A cost sheet is a report on which is accumulated all of the costs associated with a product or production job. A cost sheet is used to compile the margin earned on a product or job, and can form the basis for the setting of prices on similar products in the future. It can also be used as the basis for a variety of cost control measures. Despite the name, a cost sheet can be compiled and viewed on a computer screen, as well as being manually developed on paper. The costs listed on the report are usually aggregated into the following categories:
In some situations, a cost sheet may also include a line item for allocated administrative overhead.
In addition, the following costs may also appear on a cost sheet in varying degrees of detail:
- Shipping and handling
- Outsourced costs
The costs listed on a cost sheet usually include charges for actual material and labor costs incurred. However, it is also possible that these costs are only listed at their standard costs, which are obtained by backflushing; this is the process of multiplying the number of units produced by bills of material and labor routings to arrive at the costs that should have been associated with a product or job.
The development of a cost sheet can be a major production, especially if it is compiled by hand. Even if it is drawn from a database of compiled costs, a cost accountant must still review it for duplicate, missing, or incorrect entries before issuing it. A cost sheet is normally issued along with an explanatory page that points out any unusual costs incurred or variances that management should be aware of.
The format of a cost sheet is usually a standard one that is either manually rolled forward from earlier reports, or else set up within the accounting system for automatic display when a report is printed.
An alternative purpose for the cost sheet concept is to use it as the basis for a quote to a customer, usually for the manufacture of a custom product. In this case, the cost sheet includes the best estimates of the company's estimators for the requested product, with details for each of the previously indicated expense line items.
A cost sheet is also known as a costing sheet.