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CMA Foundation · Fundamentals of Financial and Cost Accounting · Classification of Costs (CAS 1)

In cost classification under CAS 1, which of the following best describes an abnormal cost?

An abnormal cost is a cost not normally expected at a given level of activity under normal conditions, such as a loss from a machine accident. It arises from unusual events and is not part of regular production cost. Normal costs, by contrast, are expected and included in product cost.

  1. AA cost incurred at the expected level for a given volume of activity under normal conditions
  2. BA cost that is not expected to be incurred at a given level of activity under normal conditions, such as loss due to a machine accidentCorrect
  3. CA cost that remains fixed within a relevant range of activity
  4. DA cost that can be traced directly to a cost unit

Explanation

An abnormal cost is one that is not normally incurred at a given level of activity under normal conditions. It arises from unusual events such as accidents or negligence. The first option describes a normal cost, so it is wrong.

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