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CA Intermediate · Cost and Management Accounting · Cost Sheet

Which one of the following items is excluded while computing the cost of production in a cost sheet?

Interest paid on a term loan is excluded from the cost sheet because it is a financial item, not an operating cost. Factory rent, power, machinery depreciation and production quality control cost are all part of factory overheads and are included in cost of production.

  1. AFactory rent and power
  2. BDepreciation on factory machinery
  3. CQuality control cost of the production process
  4. DInterest paid on a term loanCorrect

Explanation

Cost of production includes factory overheads such as factory rent, power, depreciation on factory plant and quality control cost of production. Interest on a term loan is a financial expense and is excluded from the cost sheet, so only that option is correct.

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