CMA Intermediate · Cost Accounting · Cost Accounting Standards (CAS 1 to CAS 24)
Under CAS 1 (Classification of Cost), which of the following is the correct classification of cost by 'relationship with the cost object'?
CAS 1 classifies cost by its relationship with the cost object into direct cost and indirect cost. Fixed and variable is classification by behaviour, normal and abnormal is by normality, and product and period cost is by inventory treatment, so they are not this basis.
- ADirect cost and indirect costCorrect
- BFixed cost and variable cost
- CNormal cost and abnormal cost
- DProduct cost and period cost
Explanation
CAS 1 classifies cost by relationship with the cost object as direct and indirect cost. Fixed and variable relate to behaviour, normal and abnormal relate to normality, and product and period cost relate to inventory valuation, so they are different bases.
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