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

Mehta Components made 5,000 units. Direct materials Rs 3,00,000; direct labour Rs 1,50,000; factory overheads are 60% of direct labour; administration overheads are 20% of factory cost; selling overheads are Rs 12 per unit. Opening and closing stocks are nil. Selling price is Rs 220 per unit. What is the profit?

Profit is Rs 3,92,000. Factory cost is Rs 5,40,000, administration overheads of 20% add Rs 1,08,000, and selling overheads add Rs 60,000, so cost of sales is Rs 7,08,000. Sales revenue of Rs 11,00,000 less this cost gives the profit.

  1. ARs 1,94,000Correct
  2. BRs 2,06,000
  3. CRs 1,46,000
  4. DRs 3,00,000

Explanation

Factory overheads = 60% of 1,50,000 = 90,000. Factory cost = 3,00,000 + 1,50,000 + 90,000 = 5,40,000. Administration = 20% of 5,40,000 = 1,08,000, so cost of production = 6,48,000. Selling overheads = 5,000 × 12 = 60,000, so cost of sales = 7,08,000. Sales = 5,000 × 220 = 11,00,000, profit = 3,92,000. Thus the key is none of the listed amounts exactly; recomputed value Rs 3,92,000 is not offered.

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