Skip to content

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

Kapoor Textiles has a standard cost of ₹85 per metre of cloth. In a month it produced 4,000 metres at an actual total cost of ₹3,56,000. A further 500 metres were estimated in a quotation at ₹90 per metre but not produced. Which statement is correct about the cost per metre for the 4,000 metres produced?

Actual cost per metre is ₹3,56,000 divided by 4,000, giving ₹89. Against the standard of ₹85 this is ₹4 higher. The ₹90 estimate concerns metres not produced, so it is not the benchmark here.

  1. AActual cost per metre is ₹89, which exceeds standard by ₹4Correct
  2. BActual cost per metre is ₹89, which is below the estimate by ₹1
  3. CActual cost per metre is ₹85, equal to standard
  4. DActual cost per metre is ₹90, exceeding standard by ₹5

Explanation

Actual cost per metre = 3,56,000 / 4,000 = ₹89. Standard is ₹85, so actual exceeds standard by ₹4. The ₹90 estimate relates to unproduced cloth and is irrelevant to the comparison; the 'below estimate' option misuses it.

Did you get it right without looking?

One question tells you little. A timed set on Classification of Costs (CAS 1) shows your real accuracy, how long you take and where you lose marks.

Practise Classification of Costs (CAS 1)Free diagnostic mock

More Classification of Costs (CAS 1) questions