Question

Carriage outwards is _______ overheads.

• A. factory
• B. selling
• C. office
• D. direct

Hint:

Do not confuse Carriage Inwards with Carriage Outwards. Carriage Inwards is the freight cost of bringing raw materials into the factory and is added to the cost of raw materials consumed (Prime Cost). Carriage Outwards is the cost of delivering goods out to customers and is classified as Selling Overheads.

Answer 1

The Correct Option is B

Step 1: Defining Carriage Outwards:
Carriage Outwards represents the shipping, delivery, freight, and transport costs incurred by a business when sending finished goods from its warehouse or retail outlets to the customer's specified location.

Step 2: Mapping Overhead Classifications:
In cost accounting, overheads are categorized based on their functional operational zones:
• Factory Overheads: Indirect costs incurred inside the plant (e.g., factory rent, machinery power).
• Office & Administrative Overheads: Costs linked to management and governance (e.g., office salaries, director fees).
• Selling & Distribution Overheads: Costs incurred to secure orders, distribute products, and satisfy customer demands.

Step 3: Finding the Correct Classification:
Since Carriage Outwards is a direct consequence of shipping and selling finished products to the customer, it belongs in the Selling and Distribution overhead category. This corresponds directly to option (B).