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CMA Final · Cost and Management Audit · Overview of Cost Accounting Standards and GACAP

Which treatment is consistent with CAS 4 (Cost of Production for Captive Consumption) when valuing goods produced and consumed within the same entity?

CAS 4 requires goods produced for captive consumption to be valued at their cost of production determined as per the standard, without adding any profit. Market price, earlier transfer prices or net realisable value are not the prescribed basis for captive consumption valuation.

  1. AValue at the market selling price including the profit margin
  2. BValue at the cost of production computed under the standard, excluding any profit elementCorrect
  3. CValue at the prior year's transfer price agreed between divisions
  4. DValue at the net realisable value of the end product

Explanation

CAS 4 prescribes that captive consumption is valued at the cost of production determined using the cost components of the standard, with no profit margin. Market price or NRV bases introduce profit or unrelated values and are not prescribed.

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