CMA Foundation · Fundamentals of Financial and Cost Accounting · Statement of Cost and Profit (Cost Sheet)
Sharma Tools Ltd reports: prime cost ₹6,00,000; factory overheads ₹1,20,000; opening work-in-progress ₹40,000; closing work-in-progress ₹25,000. What is the factory (works) cost?
Factory cost is ₹7,35,000. Add factory overheads of ₹1,20,000 to prime cost of ₹6,00,000, then add opening WIP of ₹40,000 and deduct closing WIP of ₹25,000. Opening WIP adds to current costs while closing WIP is carried forward.
- A₹7,35,000Correct
- B₹7,05,000
- C₹7,65,000
- D₹7,20,000
Explanation
Factory cost = prime cost + factory overheads + opening WIP - closing WIP = 6,00,000 + 1,20,000 + 40,000 - 25,000 = ₹7,35,000. Option B wrongly reverses the WIP adjustment (subtracts opening, adds closing, giving 7,05,000).
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