CA Intermediate · Cost and Management Accounting · Cost Sheet
Which of the following items is excluded from the cost of production and therefore does not form part of the factory cost in a cost sheet?
Interest on a working capital loan is excluded from the cost sheet because it is a financial charge, not a cost of producing goods. Factory depreciation, the factory manager's salary and carriage inward on materials are all production costs and are included.
- ADepreciation on factory building
- BFactory manager's salary
- CCarriage inward on raw materials
- DInterest on loan taken for working capitalCorrect
Explanation
Interest on working capital loans is a financial expense, so it is excluded from the cost sheet. Factory depreciation, the factory manager's salary and carriage inward are all production-related costs. They are included in the cost of production.
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