Question

State whether the following statement is True or False: “Direct cost, Works cost, Cost of production and Total cost are the components of Cost Sheet.”

Hint:

Remembering this exact order is critical for solving any Cost Sheet problem: $$\text{Direct Cost} \to \text{Works Cost} \to \text{Cost of Production} \to \text{Total Cost}$$

Answer 1

Step 1: Identifying the Stages of a Standard Cost Sheet:
A cost sheet is structured to calculate intermediate cost totals in a logical, step-by-step sequence. Each stage represents a specific component of the overall cost structure:
• Direct Cost Prime Cost: Represents direct materials, direct labor, and direct expenses.
• Works Cost Factory Cost: Derived by adding factory overheads to the Prime Cost.
• Cost of Production: Computed by adding administrative overheads to the Works Cost.
• Total Cost Cost of Sales: Calculated by adding selling and distribution overheads to the Cost of Production.

Step 2: Verifying the Statement:
The statement asserts that Direct Cost, Works Cost, Cost of Production, and Total Cost are the components of a Cost Sheet. Because these are indeed the four essential, sequential components that define the structure of a standard Cost Sheet, the statement is completely accurate.

Step 3: Final Determination:
The given statement is True.