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CMA Foundation · Fundamentals of Financial and Cost Accounting · Statement of Cost and Profit (Cost Sheet)

Verma Industries has a cost of production of Rs 8,00,000 for the period for 10,000 units. Opening finished stock was 1,000 units valued at Rs 76,000, and closing finished stock was 2,000 units valued at the cost of production per unit of the current period. Administration overheads are included in the cost of production. What is the cost of goods sold?

Cost of goods sold is Rs 7,16,000. Cost per unit is Rs 80, so closing finished stock is Rs 1,60,000. Adding opening stock of Rs 76,000 to the cost of production of Rs 8,00,000 and subtracting closing stock of Rs 1,60,000 gives Rs 7,16,000.

  1. ARs 7,16,000Correct
  2. BRs 6,76,000
  3. CRs 7,24,000
  4. DRs 8,76,000

Explanation

Cost of goods sold = opening finished stock + cost of production - closing finished stock. Cost per unit = 8,00,000/10,000 = Rs 80, so closing stock is 2,000 x 80 = 1,60,000. COGS = 76,000 + 8,00,000 - 1,60,000 = 7,16,000. Rs 6,76,000 results from subtracting the opening stock instead of adding it.

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