EXPLAIN the treatment of following items in cost sheet. (i) Credit for Recoveries (ii) Packing Cost (primary) (iii) Joint Products and By-Products…

5(b) Treatment is as follows: (i) Credit for Recoveries: The realised or realisable value of scrap or waste is deducted as it reduces the cost of production. (ii) Packing Cost (primary): Packing material which is essential to hold and preserve the product for its use by the customer is added in the factory cost. (iii) Joint Products and By-Products: Joint costs are allocated between/among the products on a rational and consistent basis. In case of by-products, the net realisable value of by-products is deducted from the cost of production. (iv) Quality Control Cost: It is added in the factory cost as this is the cost of resources consumed towards quality control procedures.