CAS 6 - Material Cost

Question 1

Definition

Answer 1

Cost of material of any nature used in the manufacture of product or providing services

Question 2

Principles of measurement

Answer 2

1. Purchase of Material ( receipt)- Purchase price-includes-taxes,duties,exp net of credits. no cash disc
2. Self Manufactured- Total of DM,DL,DE,PO,AO(pro)
3. Normal loss is includable
4. Abnormal loss is not includable
5. Forex- imported mat- converted-date of transaction- fluctations- gain or loss- not part of cost
6. Spares-depends-main asset- amortised over life
7. Issue of mat-any method-consistently

Question 3

General Principle

Answer 3

1. Finance cost is not included
2. Abnormal cost is not included
3. Imputed cost is included ( only materials)
4. Depreciation- based on benefit received
5. Credit or recoveries shall be reduced
6. Subsidy, grant or incentives shall be reduced
7. Penalties ,damages, fines paid to stat auth not cost
8. Cost-standard rates- variance is part of cost

Question 4

Assignment of cost

Answer 4

1. If direct, in econ feasible manner

2. If indirect, suitable basis- tech estimates

Question 5

Presentation

Answer 5

1. Classified as direct and indirect
2. DM- RM,Comp,Semi Finished, Finished
3. further- Purchased (dom and imp), Self manf.
4. Indirect material cost classified under suitable head

Question 6

Disclosure

Answer 6

1. Quantity ,rates forming >5% - ind elements- of mat cost - disclosed separately
2. Basis of valuation of materials
3. Abnormal cost excluded
4. Penalties , damaged, fines paid to stat authorities
5. Imputed cost is included
6. Related party transactions
7. Any change in app of cost acc principles and methods