A manufacturing company has an opening stock of raw materials of Rs. 45 crore. During the year, it purchased raw materials worth Rs. 280 crore and paid freight-in of Rs. 5 crore. At the end of the year, the closing stock of raw materials is Rs. 50 crore. What is the Cost of Raw Materials Consumed reported in the Profit and Loss statement?

[ A ]Rs. 330 crore

[ B ]Rs. 285 crore

[ C ]Rs. 280 crore[ CORRECT ]

[ D ]Rs. 275 crore

Takeaway

Option C is correct: Rs. 280 crore

Derivation

Cost of Raw Materials Consumed under Schedule III is calculated as: Cost of Materials Consumed = Opening Stock of Raw Materials + Purchases (including direct procurement costs like freight-in) - Closing Stock of Raw Materials. Substituting the given figures: Cost of Materials Consumed = 45 + (280 + 5) - 50 = 45 + 285 - 50 = Rs. 280 crore. This question tests the standard formula for raw material consumption in income statement analysis. The primary candidate error is ignoring direct freight costs or adding closing stock instead of subtracting it.

Why the others fail

A — Rs. 330 crore

Rs. 330 crore erroneously adds closing inventory (Rs. 50 cr) instead of subtracting it from total available raw materials.

B — Rs. 285 crore

Rs. 285 crore represents total raw material purchases during the year without adjusting for inventory changes.

D — Rs. 275 crore

Rs. 275 crore results from mistakenly omitting the direct procurement freight-in expenditure of Rs. 5 crore.