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

In a cost sheet, which of the following is obtained by adding factory overheads to prime cost and adjusting for opening and closing work-in-progress?

Factory (works) cost is the figure obtained by adding factory overheads to prime cost and adjusting for opening and closing work-in-progress. Administration overheads are added after this stage to arrive at cost of production, followed by stock adjustments for finished goods to reach cost of goods sold.

  1. ACost of production
  2. BFactory (works) costCorrect
  3. CCost of goods sold
  4. DCost of sales

Explanation

Prime cost plus factory overheads gives gross factory cost. Adjusting for the opening and closing work-in-progress gives factory or works cost. Office and administration overheads are added only after this stage to reach cost of production, so cost of production is not correct.

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