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

Sharma Fabrics reports: direct materials Rs 2,40,000; direct wages Rs 1,20,000; direct expenses Rs 20,000; factory overheads Rs 90,000; administration overheads Rs 50,000; selling overheads Rs 30,000. There was no opening or closing stock of any kind. What is the cost of production?

Cost of production is Rs 5,20,000. Prime cost is Rs 3,80,000; adding factory overheads of Rs 90,000 gives factory cost of Rs 4,70,000; adding administration overheads of Rs 50,000 gives cost of production. Selling overheads are excluded because they belong to cost of sales.

  1. ARs 4,70,000Correct
  2. BRs 5,00,000
  3. CRs 5,20,000
  4. DRs 3,80,000

Explanation

Prime cost = 2,40,000 + 1,20,000 + 20,000 = 3,80,000. Factory cost = 3,80,000 + 90,000 = 4,70,000. With no stocks, cost of production = factory cost + administration overheads = 4,70,000 + 50,000 = 5,20,000. Check: 5,20,000 is the correct total, so the key must be Rs 5,20,000.

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