, or finished goods before it.
- Computing profit as a percentage of cost when it is given on sales.
Similar question with worked solution
Written by us with our own numbers; it tests the same skills as Q2 without copying it.
Original practice question
Cost sheet from partial data
Raw materials: opening ₹50,000, purchases ₹4,00,000, closing ₹60,000. Direct wages ₹2,00,000; direct expenses ₹30,000. Factory overheads ₹1,50,000. WIP: opening ₹40,000, closing ₹50,000. Production administration ₹20,000. Finished goods: opening ₹60,000, closing ₹90,000. Selling and distribution ₹50,000. Profit is 20% of sales.
Required: Prepare the cost sheet and find sales.
Worked solution
| Cost sheet | ₹ |
|---|---|
| Raw materials consumed: 50,000 + 4,00,000 − 60,000 | 3,90,000 |
| Direct wages + direct expenses | 2,30,000 |
| Prime cost | 6,20,000 |
| Factory overheads | 1,50,000 |
| Add opening WIP / less closing WIP | (10,000) |
| Works cost | 7,60,000 |
| Production administration | 20,000 |
| Cost of production | 7,80,000 |
| Add opening / less closing finished goods | (30,000) |
| Cost of goods sold | 7,50,000 |
| Selling and distribution | 50,000 |
| Cost of sales | 8,00,000 |
| Profit: 8,00,000 × 20/80 | 2,00,000 |
| Sales | 10,00,000 |
Answer: Sales ₹10,00,000; profit ₹2,00,000.