Skip to content

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

Sharma Engineering incurred the following for a job: raw materials consumed Rs 80,000, wages of machine operators on the job Rs 30,000, hire charges of a special tool used only for this job Rs 6,000, and factory rent Rs 20,000. What is the total direct cost (prime cost including direct expenses) of the job?

The total direct cost is Rs 1,16,000, being materials Rs 80,000, direct wages Rs 30,000 and job-specific tool hire Rs 6,000. Factory rent of Rs 20,000 is an indirect overhead and is excluded because it cannot be traced to the job.

  1. ARs 1,16,000Correct
  2. BRs 1,10,000
  3. CRs 1,36,000
  4. DRs 1,30,000

Explanation

Direct cost = direct material 80,000 + direct labour 30,000 + direct expense (tool hire specific to job) 6,000 = Rs 1,16,000. Rs 1,10,000 omits the direct expense. Rs 1,36,000 wrongly adds factory rent, which is an indirect overhead.

Did you get it right without looking?

One question tells you little. A timed set on Classification of Costs (CAS 1) shows your real accuracy, how long you take and where you lose marks.

Practise Classification of Costs (CAS 1)Free diagnostic mock

More Classification of Costs (CAS 1) questions