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Cost Accounting · Cost Accounting Standards (CAS 1 to CAS 24)

CAS 7 to CAS 12: Employee, Utilities and Related Costs

Updated 10 October 2026 · Fact-checked

CAS 7 to CAS 12 are the Cost Accounting Standards on employee cost, cost of utilities, packing material, direct expenses, administrative overheads, and repairs and maintenance. Each says what to include in cost, what to exclude (abnormal items), and how to assign the cost to a cost object. Solve questions by classifying each item, then applying that standard's rule.

Understand CAS 7 to CAS 12: Employee, Utilities, Production and Joint Costs

Cost Accounting Standards (CAS) are issued by the Cost Accounting Standards Board of ICMAI. They make cost measurement uniform. Two companies treating the same cost differently give figures that cannot be compared. Each standard fixes the principles of recognition, measurement, assignment and presentation for one type of cost.

A note on the numbering. Cost of production for captive consumption is CAS 4 and joint costs are CAS 19. They are not in the CAS 7 to CAS 12 range, even though study notes sometimes bundle them. Study them with their own standards. The six standards on this page are: CAS 7 Employee Cost, CAS 8 Cost of Utilities, CAS 9 Packing Material Cost, CAS 10 Direct Expenses, CAS 11 Administrative Overheads and CAS 12 Repairs and Maintenance Cost.

A theme runs through all six. Normal costs of running the business form part of product cost. Abnormal costs, such as abnormal idle time, abnormal utility loss or an abnormal breakdown, are not charged to the product. They are shown separately in the costing profit and loss account. This stops inefficiency from inflating unit cost.

The second theme is traceability. A cost that can be identified with a product or job is assigned directly. A cost shared by several cost objects is apportioned on a reasonable basis such as consumption, hours or output. Costs that cannot be traced sensibly go to overheads.

The third theme is net cost. Where a cost is recovered or a credit arises, for example recoverable duties and taxes, recoveries from employees, or scrap from packing, you deduct it. Only the net cost to the entity is the cost.

Key rules to remember

Employee cost in cost of production
Productive wages + normal idle time + normal overtime premium + other employee benefits (CAS 7)
Abnormal idle time and abnormal overtime are excluded and charged to the costing profit and loss account.
Cost of purchased utility
Purchase price + other costs to bring it into use − duties and taxes later recoverable (CAS 8)
Use net cost after recoverable taxes and trade discounts.
Cost of self-generated utility per unit
(Total cost of generation − abnormal loss cost) ÷ Usable units
Abnormal loss is valued at cost per unit of normal output (total cost ÷ normal output) and excluded. The cost of normal loss is not removed. It stays in the total and is absorbed by the usable units, which is why the divisor is usable units and not units generated.
Packing material split
Primary packing → product cost; secondary packing → distribution cost (CAS 9)
Primary packing is needed to hold or protect the product as sold. Secondary packing is for handling and transport.
Direct expenses (CAS 10)
Expenses traceable to a cost object, such as job-specific royalty, hire of equipment for a job, and sub-contract charges
Charge directly to that cost object. Exclude interest and abnormal items.
Administrative overheads (CAS 11)
Cost of general management not related to production or selling, assigned on a suitable basis
Examples: office salaries, audit fees, legal fees. Administrative cost relating to the factory belongs to production overheads.
Repairs and maintenance (CAS 12)
Normal repair and maintenance cost → assigned to the asset's cost object or the overhead pool; abnormal cost excluded
Where a cost clearly relates to one asset or product, treat it as direct for that asset or product.

How to solve CAS 7 to CAS 12: Employee, Utilities, Production and Joint Costs questions

Use this method for any question on CAS 7 to CAS 12. Most questions ask you to compute a cost for a cost object and to say what is excluded.

  1. 1Identify which standard applies: workers, power or steam, packing, job-specific expense, office cost, or repairs.
  2. 2List every item in the data and mark each one: normal or abnormal, direct or indirect, recoverable or not.
  3. 3Remove items the standard excludes, such as abnormal idle time, abnormal losses, interest, and taxes that are recoverable.
  4. 4Deduct credits and recoveries, such as scrap sales, employee recoveries and later-recoverable duties.
  5. 5Compute the rate or amount: divide the net cost by the correct base, usually usable units, hours or output.
  6. 6Assign to the cost object: directly if traceable, otherwise on a reasonable basis that you state.
  7. 7Show the excluded amounts separately as charged to the costing profit and loss account.
  8. 8State the CAS principle in one line against each treatment, to earn the reasoning marks.

Quickest way: Normal-in, abnormal-out sorting

When to use it: Use it for MCQs and for short numerical parts where items must be classified before adding up.

  1. Write two columns, Include and Exclude, and place each item in one.
  2. Ask only three questions of each item: Is it normal? Is it traceable? Is it recovered?
  3. Add the Include column. Divide by the right base only if a rate is asked.
  4. Check that Include plus Exclude equals the total given in the question.

Common mistakes in CAS 7 to CAS 12: Employee, Utilities, Production and Joint Costs

  • Including abnormal idle time in the cost of production.

    Students treat all wages paid as product cost because they were paid.

    Fix: Split idle time into normal and abnormal. Normal idle time stays in cost. Abnormal goes to the costing profit and loss account.

  • Dividing utility cost by total units generated instead of usable units.

    The loss units are forgotten, or all losses are treated the same way.

    Fix: Normal loss stays in the rate by reducing the units. Value abnormal loss at the normal rate and exclude it.

  • Putting all packing cost into product cost.

    The word packing suggests one single treatment.

    Fix: Separate primary packing, which is product cost, from secondary packing, which is generally a distribution cost.

  • Including duties and taxes that can be claimed back in the cost of a utility or material.

    Students copy the invoice total.

    Fix: Take the invoice value net of duties and taxes that are later recoverable, and net of trade discounts.

  • Treating every office expense as administrative overhead.

    Students look at where the expense is booked, not at what it relates to.

    Fix: Factory office and factory management costs are production overheads. Selling costs are selling and distribution overheads. Only general management costs are administrative overheads.

  • Naming CAS 4 or CAS 19 as part of CAS 7 to CAS 12 in an answer.

    Notes group captive consumption and joint costs with these standards.

    Fix: Remember the numbers: captive consumption is CAS 4 and joint costs are CAS 19. Quote the correct number.

Worked examples

Example 1

In a month, a factory pays 8,000 labour hours at ₹120 per hour (₹9,60,000). Of these, 7,200 hours are productive, 400 are normal idle time and 400 are abnormal idle time caused by a management lapse in scheduling. Overtime premium paid is ₹18,000, of which ₹12,000 is normal and ₹6,000 is abnormal. Output is 18,480 units. Find the employee cost to be included in cost of production, the amount excluded, and the employee cost per unit.

Show the solution
  1. Productive hours: 7,200 × ₹120 = ₹8,64,000.
  2. Normal idle time: 400 × ₹120 = ₹48,000. It is included.
  3. Normal overtime premium: ₹12,000. It is included.
  4. Included employee cost = 8,64,000 + 48,000 + 12,000 = ₹9,24,000.
  5. Abnormal idle time: 400 × ₹120 = ₹48,000. Abnormal overtime premium: ₹6,000. Excluded = ₹54,000.
  6. Check: 9,24,000 + 54,000 = ₹9,78,000, which equals ₹9,60,000 wages plus ₹18,000 premium.
  7. Per unit = 9,24,000 ÷ 18,480 = ₹50.

Answer: Employee cost included in cost of production is ₹9,24,000 (₹50 per unit). ₹54,000 is excluded and charged to the costing profit and loss account under CAS 7.

Example 2

A company runs its own power plant. In a month it generates 50,000 units at a total cost of ₹3,00,000. Normal loss is 2,000 units. Abnormal loss due to a transformer fault is 3,000 units. The balance of 45,000 units is supplied to the production department. Find (a) the abnormal loss excluded, (b) the power cost per usable unit, and (c) the power cost charged to production.

Show the solution
  1. Normal output = 50,000 − 2,000 = 48,000 units.
  2. Cost per normal unit = 3,00,000 ÷ 48,000 = ₹6.25.
  3. Abnormal loss = 3,000 × ₹6.25 = ₹18,750. It is excluded.
  4. Cost to be charged = 3,00,000 − 18,750 = ₹2,81,250. The cost of the 2,000 normal loss units is not removed. It stays in this figure and is absorbed by the usable units.
  5. Rate = (cost − abnormal loss cost) ÷ usable units = 2,81,250 ÷ 45,000 = ₹6.25 per unit.
  6. Power cost charged to production = 45,000 × ₹6.25 = ₹2,81,250.

Answer: (a) ₹18,750 excluded; (b) ₹6.25 per usable unit; (c) ₹2,81,250 charged to production (CAS 8).

Example 3

A product needs primary packing at ₹8 per unit and secondary cartons at ₹3 per unit. 10,000 units are packed and sold. Find the packing cost included in product cost and the packing cost treated as distribution cost.

Show the solution
  1. Primary packing = 10,000 × ₹8 = ₹80,000. It holds or protects the product as sold, so it is in product cost.
  2. Secondary packing = 10,000 × ₹3 = ₹30,000. It is for handling and transport, so it is in distribution cost.
  3. Check: 80,000 + 30,000 = ₹1,10,000, which equals 10,000 × ₹11.

Answer: ₹80,000 is in product cost and ₹30,000 is in distribution cost (CAS 9).

Exam tips

  • MCQs often test which cost is excluded. Look for the words abnormal, recoverable, interest and secondary packing.
  • In written answers, state the CAS principle in one line, then compute. This earns marks even if arithmetic slips.
  • Always show the excluded amount separately, and check that included plus excluded equals the total given.
  • Learn the standard numbers with titles. Questions can ask which CAS governs a treatment, and CAS 4 and CAS 19 are common traps.
  • For utility and packing sums, write the unit base clearly. Most lost marks come from dividing by the wrong number of units.

Practice questions from Cost Accounting Standards (CAS 1 to CAS 24)

CAS 7 to CAS 12: Employee, Utilities, Production and Joint Costs in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

CAS 7 to CAS 12: Employee, Utilities, Production and Joint Costs: frequently asked questions

What do CAS 7 to CAS 12 cover?

They cover employee cost (CAS 7), cost of utilities (CAS 8), packing material cost (CAS 9), direct expenses (CAS 10), administrative overheads (CAS 11), and repairs and maintenance cost (CAS 12). Each fixes what is included in cost and how it is assigned.

Is abnormal idle time part of employee cost under CAS 7?

Abnormal idle time is not included in the cost of production. It is charged to the costing profit and loss account. Normal idle time is part of employee cost.

How is packing material treated under CAS 9?

Primary packing, which is needed to hold or protect the product as sold, is part of product cost. Secondary packing, used mainly for handling and transport, is generally treated as a distribution cost.

Where are captive consumption and joint costs covered?

Cost of production for captive consumption is CAS 4, and joint costs are CAS 19. Study them with those standards, not with CAS 7 to CAS 12.