CMA Intermediate · Cost Accounting · Cost Accounting Standards (CAS 1 to CAS 24)
A company has total direct material cost of ₹6,00,000, direct employee cost of ₹4,00,000 and direct expenses of ₹50,000. Under the principle of cost classification in CAS, the prime (direct) cost for the period is:
The direct cost is the sum of direct material, direct employee cost and direct expenses, that is 6,00,000 plus 4,00,000 plus 50,000, giving ₹10,50,000. Leaving out direct expenses would wrongly give ₹10,00,000.
- A₹10,50,000Correct
- B₹10,00,000
- C₹4,50,000
- D₹6,50,000
Explanation
Direct cost = direct material + direct employee cost + direct expenses = 6,00,000 + 4,00,000 + 50,000 = ₹10,50,000. ₹10,00,000 omits direct expenses, which is a direct cost.
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