B.Com Sem-3 Costing Formula Tricks | 1 Page Cost Accounting Chart
B.Com Sem-3 Costing – Easy Tricks to Remember Formulas | 1 Page Chart
B.Com Semester 3 Cost Accounting Notes | Easy Formula Tricks | Cost Sheet | Labour | Overheads | Halsey & Rowan
Costing becomes much easier when you understand the sequence of cost instead of trying to memorize every formula separately.
This article provides a simple B.Com Semester 3 Costing Formula Chart that you can use for quick revision before your examination.
Quick Revision Rule:
Material → Labour → Direct Expenses → Prime Cost → Factory Overhead → Works Cost → Administration Overhead → Cost of Production → Finished Goods → Cost of Sales → Profit → Sales
For students following Gujarat University, the current online B.Com course listing includes DSC-C-231 Cost Accounting–1 in Semester 3. However, students should always match these notes with the syllabus prescribed by their own university or college.
1. Cost Sheet – The Basic Flow
The easiest way to remember Cost Sheet formulas is to remember the cost flow.
Cost Flow
Direct Material
↓
Direct Labour
↓
Direct Expenses
↓
Prime Cost
↓
Factory Overhead
↓
Works Cost / Factory Cost
↓
Administration Overhead
↓
Cost of Production
↓
Opening Finished Goods – Closing Finished Goods
↓
Cost of Goods Sold
↓
Selling & Distribution Overhead
↓
Cost of Sales
↓
Profit
↓
Sales
Easy Memory Sequence
Prime → Works → Production → Goods Sold → Sales → Profit
If you remember this sequence, many Cost Sheet problems become easier.
2. Material Consumed Formula
Formula
Material Consumed = Opening Stock of Materials + Purchases + Direct Material Expenses – Closing Stock of Materials
Easy Trick
Remember:
Opening + Purchases + Direct Expenses – Closing
Example
Opening Material = ₹10,000
Purchases = ₹50,000
Direct Material Expenses = ₹2,000
Closing Material = ₹12,000
Therefore:
Material Consumed = 10,000 + 50,000 + 2,000 – 12,000
Material Consumed = ₹50,000
3. Prime Cost
Prime Cost includes all direct costs.
Formula
Prime Cost = Direct Material + Direct Labour + Direct Expenses
Easy Trick
Remember:
M + L + E = Prime Cost
Where:
M = Direct Material
L = Direct Labour
E = Direct Expenses
Example
Direct Material = ₹40,000
Direct Labour = ₹20,000
Direct Expenses = ₹5,000
Prime Cost = 40,000 + 20,000 + 5,000
Prime Cost = ₹65,000
4. Conversion Cost
Conversion Cost represents the cost of converting materials into finished goods.
Formula
Conversion Cost = Direct Labour + Production/Factory Overhead
Easy Trick
Labour + Factory Overhead = Conversion Cost
5. Works Cost / Factory Cost
Basic Formula
Works Cost = Prime Cost + Factory Overhead
If Work-in-Progress is given:
Works Cost = Prime Cost + Factory Overhead + Opening WIP – Closing WIP
Easy Trick
For WIP:
Opening WIP = Add
Closing WIP = Less
Example
Prime Cost = ₹65,000
Factory Overhead = ₹10,000
Opening WIP = ₹3,000
Closing WIP = ₹2,000
Works Cost:
= 65,000 + 10,000 + 3,000 – 2,000
Works Cost = ₹76,000
6. Cost of Production
Formula
Cost of Production = Works Cost + Administration Overhead
Easy Trick
Works + Administration = Production
Example
Works Cost = ₹75,000
Administration Overhead = ₹5,000
Cost of Production = ₹80,000
7. Cost of Goods Sold
When opening and closing finished goods are given:
Formula
Cost of Goods Sold = Cost of Production + Opening Finished Goods – Closing Finished Goods
Easy Trick
Opening Finished Goods = Add
Closing Finished Goods = Less
Example
Cost of Production = ₹80,000
Opening Finished Goods = ₹6,000
Closing Finished Goods = ₹4,000
Cost of Goods Sold:
= 80,000 + 6,000 – 4,000
COGS = ₹82,000
8. Cost of Sales
Formula
Cost of Sales = Cost of Goods Sold + Selling & Distribution Overhead
Easy Trick
COGS + Selling & Distribution = Cost of Sales
Example
COGS = ₹82,000
Selling & Distribution Overhead = ₹4,000
Cost of Sales = ₹86,000
9. Profit and Sales Formula
Profit
Profit = Sales – Cost of Sales
Sales
Sales = Cost of Sales + Profit
Easy Trick
Think of it as:
Cost + Profit = Sales
Example
Cost of Sales = ₹84,000
Profit = ₹16,000
Therefore:
Sales = ₹84,000 + ₹16,000 = ₹1,00,000
10. Cost Per Unit
Formula
Cost Per Unit = Total Cost ÷ Number of Units Produced
Example
Total Cost = ₹1,00,000
Units Produced = 5,000
Cost per Unit:
= 1,00,000 ÷ 5,000
Cost per Unit = ₹20
11. Material Cost Variance
Material Variance questions are easier if you remember the basic structure.
Formula
Material Cost Variance = Standard Cost – Actual Cost
Or:
MCV = (SQ × SP) – (AQ × AP)
Where:
SQ = Standard Quantity
SP = Standard Price
AQ = Actual Quantity
AP = Actual Price
Easy Trick
Standard – Actual
12. Material Price Variance
Formula
Material Price Variance = AQ × (SP – AP)
Easy Trick
Quantity × Price Difference
13. Material Usage Variance
Formula
Material Usage Variance = SP × (SQ – AQ)
Easy Trick
Standard Price × Quantity Difference
14. Labour Cost Variance
Formula
Labour Cost Variance = Standard Labour Cost – Actual Labour Cost
Or:
LCV = (SH × SR) – (AH × AR)
Where:
SH = Standard Hours
SR = Standard Rate
AH = Actual Hours
AR = Actual Rate
Easy Trick
Standard Cost – Actual Cost
15. Labour Rate Variance
Formula
Labour Rate Variance = AH × (SR – AR)
Easy Trick
Actual Hours × Rate Difference
16. Labour Efficiency Variance
Formula
Labour Efficiency Variance = SR × (SH – AH)
Easy Trick
Standard Rate × Hours Difference
17. Halsey Plan
The Halsey Plan is based on time saved.
Step 1: Time Saved
Time Saved = Time Allowed – Time Taken
Step 2: Bonus
Bonus = Agreed Percentage × Time Saved × Rate per Hour
Step 3: Total Earnings
Total Earnings = Time Taken × Rate + Bonus
Easy Memory Trick
Halsey = Time Saved → Bonus
18. Rowan Plan
Formula
Bonus = (Time Saved ÷ Time Allowed) × Time Taken × Rate per Hour
Easy Memory Trick
Remember:
Saved ÷ Allowed × Taken × Rate
19. Halsey vs Rowan – Quick Revision
| Basis | Halsey Plan | Rowan Plan |
|---|---|---|
| Main idea | Share of time saved | Proportion of time saved |
| Bonus | % × Time Saved × Rate | Time Saved ÷ Time Allowed × Time Taken × Rate |
| Important term | Agreed percentage | Time-saving proportion |
One-Line Memory Trick
Halsey → Percentage of Time Saved
Rowan → Time Saved / Time Allowed
20. Labour Turnover Formulas
Average Number of Workers
Average Workers = (Opening Workers + Closing Workers) ÷ 2
Separation Method
Labour Turnover = Separations ÷ Average Workers × 100
Replacement Method
Labour Turnover = Replacements ÷ Average Workers × 100
Flux Method
Labour Turnover = (Separations + Replacements) ÷ Average Workers × 100
Easy Trick
Remember:
S = Separation
R = Replacement
F = Both
21. Inventory Valuation – Quick Revision
FIFO
FIFO = First In, First Out
The materials purchased first are assumed to be issued first.
LIFO
LIFO = Last In, First Out
The materials purchased last are assumed to be issued first.
Weighted Average Price
Weighted Average Price = Total Cost ÷ Total Quantity
Easy Memory Trick
FIFO → First goes first
LIFO → Last goes first
Weighted Average → Total Cost ÷ Total Quantity
22. One-Page Costing Formula Chart
| Topic | Formula |
|---|---|
| Material Consumed | Opening Stock + Purchases + Direct Material Expenses – Closing Stock |
| Prime Cost | Direct Material + Direct Labour + Direct Expenses |
| Conversion Cost | Direct Labour + Factory Overhead |
| Works Cost | Prime Cost + Factory Overhead |
| Works Cost with WIP | Prime Cost + Factory OH + Opening WIP – Closing WIP |
| Cost of Production | Works Cost + Administration OH |
| COGS | Cost of Production + Opening FG – Closing FG |
| Cost of Sales | COGS + Selling & Distribution OH |
| Profit | Sales – Cost of Sales |
| Sales | Cost of Sales + Profit |
| Cost Per Unit | Total Cost ÷ Units |
| Material Cost Variance | Standard Cost – Actual Cost |
| Material Price Variance | AQ × (SP – AP) |
| Material Usage Variance | SP × (SQ – AQ) |
| Labour Cost Variance | Standard Labour Cost – Actual Labour Cost |
| Labour Rate Variance | AH × (SR – AR) |
| Labour Efficiency Variance | SR × (SH – AH) |
| Halsey Bonus | Agreed % × Time Saved × Rate |
| Rowan Bonus | Time Saved ÷ Time Allowed × Time Taken × Rate |
| Separation Rate | Separations ÷ Average Workers × 100 |
| Replacement Rate | Replacements ÷ Average Workers × 100 |
| Flux Rate | (Separations + Replacements) ÷ Average Workers × 100 |
| Weighted Average Price | Total Cost ÷ Total Quantity |
23. The Most Important Costing Memory Rule
Whenever you see Opening and Closing Stock/WIP/Finished Goods, remember:
Opening = ADD
Closing = LESS
For example:
Opening WIP +
Closing WIP –
Opening Finished Goods +
Closing Finished Goods –
This simple rule can help prevent many calculation mistakes.
24. Complete Cost Sheet Example
Suppose:
Direct Material = ₹40,000
Direct Labour = ₹20,000
Direct Expenses = ₹5,000
Factory Overhead = ₹10,000
Administration Overhead = ₹5,000
Selling & Distribution Overhead = ₹4,000
Profit = ₹16,000
Step 1 – Prime Cost
= 40,000 + 20,000 + 5,000
Prime Cost = ₹65,000
Step 2 – Works Cost
= 65,000 + 10,000
Works Cost = ₹75,000
Step 3 – Cost of Production
= 75,000 + 5,000
Cost of Production = ₹80,000
Step 4 – Cost of Sales
= 80,000 + 4,000
Cost of Sales = ₹84,000
Step 5 – Sales
= Cost of Sales + Profit
= 84,000 + 16,000
Sales = ₹1,00,000
Complete Flow
Direct Material ₹40,000
Direct Labour ₹20,000
Direct Expenses ₹5,000
= Prime Cost ₹65,000
↓
Factory Overhead ₹10,000
= Works Cost ₹75,000
↓
Administration Overhead ₹5,000
= Cost of Production ₹80,000
↓
Selling & Distribution Overhead ₹4,000
= Cost of Sales ₹84,000
↓
Profit ₹16,000
= Sales ₹1,00,000
25. Important Exam Questions
Short Answer Questions
Q1. What is Prime Cost?
Answer:
Prime Cost is the total of direct material, direct labour and direct expenses.
Prime Cost = Direct Material + Direct Labour + Direct Expenses
Q2. What is Works Cost?
Answer:
Works Cost is obtained after adding factory overhead to Prime Cost, with adjustment for opening and closing Work-in-Progress where applicable.
Q3. What is Cost of Production?
Answer:
Cost of Production is the total cost incurred to manufacture finished goods after adding administration overhead to Works Cost.
Q4. What is Cost of Sales?
Answer:
Cost of Sales is obtained by adding selling and distribution overhead to Cost of Goods Sold.
Q5. What is Conversion Cost?
Answer:
Conversion Cost represents the cost incurred to convert materials into finished products. It generally includes direct labour and production/factory overhead.
26. Important Numerical Questions
Students should practice numerical problems based on:
Preparation of Cost Sheet
Calculation of Material Consumed
Prime Cost
Works Cost
Cost of Production
Cost of Goods Sold
Cost of Sales
Profit and Sales
Material Cost Variance
Material Price Variance
Material Usage Variance
Labour Cost Variance
Labour Rate Variance
Labour Efficiency Variance
Halsey Incentive Plan
Rowan Incentive Plan
Labour Turnover
FIFO and LIFO
Weighted Average Price
Cost Per Unit
27. Common Mistakes Students Should Avoid
Mistake 1: Forgetting Closing Stock
Always check whether closing material, WIP or finished goods is given.
Closing = Less
Mistake 2: Confusing Prime Cost and Works Cost
Prime Cost contains direct costs only.
Works Cost comes after adding factory overhead.
Mistake 3: Mixing Factory and Administration Overheads
Remember the order:
Factory Overhead → Works Cost
Administration Overhead → Cost of Production
Mistake 4: Confusing COGS and Cost of Sales
COGS + Selling & Distribution Overhead = Cost of Sales
Mistake 5: Writing the Wrong Variance Formula
First identify whether the question is asking about:
Cost
Price/Rate
Usage/Efficiency
Then apply the appropriate formula.
28. 7-Day Costing Formula Revision Plan
Day 1
Revise:
Material
Direct Material
Direct Labour
Direct Expenses
Prime Cost
Day 2
Revise:
Factory Overhead
Works Cost
WIP
Day 3
Revise:
Administration Overhead
Cost of Production
Finished Goods
COGS
Cost of Sales
Day 4
Revise:
Material Variances
Labour Variances
Day 5
Revise:
Halsey Plan
Rowan Plan
Labour Turnover
Day 6
Revise:
FIFO
LIFO
Weighted Average
Cost Per Unit
Day 7
Solve:
1 complete Cost Sheet + 5 variance problems + 2 incentive wage problems
29. Final 5-Minute Revision
Before entering the examination hall, remember this sequence:
Material → Labour → Expenses
↓
Prime Cost
↓
+ Factory Overhead
↓
Works Cost
↓
+ Administration Overhead
↓
Cost of Production
↓
+ Opening Finished Goods – Closing Finished Goods
↓
Cost of Goods Sold
↓
+ Selling & Distribution Overhead
↓
Cost of Sales
↓
+ Profit
↓
Sales
The 5 Most Important Formula Rules
1. Prime Cost = Direct Material + Direct Labour + Direct Expenses
2. Works Cost = Prime Cost + Factory Overhead
3. Cost of Production = Works Cost + Administration Overhead
4. Cost of Sales = COGS + Selling & Distribution Overhead
5. Sales = Cost of Sales + Profit
30. Conclusion
Costing becomes easier when formulas are connected through a logical sequence.
Do not try to memorize every formula separately. First understand the Cost Sheet flow, then revise the important formulas using the one-page chart.
For quick examination revision, focus especially on:
Prime Cost → Works Cost → Cost of Production → COGS → Cost of Sales → Profit
Also practice Material Variances, Labour Variances, Halsey Plan, Rowan Plan, Labour Turnover and Inventory Valuation.
These formulas can be revised repeatedly using this one-page chart before solving numerical questions.
CommerceWallah12 | Shobhan Joshi
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