Q.A factory produced 10,000 units during a period. From the following particulars, prepare a Cost Sheet showing total cost and cost per unit at each stage, and the selling price if profit is 20% on cost:
Direct materials ₹2,00,000; Direct wages ₹1,50,000; Direct expenses ₹25,000; Factory overheads are 60% of direct wages; Office and administration overheads ₹35,000; Selling and distribution overheads ₹50,000.

Here factory overheads are given as a percentage of wages, and both total and per-unit figures are required, with the selling price set at a profit of 20% on cost.

First compute factory overheads = 60% of direct wages = 60% of ₹1,50,000 = ₹90,000. Output is 10,000 units, so cost per unit at any stage = total ÷ 10,000.

Working.

• Factory overheads = 60% × 1,50,000 = ₹90,000.
• Prime cost = 2,00,000 + 1,50,000 + 25,000 = ₹3,75,000.
• Works cost = 3,75,000 + 90,000 = ₹4,65,000.
• Cost of production = 4,65,000 + 35,000 = ₹5,00,000; per unit = 5,00,000 ÷ 10,000 = ₹50.
• Cost of sales = 5,00,000 + 50,000 = ₹5,50,000; per unit = ₹55.
• Profit = 20% of cost of sales = 20% × 5,50,000 = ₹1,10,000; per unit = ₹11.
• Sales = 5,50,000 + 1,10,000 = ₹6,60,000; per unit = ₹66. …

Alternative for the selling price: since profit is 20% on cost, selling price per unit = cost of sales per unit × 1.20 = 55 × 1.20 = ₹66, and total sales …

Two frequent errors: (i) computing factory overheads on prime cost or on materials instead of on direct wages — read the base carefully (here it is 60% of wages); and (ii) confusing '20% on cost' with '20% on sales' — profit of …