Maximum Marks: 51 Time Allowed: 120 Minutes Date: 2 May 2025

Syllabus: Material Cost, Employee Cost, Direct Expenses, Overheads, Process Costing, Contract
Costing, Service Costing, Job Costing & Batch Costing

Instructions:
▪ Part A is Compulsory. All MCQs questions are to be solved.
▪ Part B: Solve any 5 Questions out of the 7 Questions [Solve any 5 questions from Q2 - Q8]
▪ Number your answers clearly and start each new question on a fresh page.
▪ Workings and notes must be shown clearly wherever required.
▪ Scan your answer sheets properly (in order) after completion. Upload the answer-sheet in PCA App
only. In case of any issues, you may contact PCA Office after completion of Paper on 8888111034.
▪ No late submissions will be entertained without prior permission.
▪ Treat these tests with full seriousness - they are a rehearsal for your real exam.

PART A – OBJECTIVE QUESTIONS

Q1. Multiple Choice Questions [8 Questions x 2 Marks = 16 Marks]

(i) At the economic ordering quantity level, the following is true:

(a) Ordering cost is minimum (b) Carrying cost is minimum
(c) Ordering cost = carrying cost (d) Purchase price is minimum
Answer: C

(ii) Cost of idle time arising due to non-availability of raw materials is____________ .
(a) recovered by inflating raw materials cost
(b) recovered by inflating wage rate.
(c) charged to factory overheads.
(d) charged to costing profit & loss account.
Answer: D

(iii) Batch costing is suitable for______.

(a) Oil Industry (b) Sugar Industry (c) Chemical Industry (d) Pharmaceutical Industry
Answer: D
(iv) Warehouse expense is an example of ______ .
(a) Production overhead (b) Administration overhead
(c) Selling overhead (d) Distribution overhead
Answer: D

(v) The most suitable cost system where the products differ in type of material and work
performed is
(a) Process Costing (b) Batch Costing
(c) Job Costing (d) Operating Costing
Answer: C

(vi) SANUM P.I.C. producing product-ZEMO provides the following information:

Royalty paid on Sales Rs. 35,000

Design Charges paid for the product Rs. 8,000
Higher Charges for Equipment used for production Rs. 3,000

Direct Expenses will be ___________ .

(a) Rs. 58,000 (b) Rs. 55,000 (c) Rs. 46,000 (d) None of these
Answer: C

(vii) Primary packing is a part of ________.

(a) Direct material cost (b) Production cost
(c) Selling overhead (d) Distribution overhead
Answer: B

(viii) Which of the following method is used for evaluation of equivalent production when prices
are fluctuating in the market?
(a) FIFO method (b) LIFO method
(c) Simple average method (d) Weighted average method
Answer: D
 PART B – DESCRIPTIVE QUESTIONS
Solve ANY 5 out of remaining 7 Questions [5 Questions x 7 Marks = 35 Marks]
Q2. Sun & Moon Ltd, (SML) is a leading hardware manufacturing startup, It manufactured and sold
200 computers in the year 2022. The summarized Trading and Profit & Loss Account of SML for the
year 2022 is as follows:
Total Output (in units) = 200
Particulars Amount Particulars Amount
To Cost of Material consumed 12,00,000 By Sales 60,00,000
To Direct Wages 18,00,000
To Manufacturing Charges 7,50,000
To Gross Profit c/d 22,50,000
60,00,000 60,00,000
To Management Expenses 9,00,000 By Gross Profit b/d 22,50,000
To General Expenses 3,00,000
To Rent, Rates & Taxes 1,50,000
To Selling Expenses 4,50,000
To Net Profit 4,50,000
22,50,000 22,50,000
The management of SML estimated the following facts for the year 2023:
1. The output and sales will be 300 computers.
2. Price of material will rise by 25% compared to previous year level.
3. Wages per unit will rise by 10%.
4. Manufacturing charges will increase in proportion to the combined cost of material and wages.
5. Selling expenses per unit will remain unchanged.
6. Other expenses will remain unaffected by the rise in output.
Required:
(a) Prepare a Cost Sheet for the year 2023.
(b) Suggest a Selling Price per unit to earn a profit of 20% on selling price.
Answer: Estimated cost sheet for the year 2023
Direct Material 22,50,000 7,500
Direct Labour 29,70,000 9,900
Prime Cost 52,20,000 17,400
Factory Overhead 13,05,000 4,350
Factory Cost 65,25,000 21,750
Office Overhead 13,50,000 4,500
 Cost of Production 78,75,000 26,250
Selling & Distribution Overhead 6,75,000 2,250
Total Cost 85,50,000 28,500
Profit 21,37,500 7,125
Selling Price 1,06,87,500 35,625

Q3. ZEDYAAH TUBES LTD. manufactures a special product, which requires ZEDY. The following
particulars were collected for the year 17-18:
Monthly demand of Zedy 7,500 units
Cost of placing an order Rs. 500
Re-order period 5 to 8 weeks
Cost per unit Rs. 60
Carrying cost % p.a. 10%
Normal usage 500 units per week
Minimum usage 250 units per week
Maximum usage 750 units per week
Required: Calculate the following:
(a) Re-order quantity (b) Re-order level (c) Minimum stock level
(d) Maximum stock level (e) Average stock level
Answer:
Re-order quantity 2AB 2 x 7500 x 12 x 500 9,00,00,000
= √ CS = √ =√ = √1,50,00,000 = 3,873 units
60 x 10% 6

Re-order level = Maximum Usage x Maximum re-order period

= 750 x 8 = 6000 units
Minimum Stock = Re-order level - [Normal Usage x Normal re-order period or Average delivery
level time]
= 6000 - [500 x 6.5]
= 6000 - 3,250 = 2,750 units
Maximum Stock = Re-order level + Re-order quantity - [Minimum Usage x Minimum re-order
level period]
= 6000 + 3,873 - [250 x 5]
= 8,623 units
Average Stock = (Minimum Stock level + Maximum Stock level) / 2
level = (2,750 + 8,623) / 2 = 5,687 units or,
= Minimum Stock level + (1 / 2) (Re-order quantity)
= 2750 + (1/2) (3,873) = 4,687 units.
Q4. M/s Lotus Inc. manufactures the fountain pen called 'Pluto'. In the manufacturing of “Pluto”, the
overheads were recovered at a pre-determined rate of Rs. 25 per man-day. The other information for
the month of April, 2023 is as under:
Total factory overheads incurred Rs. 83,00,000
Man-days actually worked 2,97,200
Total units manufactured 80,000
Units sold during the month 60,000
Incomplete units (60% Complete) 60,000
On analysing the reasons, it was found that 40% of the unabsorbed overheads were due to defective
planning & the rest were attributable to increased overhead costs.
Required: You, as a qualified cost accountant, are asked to suggest how would unabsorbed
overheads be treated in Cost Accounts?
Answer:
Overhead Incurred Rs. 83,00,000
Less: Overhead Absorbed (25 x 2,97,200) Rs. 74,30,000
Under Absorption Rs. 8,70,000
Supplementary Overhead Rate Rs. 7.50 per unit
So, unabsorbed overheads will be an absorbed as under:
Cost of Goods Sold Rs. 4,50,000
Closing Stock of Finished Goods Rs. 1,50,000
Work in Progress Rs. 2,70,000
Rs. 8,70,000

Q5. M/s Peacock Ltd. is in the process of evaluation of employee’s welfare scheme of the company.
In this regard, it has selected three workers - K, L, and M to study their wage earnings. The company
furnishes the following particulars for the month of April, 2023 as under:
SN Particular K L M
(a) Job completed (Units) 10,000 8,000 14,400
(b) Out of above output rejected and unsaleable (Units) 400 160 1,600
2 Hrs. 36 3 Hrs. 1 Hr. 30
(c) Time allowed for 100 units
Min. Min.
(d) Basic wage rate per hour (Rs.) 25 40 30
(e) Time taken (Hrs.) 200 216 184
The normal working hrs. per month are fixed at 176 hrs. Bonus is paid @ 60% of the basic wage rate
for gross time worked and gross output produced without deduction for rejected output. The rate of
overtime for first 20 hrs. is paid at time plus 1/3 and for next 20 hrs. is paid at time plus 1/2.
From the above information, you are asked by the management to calculate the following for each
worker:
▪ Number of bonus hrs. and amount of bonus earned
▪ Total wages earned including basic wages, overtime premium and bonus
▪ Direct wages cost per 100 saleable units
Answer:
Particulars K L M

No. of units produced 10,000 8,000 14,400

Rejected Units 400 160 1600

Saleable Units 9,600 7840 12,800

Normal Rate per hour 25 40 30

Standard Time 156 minutes/100 180 minutes/100 90 minutes/100 units x

units x 10,000 units x 8,000 14,400/60 minutes
units/60 minutes units/60 minutes

260 hrs. 240 hrs. 216 hrs.

Actual Time Worked 200 216 184

Overtime Worked 24 40 8

Bonus Hrs. 60 24 32

Amount Bonus 60 x 60% of 25 = 900 24 x 60% Of 40 = 576 32 x 60% of 30 = 576

Overtime Wage 20 x 25 x 4/3 + 4 x 25 x 20 x 40 x 4/3 + 20 x 8 x 30 x 4/3 = 320

3/2 = 817 40 x 3/2 = 2,266

Basic Wage 176x25 = 4,400 176x40 = 7,040 176x30 = 5,280

Total Wage 6,117 9,882 6,176

Direct Wage Cost per 6,117/9,600 x 100 = 9,882/7840 x 100 = 6,176/12,800 x 100 =
100 saleable units 63.72 126 48.25

Q6. SANT TRAVELS AGENCY is a bus and operates a tourist service on daily basis. Bus starts from
New City to Rest Village & returns to New City the same day. Distance between New City and Rest
Village is 250 km. This trip operates for 10 days a month. Bus also plies for another 10 days between
New City & Kolanpur and returns to New City the same day, the distance between these two places
is 200 km. Bus makes local sight-seeing trips for 5 days in a month covering a total distance of 80 km
per day. The following data are given: Cost of Bus Rs. 35 lacs. Depreciation 25% (Straight line method)
Driver's Salary Rs. 16,000 p.m.
Conductor's Salary Rs.10,000 p.m.
Part-time clerk's salary Rs. 6,000 p.m.
Insurance Rs. 18,000 p.a.
Diesel consumption 5 km per litre @ Rs. 65 per litre
Token Tax Rs. 30,000 p.a.
Permit fee Rs. 4,500 p.m.
Sundry Expenses Rs. 1,000 for the month
Lubricant oil Rs. 500 for every 200 km
Repairs and Maintenance Rs. 11,000 p.m.
The normal capacity of the bus is 50 passengers? While playing to for Rest Village the bus occupies
90% of the capacity and 80% when it plies between New City to Kolanpur (both ways). In New City,
the bus runs at full capacity. Passenger Tax is 15% of the net takings of the travel firms. Ignore interest
& taxes.
Required: Calculate the rate to be charged to Rest Village and Kolanpur from New City per passenger
if the profit required to be earned is 25% of the takings of the Agency.
Answer: Statement of Total running kms. per month
Particulars Kms. Per Trips per Days per Kms per month
trip day month
New City to rest village 250 2 10 5,000
New City to Kolanpur 200 2 10 4,000
Local trip 80 5 400
Total running Kms. For the month 9,400
Statement of total seating capacity per month
Particulars No. of No. of trips No. of days Total Seating
seats capacity
New city to rest 50 2 10 1,000
New city to Kolanpur 50 2 10 1,000
Local City 50 5 250
Statements of Passenger Km. Per month:
Particulars New City to Local City
Rest Kolanpur
Total seating capacity 1,000 1,000 250
Capacity Utilisation 90% 80% 100%
Seats Occupied 900 800 250
Kms per trip 250 200 80
Passenger km per month 2,25,000 1,60,000 20,000
Total Passenger Km per month = 4,05,000
 Statements of operating cost Buses run between different cities

Particulars Per months

Fixed Cost:
Driver’s Salary 16,000
Conductor’s Salary 10,000
Part time clerk’s salary 6,000
Insurance 1,500

Token Tax 2,500

Permit Fee 4,500
Sundry Expenses 1,000
Repairs & Maintenance 11,000
Depreciation 72,917
Total Fixed Cost 1,25,417
Variable Cost:

Diesel 1,22,200
Lubricant Oil 23,500
Total Variable Cost 1,45,700
Total Cost 2,71,117
Passenger Tax (0.15x) 67,779
Profit (0.25x) 1,12,966

Total Takings 4,51,862

Rate per passenger per km (4,51,862/4,05,000) 1.11
Fare to be charged per passenger
New City to rest 250 * 1.11 277
New City to Kolanpur 200 * 1.11 222
Local 80*1.11 89
Working Note:
Let the taking be x
Passenger tax 15x
Profit 0.25x
X = 2,71,117 +0.15x + 0.25x
X = 2,71,117/0.6; X = 4,51,862
Q7. The net profit of X Ltd., appeared at Rs. 41,800 as per financial records for the year ending 31
March, 2018. A scrutiny of the figures from both the sets of accounts revealed the following facts:
Works overhead under-recovered in costs 1,500
Administrative overheads over-recovered in costs 850
Depreciation charged in financial accounts 5,600
Depreciation recovered in costs 6,250
Interest on investments not included in costs 3,000
Loss due to obsolescence charged in financial accounts 2,850
Income tax reserve made in financial accounts 20,150
Bank interest and transfer fee credited in financial books 370
Stores adjustment (credit) in financial books 230
Value of opening stock in : Cost accounts 24,800
: Financial accounts 26,300
Value of closing stock in : Cost accounts 25,000
: Financial accounts 23,000
Interest charged in cost accounts. 2,000
Imputed rent charged in cost accounts 1,000
Goodwill written off 5,000
Loss on sale of furniture 600
Selling and distribution expenses not charged in cost accounts 10,000
Donations to Prime Minister’s Relief Fund 5,100
Transfer to Debenture Redemption Fund 9,000
Transfer to Dividend Equalisation Fund 20,500
Required: Prepare a statement showing reconciliation statement & find out profit as per Cost
Accounts.
Answer: Reconciliation Statement
Particulars Amount Amount
Profit as per Financial Accounts 41,800
Add: Works Overhead under-recovered in Cost Accounts 1,500
Expenses and Losses debited in Financial Accounts but excluded from
Cost Accounts:
Income Tax Reserve 20,150
Loss on Sale of Furniture 600
Loss due to obsolescence 2,850
Goodwill written off 5,000
 Selling and Distribution expenses not charged in Cost Accounts 10,000
Donation to Prime Minister’s Relief Fund 5,100
Transfer to Debenture Redemption Fund 9,000
Transfer to Dividend Equalisation Fund 20,500
Under Valuation of Opening Stock in Cost Accounts 1,500
Over Valuation of Closing Stock in Cost Accounts 2,000 78,200
1,20,000
Less: Administrative Overheads over-recovered in Cost Accounts 850
Depreciation Over-charged in Cost Accounts 650
Incomes and gains credited in financial books but not shown in Cost
Accounts:
Interest on Investments 3,000
Bank Interest and transfer fees 370
Stores adjustments 230
Imputed Rent charged in Cost Accounts 1,000
Interest charged in Cost Accounts 2,000 8,100
Profit as per Cost Accounts 1,11,900

Q8. “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, 2023:
Particulars Process X Process Y Process Z
Input of raw materials @ Rs. 30 per unit (units) 1,000 - -
Other materials (Rs.) 26,000 19,800 29,620
Direct wages (Rs.) 20,000 30,000 40,000
Normal loss of input 5% 10% 15%
Output (units) 950 840 750
Sale of scrap per unit (Rs.) 20 40 50
Total overheads are Rs. 90,000 which are recovered at 100% of wages
Required: Prepare different Process Accounts of the firm for July 2023.
Answer: Process X Account
Particulars Units Rs. Amt. Particulars Units Rs. Amt.

To Input of Raw 1000 30 30,000 By Normal loss (5% of

50 20 1,000
Material 1000)

To Other Material - - 26,000 By Process Y Account 950 100 95,000

 To Direct Wages - - 20,000

To Overhead (100%
- - 20,000
wages)

1000 96,000 1000 96,000

Process Y Account

Particulars Units Rs. Amt. Particulars Units Rs. Amt.

By Normal loss (5% of

To Process X 950 100 95,000 95 40 3,800
1000)

To Other Material - - 19,800 By Abnormal loss 15 200 3,000

To Direct Wages - - 30,000 By Process Z Account 840 200 1,68,000

To Overhead (100% of
30,000
wages)

Total 950 1,74,800 950 1,74,800

Working Note 1: Cost per good unit = (1,74,800 - 3,800) ÷ (950 - 95) = Rs. 200
Process Z Account

Particulars Units Rs. Amount Particulars Units Rs. Amount

By Normal loss (15%

To Process Y 840 200 1,68,000 126 50 6,300
of 840)

To Other Material - - 29,620

To Direct Wages - - 40,000

To Overhead (100%
- - 40,000 By Finished Stock 750 380 2,85,000
wages)

To Abnormal gain 36 380 13,680

876 2,91,300 876 2,91,300

Working Note 2: Cost per good unit = (2,77,620 - 6,300) ÷ (840 - 126) = Rs. 380