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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 purely financial or appropriation item?

Income tax paid is excluded from the cost sheet because it is an appropriation of profit and not a cost of making or selling the product. Factory power, office equipment depreciation and carriage outwards are all genuine operating costs included under production, administration and distribution overheads.

  1. AFactory power
  2. BDepreciation on office equipment
  3. CIncome tax paidCorrect
  4. DCarriage outwards

Explanation

Income tax is an appropriation of profit, not a cost of producing or selling goods, so it is excluded from the cost sheet. Factory power is a production overhead, office equipment depreciation is an administration overhead, and carriage outwards is a distribution overhead.

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