CA Intermediate · Cost and Management Accounting · Cost Sheet
Which of the following items is treated as part of prime cost in a cost sheet?
Carriage inward on raw materials forms part of prime cost because it is a cost of acquiring direct materials. Factory rent, works manager's salary and depreciation of machinery are factory overheads and are added after prime cost to reach factory cost.
- AFactory rent
- BCarriage inward on raw materialsCorrect
- CSalary of the works manager
- DDepreciation on factory machinery
Explanation
Prime cost consists of direct materials, direct labour and direct expenses. Carriage inward is part of the cost of direct materials, so it belongs in prime cost. Factory rent, works manager's salary and machinery depreciation are factory overheads, not prime cost.
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