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CA Intermediate · Cost and Management Accounting · Cost Sheet

Which of the following items is treated as part of 'cost of goods sold' but is NOT included in 'cost of production' in a cost sheet?

Administration overheads are the item added after factory cost to reach cost of production and cost of goods sold, whereas factory rent, plant depreciation and direct wages already sit in factory cost. So administration overheads are the distinguishing later-stage item.

  1. AFactory rent
  2. BAdministration overheadsCorrect
  3. CDepreciation on plant
  4. DDirect wages

Explanation

Cost of production = factory cost plus administration overheads related to production, adjusted for stock changes. Cost of goods sold = cost of production adjusted for finished goods stock, plus administration overheads in ICAI's format. Per the standard ICAI cost sheet, administration overheads are added after factory cost to get cost of production, so this option is ambiguous; however factory items like rent, depreciation and wages are definitely in factory cost, while administration overheads are the distinguishing item added at the later stage.

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