Skip to content

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

Sharma Fabrics has prime cost of Rs 2,40,000, factory overhead of Rs 60,000, office overhead of Rs 30,000 and selling and distribution overhead of Rs 30,000. It wants a profit of 20% on selling price. What is the selling price?

The selling price is Rs 4,50,000. Cost of sales is Rs 3,60,000, and since profit is 20% of selling price, cost represents 80% of sales, so sales equal 3,60,000 divided by 0.8. Taking 20% on cost gives a wrong figure.

  1. ARs 4,32,000
  2. BRs 4,50,000Correct
  3. CRs 4,20,000
  4. DRs 3,96,000

Explanation

Cost of sales = 2,40,000 + 60,000 + 30,000 + 30,000 = Rs 3,60,000. Profit is 20% of sales, so cost is 80% of sales and sales = 3,60,000 / 0.8 = Rs 4,50,000. Adding 20% on cost gives Rs 4,32,000, which wrongly uses cost as the base.

Did you get it right without looking?

One question tells you little. A timed set on Statement of Cost and Profit (Cost Sheet) shows your real accuracy, how long you take and where you lose marks.

Practise Statement of Cost and Profit (Cost Sheet)Free diagnostic mock

More Statement of Cost and Profit (Cost Sheet) questions