INTERMEDIATE EXAMINATION SET - 1

MODEL QUESTION TERM – JUNE 2025

PAPER – 8 SYLLABUS 2022
COST ACCOUNTING
Time Allowed: 3 Hours Full Marks: 100
The figures in the margin on the right side indicate full marks.

SECTION – A (Compulsory)
1. Choose the correct option: [15 × 2 = 30]

i. If fixed manufacturing costs are ₹50,000 and the number of units produced is 5,000, what is the fixed cost
per unit?
a. ₹10
b. ₹5
c. ₹50
d. ₹0.1

ii. _______ is a method of dealing with overheads which involves spreading common costs over cost centers
on the basis of benefit received.
a. overhead absorption
b. overhead apportionment
c. overhead allocation
d. overhead analysis

iii. Standard price of material per kg ₹20, standards consumption per unit of production is 5 kg. Standard
material cost for producing 100 units is
a. ₹ 20,000
b. ₹ 12,000
c. ₹ 8,000
d. ₹ 10,000

iv. In a period, 11280 kilograms of material were used at a total standard cost of ₹ 46,248. The material usage
variance was ₹492 adverse. What was the standard allowed weight of material for the period?
a. 11600 kg
b. 11160 kg
c. 12190 kg
d. 10590 kg

v. What defines an integrated accounting system?

a. Separation of cost and financial records
b. Streamlining reconciliation
c. Sole reliance on financial principles
d. Consolidation of cost and financial information

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 INTERMEDIATE EXAMINATION SET - 1
MODEL QUESTION TERM – JUNE 2025
PAPER – 8 SYLLABUS 2022
COST ACCOUNTING
vi. A company has set up a laboratory for testing of products for compliance with standards. Salary of this
laboratory stuffs are part of:
a. Direct expenses
b. Quality control cost
c. Works overheads
d. Research and development cost

vii. CAS 9 specifically deals with:

a. Employee Cost
b. Packing Material Cost
c. Direct Expenses
d. Repairs and Maintenance Cost

viii. In which of the following methods of pricing, costs lag behind the current economic values?
a. Replacement price method
b. Last in first out price method
c. First in first out price method
d. Weighted average price method

ix. Which of the following is deducted from the total cost to calculate the net profit?
a. Selling Expenses
b. Opening Stock
c. Direct Materials
d. Indirect Labour

x. What type of cost is incurred to support multiple cost objects but cannot be directly traced to any specific
one?
a. Direct Cost
b. Indirect Cost
c. Variable Cost
d. Fixed Cost

xi. A company operates a job costing system. Job number 6789 will require ₹345 of direct materials and ₹210
of direct labour, which is paid ₹14 per hour. Production overheads are absorbed at the rate of ₹30 per direct
labour hour and non-production overheads are absorbed at the rate of 40% of prime cost. Required What is
the total expected cost of the job?
a. ₹ 7,221
b. ₹ 1,272
c. ₹ 2,127
d. ₹ 1,227

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 INTERMEDIATE EXAMINATION SET - 1
MODEL QUESTION TERM – JUNE 2025
PAPER – 8 SYLLABUS 2022
COST ACCOUNTING

xii. The budget that is prepared first of all is _________.

a. Master budget
b. Sales budget assuming that it is the key factor
c. Cash Budget
d. Capital expenditure budget

xiii. A company employs three drivers to deliver goods to its customers. The salaries paid to these drivers are:
a. a part of prime cost
b. a direct production expense
c. a production overhead
d. a selling and distribution overhead

xiv. Which section of the Companies Act, 2013, deals with the adoption and adherence to Cost Accounting
Standards (CAS)?
a. Section 135
b. Section 148
c. Section 170
d. Section 184

xv. When a company wants to prepare a factory overhead budget in which the estimated costs are directly
derived from the estimates of activity levels, which of the following budget should be prepared by the
company?
a. Flexible budget
b. Fixed budget
c. Master budget
d. R & D budget

SECTION - B

(Answer any five questions out of seven questions given. Each question carries 14 Marks)
[5 × 14 = 70]

2. (a) PR Ltd manufactures and sells a typical brand of Tiffin Boxes under its on brand name. The installed
capacity of the plant is 1,20,000 units per year distributable evenly over each month of calendar year. The
Cost Accountant of the company has informed the following cost structure of the product, which is as
follows:
Raw Material ₹ 20 per unit.
Direct Labour ₹ 12 per unit.
Direct Expenses ₹ 2 per unit
Variable Overheads ₹ 16 per unit
Fixed Overheads ₹ 3,00,000.

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 INTERMEDIATE EXAMINATION SET - 1
MODEL QUESTION TERM – JUNE 2025
PAPER – 8 SYLLABUS 2022
COST ACCOUNTING
Semi-variable Overheads are as follows:
₹ 7,500 per month upto 50% capacity and additional ₹2,500 per month for every additional 25% capacity
utilization or part thereof.
The plant was operating at 50% capacity during the first seven months of the calendar year 2025, at 100%
capacity in the remaining months of the year.
The selling price for the period from 1st January, 2025 to 31st July, 2025 was fixed at ₹69 per unit. The
firm has been monitoring the profitability and revising the selling price to meet its annual profit target of
₹8,00,000. Identify the selling price per unit for the period from 1st August, 2025 to 31st December, 2025.
Illustrate the cost sheet clearly showing the total and per unit cost, as well as the profit for the period.
1. From 1st January to 31st July, 2025.
2. From 1st August to 31st December, 2025. [7]

(b) ZION LTD uses three types of materials A, B and C for production of Product-P for which the following
data apply:
Raw Usage per unit Reorder Price per Delivery period (in weeks) Reorder Minimum
Material of Product (kgs) quantity(kgs) Kg (`) Minimum Average Maximum level (kgs) level (kgs)
A 10 10000 0.10 1 2 3 8000 ?
B 4 5000 0.30 3 4 5 4750 1550
C 6 10000 0.15 2 3 4 ? 2000

Weekly production varies from 175 to 225 units, averaging 200 units of the said product.
Calculate the following quantities?
(i) Minimum stock of A,
(ii) Maximum stock of B,
(iii) Re-order level of C,
(iv) Average stock level of A. [7]

3. (a) DOZIN Ltd. manufactures a single product. It recovers factory overheads at a pre-determined rate of ₹20
per man day.
During the year 2024-25, the total factory overheads incurred and the man-days actually worked were
₹35.50 lakhs and 1.50 lakh days respectively. Out of the amount of ₹35.50 lakhs, ₹2.00 lakhs were in respect
of wages for strike period and ₹1.00 lakh was in respect of expenses of previous year booked in this current
year. During the period, 50000 units were sold. At the end of the period, 12000 completed units were held
in stock but there was no opening stock of finished goods. Similarly, there was no stock of uncompleted
units at the beginning of the period but at the end of the period there were 20000 uncompleted units which
may be treated as 65% complete in all respects.
On investigation, it was found that 40% of the unabsorbed overheads were due to factory inefficiency and
the rest were attributable to increase in the cost of indirect materials and indirect labour.
Required:
(i) Calculate the amount of unabsorbed overheads during the year 2024-25.
(ii) Analyze the accounting treatment of unabsorbed overheads in cost Accounts. [7]

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 INTERMEDIATE EXAMINATION SET - 1
MODEL QUESTION TERM – JUNE 2025
PAPER – 8 SYLLABUS 2022
COST ACCOUNTING

(b) The following information is available from the Financial Books of SONT Ltd. newly established company
for the year ended 31st March 2025,
(Amount in ₹)
Direct Material Consumption 50,00,000
Direct Wages 30,00,000
Factory Overhead 16,00,000
Administrative Overhead 7,00,000
Selling and Distribution Overhead 9,60,000
Bad Debts 80,000
Preliminary Expenses written off 40,000
Legal Charges 10,000
Dividends Received. 1,00,000
Interest Received on Deposits 20,000
Sales (120000 units) 1,20,00,000
Closing Stock:
Finished Goods (4000 units) 3,20,000
Work-in-progress 2,40,000
Profit (Net) for the year 2024-25 12,90,000

The cost accounts for the same period reveal that the direct material consumption was ₹56,00,000. Factory
overhead is recovered at 20% on prime cost.

Administration overhead is recovered at ₹6 per unit of production. Selling and distribution overheads are
recovered at ₹8 per unit sold

Required:
(i) Prepare the Profit and Loss Accounts both as per financial records and as per cost records.
(ii) Reconcile the profits as per the two records. [7]

4. (a) HOTEL IREVNA INN, has a capacity of 200 single rooms and 40 double rooms. The average occupancy of
both single and double rooms is expected to be 80% throughout the year of 365 days. The rent for double
room has been fixed at 125% of the rent of a single room. The costs are as under:
Variable Costs : Single Rooms ` 110 each per day
Double Rooms ` 175 each per day
Fixed Costs: Single Rooms ` 60 each per day
Double Rooms ` 125 each per day

Required:
Calculate the rent chargeable for each single room and double room per day in such a way that the hotel earns
a margin of safety of 20% on rent of rooms. [7]

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 INTERMEDIATE EXAMINATION SET - 1
MODEL QUESTION TERM – JUNE 2025
PAPER – 8 SYLLABUS 2022
COST ACCOUNTING

(b) OMEGA LTD undertook a contract for the construction of a building at a contract price of ` 45,00,000.
During the first year, the following amounts were spent against which a sum of ` 16,87,500 (representing
90% of the work certified) was received by the contractor:
`
Materials used 7,87,500
Wages paid to the workers 4,50,000
Overhead expenses 1,12,500

During the second year, the contractor spent the following amounts:
`
Materials used 11,25,000
Wages paid to the workers 9,00,000
Overhead expenses 2,25,000
In the second year, the contract was completed and a sum of `26,25,000 was received by the contractor.
Prepare the Contract Account and the Contractee Account for both the years and calculate the profits. [7]

5. (a) "Super Bite" is a leading product in the confectionery market which is obtained after it has gone through
three distinct processes - X, Y and Z. The following information is obtained from cost records of Super
(India) Ltd. for the month of July, 2024:
Particulars Process X Process Y Process Z
Input of raw materials @₹30 per unit (units) 1,000 - -
Other materials (₹) 26,000 19,800 29,620
Direct wages (₹) 20,000 30,000 40,000
Normal loss of input 5% 10% 15%
Output (units) 950 840 750
Sale of scrap per unit (2) 20 40 50
Total overheads are ₹90,000 which are recovered at 100% of wages.
Required:
Prepare different Process Accounts of the firm for July 2024. [7]
(b) ANKRITI LTD. manufactures product X and product Y during the year ending on 31 st March, 2025. It is
expected to sell 7500 kg of product X and 37500 kg of product Y @ ` 60 and ` 32 per kg respectively.
The direct materials A, B and C are mixed in the proportion of 4:4:2 in the manufacture of Product X and
in the proportion of 3:5:2 in the manufacture of product Y. The actual and budget inventories for the year
are as follows:
Particulars Opening Stock (kg) Expected Closing Stock (kg) Anticipated Cost per kg (`)
Material A 3000 2400 10
Material B 2500 5800 8
Material C 16000 17300 6
Product X 1500 2000 —
Product Y 3000 3500 —

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 INTERMEDIATE EXAMINATION SET - 1
MODEL QUESTION TERM – JUNE 2025
PAPER – 8 SYLLABUS 2022
COST ACCOUNTING

Required:
Prepare the Production Budget and Materials Budget showing the purchase cost of materials for the year
ending 31st March, 2025. [7]

6. The standard material inputs required for 1,000 kgs. of a finished product are given below:
Material Quantity (in kg) Standard rate per kg. (in ₹)
P 450 20
Q 400 40
R 250 60
1,100
Standard loss 100
Standard output 1,000

Actual production in a period was 20,000 kgs. of the finished product for which the actual quantities of material
used and the prices paid thereof, are as under:
Material Quantity (in kgs) Standard rate per kg. (in ₹)
P 10,000 19
Q 8,500 42
R 4,500 65

Calculate:
(i) Material Cost Variances;
(ii) Material Price Variance;
(iii) Material Usage Variance;
(iv) Material Mix Variance;
(v) Material Yield Variance.
Prepare a reconciliation among the variances. [14]

7. (a) Prepare the following information to show to management:

(i) The marginal product cost and the contribution per unit
(ii) The total contribution and profits resulting from each of the following sales mix results:
Particulars Product Per unit
Direct Materials A 10
Direct Materials B 9
Direct Wages A 3
Direct Wages B 2
Fixed Expenses - ₹ 800
Variable expenses are allotted to products at 100% of Direct Wages
Sales Price A ₹ 20

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 INTERMEDIATE EXAMINATION SET - 1
MODEL QUESTION TERM – JUNE 2025
PAPER – 8 SYLLABUS 2022
COST ACCOUNTING
Sales Price B ₹ 15

Sales Mixtures:
(a) 100 units of Product A and 200 units of Product B
(b) 150 units of Product A and 150 units of Product B
(c) 200 units of Product A and 100 units of Product B [7]

(b) Describe the disclosures to be made as per CAS 3. [7]

8. (a) Explain the Responsibility centre? Classify the different types of Responsibility Centre? [4]

(b) Discuss the Bills of Materials? Examine the basic purposes of preparing a Bills of Material? [5]

(c) Summarize the objectives and scope of Cost Accounting Standard (CAS) - 5 on determination of Average
(Equalized) Cost of Transportation. [5]

Directorate of Studies, The Institute of Cost Accountants of India 8