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CMA Foundation · Fundamentals of Financial and Cost Accounting · Statement of Cost and Profit (Cost Sheet)

Ganga Textiles has: opening raw materials Rs 40,000, purchases Rs 2,10,000, carriage inwards Rs 10,000, closing raw materials Rs 60,000, direct wages Rs 1,20,000 and direct expenses Rs 30,000. What is the prime cost?

The prime cost is Rs 3,50,000. Materials consumed are opening stock plus purchases plus carriage inwards less closing stock, which is Rs 2,00,000. Adding direct wages of Rs 1,20,000 and direct expenses of Rs 30,000 gives Rs 3,50,000. Closing stock must be deducted to find consumption.

  1. ARs 3,50,000Correct
  2. BRs 3,60,000
  3. CRs 3,00,000
  4. DRs 4,10,000

Explanation

Materials consumed = 40,000 + 2,10,000 + 10,000 - 60,000 = 2,00,000. Prime cost = 2,00,000 + 1,20,000 + 30,000 = 3,50,000. Rs 3,60,000 wrongly ignores the closing stock adjustment of carriage-inward treatment (adds carriage twice), and Rs 4,10,000 ignores closing stock.

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