CA Intermediate · Cost and Management Accounting · Cost Sheet
Aarav Plastics reports: Raw material consumed ₹3,60,000; direct wages ₹1,40,000; factory overheads ₹2,00,000; opening WIP ₹30,000; closing WIP ₹50,000; administrative overheads ₹90,000 (office related); selling and distribution overheads ₹60,000. Opening and closing finished goods are nil. What is the cost of sales?
Cost of sales is ₹8,30,000. Factory cost of ₹7,00,000 is adjusted for opening WIP (+30,000) and closing WIP (-50,000) to give ₹6,80,000 production cost; adding administrative ₹90,000 and selling overheads ₹60,000 yields ₹8,30,000.
- A₹8,30,000Correct
- B₹8,50,000
- C₹8,70,000
- D₹8,80,000
Explanation
Prime cost = 3,60,000 + 1,40,000 = 5,00,000. Factory cost = 5,00,000 + 2,00,000 = 7,00,000. Adjust WIP: 7,00,000 + 30,000 - 50,000 = 6,80,000 = cost of production. Add admin 90,000 = 7,70,000 cost of goods sold; add selling 60,000 = 8,30,000. The ₹8,50,000 option wrongly ignores the WIP adjustment sign (adds closing WIP and subtracts opening).
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