CMA Intermediate · Cost Accounting · Cost Accounting Standards (CAS 1 to CAS 24)
Under CAS 6 (Material Cost), which of the following is excluded from the cost of purchase of materials?
Trade discount received is not included in the cost of purchase; it is deducted from the purchase price. Inward freight, insurance in transit and non-recoverable import duty are all added to the cost of materials under CAS 6.
- ATrade discount receivedCorrect
- BInward freight
- CImport duty not subsequently recoverable
- DCost of insurance in transit
Explanation
Under CAS 6, the cost of purchase includes the purchase price, duties and taxes not recoverable, freight inward and insurance in transit. Trade discounts, rebates and recoverable duties are deducted. Therefore trade discount is not added; it reduces the cost.
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