CA - INTERMEDIATE
COST & MANAGEMENT ACCOUTING
GROUP II - PAPER 4
SERIES – 2
January - 2026
VOL – 31 & 33
Date : 23.11.2025
Vidya Sagar Institute
K-50, Bhawna Tower, Income Tax Colony, Tonk Road,
Near Durga Pura, Bus Stand, Jaipur - 302018
Mobile :- 93514-68666 Ph. :- 7821821250, 7821821251, 7821821252,
7821821253, 7821821254. web : [Link]
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CA - INTERMEDIATE
GROUP II – PAPER 4
COST & MANAGEMENT ACCOUTING
SERIES – 2 (Jan. - 2026)
Vol. 31 & 33 Date : 23.11.2025
Maximum Marks: 100 Time: 3 Hours
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Question No. 1 is compulsory.
Attempt any four questions from the rest.
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CASE STUDY 1
ABC Pvt Ltd is engaged in the manufacture of a Product Q. The product has the following
standard production requirements determined by the technical team of the company post
satisfactory completion of test run.
Raw Material Z – 2 units @ ` 2 per unit Skilled labour of – 2.5 hours@ ` 5 per hour Fixed
Overheads – ` 7.5 per unit
The input of Raw material Z has a yield of 80% everytime when infused into production.
The actual quantity of Raw material Z consumed for production during the year was
24,000 units. The Usage variance of Material Z was 2,000 Favourable. Further the actual
amount of material cost for the material consumed amounted to ` 45,000.
During the said year, the actual working hours were 30,000 for which the labour cost paid
by the company amounted to `1,20,000. The idle time variance amounted to 10,000
Adverse.
The actual fixed overheads incurred for the year amounted to ` 1,50,000 and the
expenditure variance was `25,000 Favourable.
In the context of the above, the following needs to be determined:
1. The Actual output of Product Q produced during the year is: 2
(a) 10,000 units (b) 12,500 units
(c) 25,000 units (d) 15,000 units
2. The Material price and material cost variance are: 2
(a) Price variance – 3,000 Adverse, Cost Variance – 5,000 Adverse
(b) Price variance – 3,000 Favourable, Cost Variance – 5,000 Favourable
(c) Price variance – 3,000 Favourable, Cost Variance – 8,000 Adverse
(d) Price variance – 5,000 Adverse, Cost Variance – 3,000 Favourable
3. The Standard Hours, Net Actual hours and the idle time are: 2
(a) Standard Hours – 27,500 Net Actual Hours – 28,000 hours Idle Time – 2,000
hours
(b) Standard Hours – 22,500 Net Actual Hours – 28,500 hours Idle Time – 1,500
hours
(c) Standard Hours – 24,000 Net Actual Hours – 29,000 hours Idle Time – 1,000
hours
(d) Standard Hours – 25,000 hours Net Actual Hours –28,000 hours Idle Time –
2,000 hours
4. Labour Efficiency variance and Labour rate variance are: 2
(a) Labour Efficiency Variance – 30,000 Favourable Labour rate Variance –
25,000 Adverse
(b) Labour Efficiency Variance – 25,000 Favourable, Labour rate Variance –
30,000 Adverse
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(c) Labour Efficiency Variance – 25,000 Adverse, Labour rate Variance – 30,000
Favourable
(d) Labour Efficiency Variance – 30,000 Adverse Labour rate Variance – 25,000
Favourable
5. Fixed Overhead volume variance is: 2
(a) Fixed Overhead volume variance – 1,00,000 Favourable
(b) Fixed Overhead volume variance – 50,000 Adverse
(c) Fixed Overhead volume variance – 1,00,000 Adverse
(d) Fixed Overhead volume variance – 50,000 Favourable
Case Study 2
During half year ending inter departmental review meeting of P Ltd., cost variance report
was discussed and the performance of the departments were assessed. The following
figures were presented.
For a period of first six months of the financial year, following information were extracted
from the books:
Actual production overheads ` 34,08,000
The above amount is inclusive of the following payments made:
Paid as per court’s order ` 4,50,000
Expenses of previous year booked in current year ` 1,00,000
Paid to workers for strike period under an award ` 4,20,000
Obsolete stores written off ` 36,000
Production and sales data for the six months are as under:
Production:
Finished goods 1,10,000 units
Works-in-progress
(50% complete in every respect) 80,000 units
Sale:
Finished goods 90,000 units
Machine worked during the period was 3,000 hours.
At the of preparation of revenue budget, it was estimated that a total of
` 50,40,000 would be required for budgeted machine hours of 6,000 as production
overheads for the entire year.
During the meeting, a data analytic report revealed that 40% of the over/under-absorption
was due to defective production policies and the balance was attributable to increase in
costs.
You were also present at the meeting; the chairperson of the meeting has asked you to be
ready with the followings for the performance appraisal of the departmental heads:
6. How much was the budgeted machine hour rate used to recover overhead? 2
(a) ` 760 (b) ` 820
(c) ` 780 (d) ` 840
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7. How much amount of production overhead has been recovered (absorbed) 2
upto the end of half year end?
(a) ` 25,20,000 (b) ` 34,08,000
(c) ` 24,00,000 (d) ` 24,60,000
8. What is the amount of overhead under/ over absorbed? 2
(a) 1,18,000 over-absorbed (b) 1,18,000 under- absorbed
(c) 18,000 over-absorbed (d) 18,000 under-absorbed
9. What is the supplementary rate for apportionment of over/under absorbed 2
overheads over WIP, Finished goods and Cost of sales?
(a) ` 0.315 per unit (b) ` 0.472 per unit
(c) ` 0.787 per unit (d) ` 1 per unit
10. What is the amount of over/under absorbed overhead apportioned to Work 2
in Progress?
(a) ` 9,440 (b) ` 42,480
(c) ` 18,880 (d) ` 70,800
General MCQs
11. The data pertaining to the worker C in a factory depicts that he is paid at a 2
rate of ` 100 per hour and a week comprises 48 hours for a 6 days’ work. The
allowed absence time is 15 minutes per day for maintenance etc. The job card
of C indicates, his chargeable time is scattered for 2 different jobs J1-21 hours
and J2-24 hours. Any unaccounted time is attributable for power failure.
Calculate cost of normal idle time and abnormal idle time.
(a) ` 100 and ` 150 (b) ` 150 and ` 150
(c) ` 150 and ` 100 (d) ` 100 and ` 100
12. AB limited has furnished the following data: 2
Budget Actual (for the month of March)
Production in units 40,000 48,000
Fixed overheads (`) 78,000 84,000
Calculate fixed overhead volume variance.
(a) ` 15,600 F (b) ` 15,600 A
(c) ` 6,000 A (d) ` 14,000 A
13. A company’s fixed costs are ` 5,00,000, the selling price per unit is ` 200, and 2
the variable cost per unit is `100. How many units must the company sell to
earn the targeted profit of ` 2,00,000?
(a) 2,000 units (b) 5,000 units
(c) 10,000 units (d) 7,000 units
14. A company is analysing its inventory management practices and has 2
determined that the Economic Order Quantity (EOQ) is 400 units. The cost
incurred for placing a single order is` 25, while the total demand for the year
amounts to 8,000 units.
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Calculate the Carrying Cost per unit.
(a) ` 2.80 per unit (b) ` 1.85 per unit
(c) ` 1.58 per unit (d) ` 2.50 per unit
15. ALC Ltd. is a insurance company. It launched a new term insurance policy 2
Names as Protection Plus. The total cost for the policy during the year is `
1,60,00,000. Total number of policies sold is 410 and total insured value of
policies is ` 920 crore.
What is the cost per rupee of insured value?
(a) ` 0.0017 (b) ` 0.18
(c) ` 575 (d) ` 2.24
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Section – B
Questions 1 is compulsory
Attempt any four questions from the rest.
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1 (a) A worker takes 15 hours to complete a piece of work for which time allowed is 20 hours. 5
His wage rate is ` 5 per hour. Following additional information are also available:
Material cost of work ` 50
Factory overheads 100% of wages
Calculate the factory cost of work under the following methods of wage payments:
(i) Rowan Plan
(ii) Halsey Plan
(b) Following figures have been extracted from the books of M/s. RST Private Limited: 5
Financial Year Sales (`) Profit/Loss (`)
2016-17 4,00,000 15,000(loss)
2017-18 5,00,000 15,000 (Profit)
You are required to calculate:
(i) Profit Volume Ratio
(ii) Fixed Costs
(iii) Break Even Point
(iv) Sales required to earn a profit of ` 45,000.
(v) Margin of Safety in Financial Year 2017-18.
(c) GK Ltd. showed net loss of ` 2,43,300 as per their financial accounts for the year ended 4
31st March, 2018. However, cost accounts disclosed net loss of ` 2,48,300 for the same
period. On scrutinizing both the set of books of accounts, the following information
were revealed:
`
(i) Works overheads over recovered 30,400 30,000
(ii) Selling overheads under recovered 20,300
(iii) Administrative overheads under recovered 27,700
(iv) Depreciation over charged in cost accounts 35,100
(v) Bad debts w/off in financial accounts 15,000
(vi) Preliminary Exp. w/off in financial accounts 5,000
(vii) Interest credited during the year in financial accounts 7,500
Prepare a reconciliation statement reconciling losses shown by financial and cost
accounts by taking costing net loss as base.
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2 (a) The following data relates to manufacturing of a standard product during the month of 9
March, 2021:
Particulars Amount
(in `)
Stock of Raw material as on 01-03-2021 80,000
Work in Progress as on 01-03-2021 50,000
Purchase of Raw material 2,00,000
Carriage Inwards 20,000
Direct Wages 1,20,000
Cost of special drawing 30,000
Hire charges paid for Plant 24,000
Return of Raw Material 40,000
Carriage on return 6,000
Expenses for participation in Industrial exhibition 8,000
Legal charges 2,500
Salary to office staff 25,000
Maintenance of office building 2,000
Depreciation on Delivery van 6,000
Warehousing charges 1,500
Stock of Raw material as on 31-03-2021 30,000
Stock of Work in Progress as on 31-03-2021 24,000
Store overheads on materials are 10% of material consumed.
Factory overheads are 20% of the Prime cost.
10% of the output was rejected and a sum of ` 5,000 was realized on sale of scrap.
10% of the finished product was found to be defective and the defective products
were rectified at an additional expenditure which is equivalent to 20% of
proportionate direct wages.
The total output was 8000 units during the month.
You are required to prepare a Cost Sheet for the above period showing the:
(i) Cost of Raw Material consumed.
(ii) Prime Cost
(iii) Work Cost
(iv) Cost of Production
(v) Cost of Sales
.
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(b) Coal is transported from two mines X & Y and unloaded at plots in a railway station. X is 5
at distance of 15 kms and Y is at a distance of 20 kms from the rail head plots. A fleet of
lorries having carrying capacity of 4 tonnes is used to transport coal from the mines.
Records reveal that average speed of the lorries is 40 kms per hour when running and
regularly take 15 minutes to unload at the rail head.
At Mine X average loading time is 30 minutes per load, while at mine Y average loading
time is 25 minutes per load.
Additional Information:
Drivers' wages, depreciation, insurance and taxes, etc. ` 12 per hour
Operated Fuel, oil tyres, repairs and maintenance, etc. ` 1.60 per km
You are required to prepare a statement showing the cost per tonne kilometre of
carrying coal from each mine 'X' and 'Y'.
3 (a) PQR Pens Ltd. manufactures two products - 'Gel Pen' and 'Ball Pen'. It furnishes the 8
following data for the year 2017:
Product Annual Total Machine Total Total number
Output Hours number of of set-ups
(Units) Purchase
orders
Gel Pen 5,500 24,000 240 30
Ball Pen 24,000 54,000 448 56
The annual overheads are as under:
Particulars `
Volume related activity costs 4,75,020
Set up related costs 5,79,988
Purchase related costs 5,04,992
Calculate the overhead cost per unit of each Product - Gel Pen and Ball Pen on the basis
of:
(i) Traditional method of charging overheads
(ii) Activity based costing method and
(iii) Find out the difference in cost per unit between both the methods.
(b) PSV Ltd. manufactures and sells a single product and estimated the following related 6
information for the period November, 2020 to March, 2021.
Particulars November, December, January, February, March,
2020 2020 2021 2021 2021
Opening Stock of 7,500 3,000 9,000 8,000 6,000
Finished Goods
(in Units)
Sales (in Units) 30,000 35,000 38,000 25,000 40,000
Selling Price per 10 12 15 15 20
unit (in `)
Additional Information:
• Closing stock of finished goods at the end of March, 2021 is 10,000 units.
• Each unit of finished output requires 2 kg of Raw Material 'A' and 3 kg of Raw
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Material 'B'.
You are required to prepare the following budgets for the period November, 2020 to
March, 2021 on monthly basis:
(i) Sales Budget (in `)
(ii) Production budget (in units) and
(iii) Raw material Budget for Raw material 'A' and 'B' separately (in units)
4(a) STG Limited is a manufacturer of Chemical 'GK', which is required for industrial use. 9
The complete production operation requires two processes. The raw material first
passes through Process I, where Chemical 'G' is produced. Following data is furnished
for the month April 2022:
Particulars (in kgs.)
Opening work-in-progress quantity 9,500
(Material 100% and conversion 50% complete)
Material input quantity 1,05,000
Work Completed quantity 83,000
Closing work-in-progress quantity 16,500
(Material 100% and conversion 60% complete)
You are further provided that:
Particulars (in `)
Opening work-in-progress cost
Material cost 29,500
Processing cost 14,750
Material input cost 3,34,500
Processing cost 2,53,100
Normal process loss may be estimated to be 10% of material input. It has no realizable
value. Any loss over and above normal loss is considered to be 100% complete in
material and processing.
The Company transfers 60,000 kgs. of output (Chemical G) from Process I to Process II
for producing Chemical 'GK'. Further materials are added in Process II which yield
1.20 kg. of Chemical 'GK' for every kg. of Chemical 'G' introduced. The chemicals
transferred to Process II for further processing are then sold as Chemical 'GK' for ` 10
per kg. Any quantity of output completed in Process I, are sold as Chemical 'G' @ ` 9 per
kg.
The monthly costs incurred in Process II (other than the cost of Chemical 'G') are: Input
60,000 kg. of Chemical 'G'
Materials Cost ` 85,000
Processing Costs ` 50,000
You are required:
(i) Prepare Statement of Equivalent production and determine the cost per kg. of
Chemical ‘G' in Process I using the weighted average cost method.
(ii) Prepare a statement showing cost of Chemical 'G’ transferred to Process II, cost of
abnormal loss and cost of closing work-in progress.
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(iii) STG is considering the option to sell 60,000 kg. of Chemical 'G' of Process I
without processing it further in Process-II. Will it be beneficial for the company
over the current pattern of processing 60,000 kg in process-II?
(b) OPR Ltd. purchases crude vegetable oil. It does refining of the same. The refining 5
process results in four products at the spilt-off point - S, P, N and A. Product 'A’ is fully
processed at the split-off point. Product S, P and N can be individually further refined
into SK, PM, and NL respectively. The joint cost of purchasing the crude vegetable oil
and processing it were ` 40,000. Other details are as follows:
Product Further processing Sales at split-off Sales after
costs point Further processing
(`) (`) (`)
S 80,000 20,000 1,20,000
P 32,000 12,000 40,000
N 36,000 28,000 48,000
A - 20,000 -
You are required to identify the products which can be further processed for
maximizing profits and make suitable suggestions.
5 (a) Star Limited manufacture three products using the same production methods. A 9
conventional product costing system is being used currently. Details of the three
products for a typical period are:
Product Labour Hrs. Machine Hrs. per Materials Volume
per unit unit per Unit1 in Units
AX 1.00 2.00 35 7,500
BX 0.90 1.50 25 12,500
CX 1.50 2.50 45 25,000
Direct Labour costs ` 20 per hour and production overheads are absorbed on a
machine hour basis. The overhead absorption rate for the period is ` 30 per machine
hour.
Management is considering using Activity Based Costing system to ascertain the cost
of the products. Further analysis shows that the total production overheads can be
divided as follows:
Particulars %
Cost relating to set-ups 40
Cost relating to machinery 10
Cost relating to material handling 30
Costs relating to inspection 20
Total production overhead 100
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The following activity volumes are associated with the product line for the period as a
whole. Total activities for the period:
Product No. of set-ups No. of movements of No. of inspections
Materials
AX 350 200 200
BX 450 280 400
CX 740 675 900
Total 1,540 1,155 1,500
Required:
(i) Calculate the cost per unit for each product using the conventional method.
(ii) Calculate the cost per unit for each product using activity based costing
method.
(b) MM Ltd. has provided the following information about the items in its inventory. 5
Item Code Number Units Unit Cost (`)
101 25 50
102 300 01
103 50 80
104 75 08
105 225 02
106 75 12
MM Ltd. has adopted the policy of classifying the items constituting 15% or above of
Total Inventory Cost as 'A' category, items constituting 6% or less of Total Inventory
Cost as 'C' category and the remaining items as 'B' category.
You are required to:
(i) Rank the items on the basis of % of Total Inventory Cost.
(ii) Classify the items into A, B and C categories as per ABC Analysis of Inventory
Control adopted by MM Ltd.
6 (a) Explain 'Just In Time' (JIT) approach of inventory management. 5
(b) Explain 'Job Costing' and 'Batch Costing'. 5
(c) What do you understand by Build-Operate-Transfer (BOT) approach in Service 4
Costing? How is the Toll rate computed?
OR
(c) Write a short note on VED analysis of Inventory Control. 4
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LIVE GUIDANCE FOR CA INTERMEDIATE STUDENTS
BY DR CA R C SHARMA ON 23-11-2025 AT 06:00 PM
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