CA Intermediate · Cost and Management Accounting · Cost Sheet
Under a cost sheet, which item is normally excluded from the cost of production because it is a financial charge or appropriation rather than a cost?
Interest on loan funds is excluded because it is a financial charge, not an operating cost. Royalty on production, factory power and primary packing are genuine production costs and are included in the cost sheet.
- ARoyalty on production
- BInterest on loan fundsCorrect
- CFactory power
- DPrimary packing cost
Explanation
Interest on borrowed funds and similar financial charges are excluded from cost sheets as they are financial in nature. Royalty on production, factory power and primary packing are costs of production.
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