CMA Intermediate · Cost Accounting · Material Costs
A Pune engineering firm buys steel sheets for Rs 4,00,000 (invoice value) and pays freight inward of Rs 20,000. It also pays Rs 8,000 for insurance in transit and receives a trade discount of Rs 10,000 already deducted in the invoice value above. Under CAS-6, the cost of the steel sheets purchased (excluding any recoverable taxes) is:
The cost is Rs 4,28,000. Under CAS-6 the purchase cost is the net invoice price after trade discount plus freight inward and transit insurance. The invoice value is already net of discount, so 4,00,000 plus 20,000 plus 8,000 gives Rs 4,28,000.
- ARs 4,20,000
- BRs 4,28,000Correct
- CRs 4,38,000
- DRs 4,18,000
Explanation
Cost of purchase includes the invoice price net of trade discount, plus freight inward and transit insurance. Since the invoice value of Rs 4,00,000 is already net of the discount, cost = 4,00,000 + 20,000 + 8,000 = Rs 4,28,000. Rs 4,38,000 wrongly adds back the discount; Rs 4,20,000 omits insurance.
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