CMA Foundation · Fundamentals of Financial and Cost Accounting · Classification of Costs (CAS 1)
Ganga Foods Ltd. incurred the following in a month: factory rent ₹40,000, office rent ₹25,000, showroom rent ₹15,000 and warehouse rent for finished goods awaiting dispatch ₹10,000. What is the total of administration cost plus selling and distribution cost from these items?
The total is ₹50,000. Office rent of ₹25,000 is administration cost, while showroom rent ₹15,000 and finished goods warehouse rent ₹10,000 together make ₹25,000 of selling and distribution cost. Factory rent of ₹40,000 is a production cost and is excluded from this total.
- A₹50,000Correct
- B₹25,000
- C₹40,000
- D₹90,000
Explanation
Factory rent of ₹40,000 is a production cost. Office rent ₹25,000 is administration cost. Showroom rent ₹15,000 and finished goods warehouse rent ₹10,000 are selling and distribution costs (₹25,000). Sum = 25,000 + 25,000 = ₹50,000. Choosing ₹90,000 wrongly includes factory rent as well.
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