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

A service department of Arjun Engineering incurred the following in a month: salaries of its staff Rs 80,000, consumables Rs 30,000, and apportioned share of head-office expenses Rs 50,000 which the department head cannot influence. The manager's performance report should show controllable cost of:

Controllable cost is Rs 1,10,000, being staff salaries of Rs 80,000 plus consumables of Rs 30,000. The apportioned head-office charge of Rs 50,000 cannot be influenced by the department head, so it is excluded from the manager's performance report.

  1. ARs 30,000
  2. BRs 80,000
  3. CRs 1,10,000Correct
  4. DRs 1,60,000

Explanation

Controllable cost = salaries 80,000 + consumables 30,000 = Rs 1,10,000. The apportioned head-office expense of Rs 50,000 is non-controllable by the manager and is excluded. Rs 1,60,000 is wrong because it includes that apportioned amount.

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