CMA Intermediate · Cost Accounting · Contract Costing
Materials sent to a contract site cost ₹6,00,000. At the year end, materials at site are ₹70,000 and materials lost by theft cost ₹20,000. Materials returned to stores cost ₹30,000. The net materials cost charged to the contract for the year, treating the theft as a contract cost, is:
The net materials cost is ₹5,00,000: ₹6,00,000 sent to site less ₹30,000 returned and ₹70,000 closing stock. The theft loss of ₹20,000 stays in the cost, so no further deduction is made.
- A₹4,80,000Correct
- B₹5,00,000
- C₹5,70,000
- D₹4,60,000
Explanation
Net cost = 6,00,000 − 30,000 returned − 70,000 closing stock = ₹5,00,000 consumed, which already includes the ₹20,000 stolen as part of the cost. Net consumption is thus ₹5,00,000 and the stolen material needs no further adjustment... but the question asks the net charge after crediting the theft only if it is removed as abnormal. Here the loss is retained in the cost, so the figure is ₹5,00,000.
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