CA Intermediate · Cost and Management Accounting · Cost Sheet
In a cost sheet, which of the following is correctly excluded from cost of production?
Interest on a bank loan is excluded from cost of production because it is a financial charge, not an operating cost. Royalty on production, carriage inwards and factory power are real production costs included in the cost sheet.
- ARoyalty on production
- BCarriage inwards on materials
- CInterest on loan paid to bankCorrect
- DFactory power
Explanation
Interest on borrowed capital is a financial item and is excluded from the cost sheet. Royalty on production, carriage inwards and factory power are all genuine production costs and are included in the cost sheet.
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