Stage 6 · The cost of one product
CAS-20: Royalty and Technical Know-how Fee
A one-time fee for a wrinkle-free secret, ₹2 a uniform to the school, and a famous brand’s royalty. Which belong in the cost of making a uniform?
What you will learn in CAS-20
- Royalty and know-how fees, and spreading a lump sum (§§4, 5)
- Cost of production, cost of sales or material? (§6)
- Presentation and disclosure (§§7–8)
Chapters
- Paying for someone else’s idea · Spread a one-time fee over the uniforms it helps (§§4, 5.1, 5.2)
- Making, selling or material? · Send each royalty to the right place (§§6.1–6.3, 7)
- Spot the mistakes in the royalty schedule · Three mistakes are hiding (§§5.1, 5.2, 6.3)
Key terms
- Royalty and technical know-how fee (§§4, 5.1, 5.2): Payments for the right to use someone else’s ideas, technology or knowledge. A lump-sum or one-time payment is spread over the output or period it is expected to help.
- Where royalty goes (§§6.1–6.3, 7): Link royalty to the product if you can; otherwise share it on units made, units sold or sales value. Product or process know-how goes to cost of production, brand royalty to cost of sales, mining royalty to material.
Common questions
Is brand royalty part of cost of production?
No. Royalty for a brand or trademark is part of cost of sales; royalty or know-how for a product or process is part of cost of production (para 6.3).
CAS-20 (Limited Revision 2017), Royalty and Technical Know-how Fee. Checked against the standard in November 2026. Selvi Garments, the school order and every figure in this lesson are fictional. Read the official text on the ICMAI Cost Accounting Standards page ↗ before applying it to real work.