CMA Final · Cost and Management Audit · Audit of Different Service Organisations
In auditing an educational institution as a service organisation, which cost is most appropriately treated as a direct cost of a particular course?
The salary of faculty exclusively teaching the course is a direct cost because it can be traced wholly to that course. Security salaries, depreciation on the common administrative block and campus electricity benefit all courses and are common overheads needing apportionment.
- ASalary of faculty exclusively teaching that courseCorrect
- BSalary of the institution's security staff
- CDepreciation on the common administrative block
- DElectricity charges of the campus as a whole
Explanation
A direct cost is traceable to a specific cost object. Faculty teaching only that course can be traced to it. Security salary, common block depreciation and campus electricity serve all courses and must be apportioned as overheads.
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