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CMA Foundation · Fundamentals of Financial and Cost Accounting · Classification of Costs (CAS 1)

A cost that is ascertained after the production has taken place, based on actual expenditure recorded in the books, is best described as:

Historical cost is the cost worked out after production using actual expenditure recorded in the books. Standard and estimated costs are fixed in advance, and opportunity cost is the benefit lost by choosing one alternative, so only historical cost fits the description.

  1. AHistorical costCorrect
  2. BStandard cost
  3. CEstimated cost
  4. DOpportunity cost

Explanation

Historical cost is computed after the event from actual amounts incurred. Standard and estimated costs are set before production, so they are predetermined. Opportunity cost refers to a forgone benefit and is not based on recorded expenditure.

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