ICAEW AF · Chapter 13 · Question 10 of 12
A company classifies expenses by function. For the year: opening inventory £34,000; purchases £286,000; closing inventory £41,500. Total depreciation is £25,000, of which 70% relates to production, 20% to distribution and 10% to administration. What is cost of sales?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) £296,000
Explanation
Cost of sales = opening inventory + purchases - closing inventory + production depreciation. = £34,000 + £286,000 - £41,500 + (70% x £25,000 = £17,500) = £296,000. The distribution and administrative shares of depreciation are presented under distribution costs and administrative expenses.
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