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Freight inward paid on purchase of raw material is
Acharged to distribution overhead
Bdeducted from the purchase price
Cincluded in the cost of material
Dtreated as an administrative cost
Answer & Solution
Correct answer: C. included in the cost of material
1. The cost of material purchased includes every cost of bringing it in.
2. The list is cost of material, freight inwards, and insurance and other expenditure directly attributable to procurement.
3. Freight inward is therefore added to material cost, not charged elsewhere.
4. Trade discounts and rebates move the other way and are deducted.
5. Freight outward, by contrast, is a distribution cost.
_Source: ICAI Cost and Management Accounting Ch6 'Cost Sheet', section 6.3.1(i)_
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