CMA Intermediate · Cost Accounting · Direct Expenses
Sharma Fabricators incurred the following for Job 52: royalty on the patented design Rs 18,000 (Rs 6 per unit on 3,000 units produced), special drawings fee Rs 7,000, and hire of a crane for the job Rs 5,000. Factory power of Rs 40,000 was shared by all jobs, of which Rs 4,000 was allocated to Job 52 by a machine-hour basis. What are the direct expenses of Job 52?
Direct expenses of Job 52 are Rs 30,000, being royalty Rs 18,000, drawings fee Rs 7,000 and crane hire Rs 5,000. The Rs 4,000 of power is an apportioned share of a common cost, so it is overhead and excluded.
- ARs 34,000
- BRs 30,000Correct
- CRs 35,000
- DRs 70,000
Explanation
Direct expenses = royalty 18,000 + drawings 7,000 + crane hire 5,000 = Rs 30,000. The power share of Rs 4,000 is apportioned overhead, not direct; adding it gives Rs 34,000, which is wrong. Rs 70,000 mixes in total power and others.
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