CMA Foundation · Fundamentals of Financial and Cost Accounting · Classification of Costs (CAS 1)
Sharma Fabricators quoted a price for a job using a cost predicted from past experience and current price trends, without using scientific standards. This predetermined cost is called:
The cost is an estimated cost because it is predetermined from past experience and expected price trends, mainly for quoting prices. A standard cost would need scientific, technical study of efficiency and prices, and historical cost is known only after the work is completed.
- AEstimated costCorrect
- BStandard cost
- CHistorical cost
- DSunk cost
Explanation
Estimated cost is a prediction of cost based on past performance and anticipated changes, and is often used for quotations. Standard cost is based on scientific technical studies of ideal or attainable conditions, which is not the case here. Historical cost is only known after the job is done.
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