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

Which of the following items is excluded from a cost sheet because it is a pure financial or appropriation item?

Income tax paid on profits is excluded from a cost sheet because it is an appropriation of profit and not a cost of making or selling the product. Factory depreciation, works manager salary and carriage inward are genuine production costs and are included.

  1. AIncome tax paid on profitsCorrect
  2. BDepreciation on factory machinery
  3. CSalary of the works manager
  4. DCarriage inward on raw materials

Explanation

Income tax on profits is an appropriation of profit, not a cost of producing or selling goods, so it is excluded. Factory machinery depreciation, works manager's salary and carriage inward are all costs of production included in the cost sheet.

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