CMA Foundation · Fundamentals of Financial and Cost Accounting · Statement of Cost and Profit (Cost Sheet)
Vikram Engineering has prime cost Rs 5,00,000, factory overheads Rs 1,50,000, opening work-in-progress Rs 40,000 and closing work-in-progress Rs 70,000. What is the factory cost?
The factory cost is Rs 6,20,000. Prime cost plus factory overheads gives Rs 6,50,000. Opening work-in-progress of Rs 40,000 is added and closing work-in-progress of Rs 70,000 is deducted, leaving Rs 6,20,000. Reversing the adjustment would wrongly give Rs 6,80,000.
- ARs 6,20,000Correct
- BRs 6,50,000
- CRs 6,80,000
- DRs 7,60,000
Explanation
Gross works cost = 5,00,000 + 1,50,000 = 6,50,000. Add opening WIP 40,000 and deduct closing WIP 70,000, giving 6,20,000. Rs 6,50,000 ignores WIP, while Rs 6,80,000 reverses the WIP adjustment.
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