Question

_________ cost will still be incurred although a plant is shut down temporarily.

• A. Cost of raw material
• B. Advertising
• C. Depreciation
• D. Carriage

Answer 1

The correct option is C Depreciation

To have a true and fair view of profit & loss of the organization, depreciation of the assets has to be charged on the basis of their useful life. If a plant is shut down temporarily, there may be significant spoilage of material in the process, some significant damage to the plant. Due to some reasons like lack of demand, maintenance of plant, the plant is shut down for some time. The shutdown does not change the inherent technical nature of the plant. Hence depreciation has to be charged.