A steel manufacturing Company has two business units. It has its own iron ore mines. It transfers the ore produced from mines to the other units for production of steel, which is the main business of the Company .
At mines department, the main cost involves are querying and raising cost other other direct and indirect expenses . It transfers the ore materials produced to the other segment at cost of manufacture through the debit note where the other segment shows it as “Raw Materials Consumed” in the process of manufacturing of steel.


My Query:
1. Whether the current treatment is correct to show the querying and raising cost (including other direct expenses) as “Raw material Cost “?? Or else to treat the querying and raising expenses as separate line items of expenses ?

Ref : Guidance Note to Division II to Schedule III:
9.5.1. Cost of materials consumed
Materials consumed would consist of raw materials, packing materials (where classified by the company as raw materials) and other materials such as purchased intermediates and components which are ‘consumed’ in the manufacturing activities of the company. Where packing materials are not classified as raw materials the consumption thereof should be disclosed separately. However, intermediates and components which are internally manufactured are to be excluded from the classification.
9.5.1.6. In the case of industries where there are several processes, materials may move from process to process, so that the finished product of one department constitutes the raw materials of the next. The consumption of raw materials for production of such intermediates would have to be accounted as raw materials consumed and so, it follows that internal transfers from one department to another should be disregarded in determining the consumption figures to be disclosed.

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