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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 the cost sheet because it is a financial or appropriation item rather than a cost of producing and selling goods?

Interest on loan paid on borrowed capital is excluded from the cost sheet because it is a financial charge, not an operating cost of production or distribution. Factory rent, office equipment depreciation and carriage outwards are all operating costs and are included in the relevant overhead group.

  1. AFactory rent
  2. BDepreciation on office equipment
  3. CInterest on loan paid on borrowed capital for the yearCorrect
  4. DCarriage outwards

Explanation

Cost sheets include factory rent in factory overheads, office equipment depreciation in administration overheads and carriage outwards in distribution overheads. Interest on borrowed capital is a financial charge and is excluded from the cost sheet under cost accounting treatment at this level.

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