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CMA Intermediate · Cost Accounting · Introduction to Cost Accounting

Kaveri Engineering reports the following for a period: Direct material Rs 4,00,000; direct labour Rs 2,50,000; factory overheads Rs 1,50,000; administration overheads Rs 90,000; selling and distribution overheads Rs 60,000; opening and closing work-in-progress and finished stock are nil; 10,000 units are produced and sold at Rs 100 per unit. What is the profit and the cost of sales per unit?

Cost of sales is Rs 9,50,000, or Rs 95 per unit, and profit is Rs 50,000. This arises from prime cost 6,50,000 plus factory overhead 1,50,000, administration 90,000 and selling 60,000, deducted from sales of Rs 10,00,000.

  1. AProfit Rs 1,50,000; cost of sales Rs 85 per unitCorrect
  2. BProfit Rs 2,10,000; cost of sales Rs 79 per unit
  3. CProfit Rs 1,50,000; cost of sales Rs 79 per unit
  4. DProfit Rs 2,40,000; cost of sales Rs 76 per unit

Explanation

Prime cost = 6,50,000; factory cost = 8,00,000; with administration 90,000 gives cost of production 8,90,000; adding selling 60,000 gives cost of sales 9,50,000, i.e. Rs 95 per unit... recheck: 9,50,000/10,000 = Rs 95. Sales = 10,00,000, profit = 50,000.

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