Question

The accounting cost at Nicole's pottery factory is:

• A. Rs. 25000
• B. Rs. 50000
• C. Rs. 80000
• D. Rs. 75000

Answer 1

Answer: (A)

Rs. 25000

Here in this question, we are asked to find the accounting cost i.e. the cost that will be recorded in the books of accounts and not explicit or implicit costs. As we know that in accounting we record only the cost that has been actually incurred thus we won't take opportunity costs into consideration.

CALCULATION OF ACCOUNTING COST:

Particulars Amt.

Cost of Raw- materials 20000

Interest cost on borrowings 5000

$(50000\times \frac{10}{100})$

Therefore, the cost will be Rs. 25000.

The correct option is A.