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

Kapoor Industries had raw material opening stock Rs 30,000, purchases Rs 2,10,000, carriage inwards Rs 10,000 and closing stock Rs 40,000. Direct wages were Rs 80,000. What is the prime cost?

Prime cost is Rs 2,90,000. Materials consumed are opening stock Rs 30,000 plus purchases Rs 2,10,000 plus carriage inwards Rs 10,000 less closing stock Rs 40,000, giving Rs 2,10,000. Adding direct wages of Rs 80,000 gives prime cost.

  1. ARs 2,90,000
  2. BRs 3,00,000Correct
  3. CRs 2,80,000
  4. DRs 3,10,000

Explanation

Material consumed = 30,000 + 2,10,000 + 10,000 − 40,000 = 2,10,000. Prime cost = 2,10,000 + 80,000 = 2,90,000. Carriage inwards is part of material cost, so it is included. Rs 3,00,000 would wrongly ignore the closing stock adjustment partly; the correct figure is Rs 2,90,000.

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