Skip to content

CMA Intermediate · Cost Accounting · Cost Accounting Standards (CAS 1 to CAS 24)

Under the Cost Accounting Standard on Employee Cost (CAS 7), how is the cost of abnormal idle time treated?

Abnormal idle time cost is excluded from the cost of production and charged to the Costing Profit and Loss Account, because it arises from unusual causes. Only normal idle time is absorbed in production cost as part of employee cost.

  1. AIncluded in the cost of production as a factory overhead
  2. BSpread over all jobs in proportion to direct wages
  3. CExcluded from the cost of production and charged to the Costing Profit and Loss AccountCorrect
  4. DAdded to the cost of closing work-in-progress

Explanation

Abnormal idle time arises from causes such as a power failure or a machine breakdown that are not part of normal operation. Its cost is not a cost of production, so it is written off to the Costing Profit and Loss Account. Normal idle time, by contrast, is absorbed into the cost of production.

Did you get it right without looking?

One question tells you little. A timed set on Cost Accounting Standards (CAS 1 to CAS 24) shows your real accuracy, how long you take and where you lose marks.

Practise Cost Accounting Standards (CAS 1 to CAS 24)Free diagnostic mock

More Cost Accounting Standards (CAS 1 to CAS 24) questions