CMA Foundation · Fundamentals of Financial and Cost Accounting · Classification of Costs (CAS 1)
A firm's cost of the delivery van used to carry finished goods to customers, and the salary of the drivers, are classified under which functional heading?
Delivery van costs and driver salaries are selling and distribution costs. Functional classification places costs of carrying finished goods to customers under distribution, because they arise after production is complete and are not part of manufacturing, general administration or research and development.
- ASelling and distribution costCorrect
- BProduction cost
- CAdministration cost
- DResearch and development cost
Explanation
Delivery of finished goods to customers is a distribution activity. Costs of vehicles and drivers used for it, such as depreciation, fuel and wages, are therefore part of selling and distribution cost. They are not incurred in making the product or in general management.
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