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

Kaveri Industries had these figures for a period: opening finished stock Rs 50,000; closing finished stock Rs 80,000; prime cost Rs 6,00,000; factory overheads Rs 1,50,000; administration overheads Rs 90,000; selling and distribution overheads Rs 70,000. No work in progress exists. Administration overheads are all related to general office. What is the total cost of sales?

Cost of sales is Rs 8,80,000. Cost of production is prime cost plus factory overheads, Rs 7,50,000. Adjusting finished stock, 50,000 opening less 80,000 closing, gives Rs 7,20,000 cost of goods sold. Adding administration Rs 90,000 and selling and distribution Rs 70,000 gives the total.

  1. ARs 8,80,000Correct
  2. BRs 8,50,000
  3. CRs 9,10,000
  4. DRs 7,80,000

Explanation

Cost of production = 6,00,000 + 1,50,000 = 7,50,000. Cost of goods sold = 50,000 + 7,50,000 - 80,000 = 7,20,000. Adding administration 90,000 and selling 70,000 gives cost of sales Rs 8,80,000. Rs 8,50,000 results from ignoring stock adjustment sign errors, and Rs 9,10,000 results from adding closing stock instead of deducting it.

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