CMA Intermediate · Cost Accounting · Direct Expenses
Sharma Constructions hired a crane exclusively for Contract X at Rs 8,000 per day for 12 days, and paid Rs 15,000 for architect's fees specific to Contract X. Head office rent allocated to Contract X is Rs 20,000. What is the total direct expense of Contract X?
The direct expense is Rs 1,11,000, being crane hire of Rs 96,000 (8,000 for 12 days) plus architect's fees of Rs 15,000 specific to the contract. Head office rent is an apportioned overhead and is excluded.
- ARs 1,11,000Correct
- BRs 96,000
- CRs 1,31,000
- DRs 1,15,000
Explanation
Crane hire = 8,000 x 12 = 96,000. Add architect's fees 15,000 = 1,11,000. Head office rent is an allocated overhead, not direct. Including it gives 1,31,000, which is wrong.
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