CA Intermediate September 2026 Suggested Answers Paper 4 Cost and Management Accounting

FOR CA INTERMEDIATE EXAM PREPARATION

CA Intermediate 2026
Suggested Answers ·
Paper 4 Cost and
Management
Accounting
EXAM YEAR TYPE

CA Intermediate 2026 Suggested Answers
SUBJECT DATE

Paper 4 Cost and Management Accounting September 2026

Notes · Sample Papers · Previous Year Papers · Mock Tests

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PAPER – 4: COST AND MANAGEMENT
ACCOUNTING
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Part I - Multiple Choice Questions

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aGNPL
Case Scenario - I
is a food processing company specializing in agricultural products. It
purchases produce directly from farmers and makes packaged food products.
GNPL is interested in understanding the profitability of its products based on
customer type. Three main customer categories have been identified by the
Marketing Department: Distributors, Supermarkets and Online Customers. The
following information relates to the year just ended:

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Table – I

Activity
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Customer level Cost Driver

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operating cost (`)

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Product handling 10,08,000 Quantity sold (kgs)
Processing of customer 20,80,000 Number of sales orders
orders
Cost of Transportation to 59,20,000 Kilometres travelled
customer
Customer Visits 19,20,000 Number of customer
visits

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Table – II

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Distributors Supermarkets Online

s em 62,000
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Quantity Sold (kg) 1,25,000 65,000

las No. of sales orders 42
gla238
a 8,800
370

ag Kilometres travelled
No. of customer visits
8,975
35 179
5,350
86
Listed Selling price (per kg) 660 660 660

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SUGGESTED ANSWERS INTERMEDIATE EXAMINATION: SEPTEMBER 2026

Discount 10% 15% 20%
Cost of goods sold (excluding 460 460 460
customer level operating cost)
(` per kg)

On the basis of the above Case Scenario, you are required to answer the following
MCQs 1 to 5:
1. What is the cost of customer visits incurred on customer category
'Distributors'?
(A) ` 2,61,400
(B) ` 2,14,600
(C) ` 2,24,000
(D) ` 2,42,000 (2 Marks)
2. What is the cost of transport for 'Online' customer category?
(A) ` 13,69,600
(B) ` 13,74,400
(C) ` 13,55,600
(D) ` 13,84,400 (2 Marks)
3. What is the cost of activities (tabulated in Table I) as a percentage of the
sales revenue net of discount for 'Supermarkets' category?
(A) 12.12%
(B) 10.30%
(C) 9.19%
(D) 8.65% (2 Marks)
4. What is the total customer-level operating cost of all activities for
'Distributors' category?
(A) ` 32,65,000
(B) ` 31,56,000
(C) ` 30,25,000

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SUGGESTED ANSWERS COST AND MANAGEMENT ACCOUNTING

(D) ` 29,95,000 (2 Marks)
5. What is the customer level operating income for 'Online' Category?
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(A) ` 8,64,000
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(B) ` 9,12,000
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(C) `m a
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g a ` 12,65,000
l(D) (2 Marks)ag
aCase Scenario - II
ABCD Ltd. manufactures two types of products WM for women and KD for
children. These are sold in containers of one kg each. Raw materials W and M are
used for product WM and raw materials K and D are used for product KD. There
is no process loss or scrap unit. During the second quarter (July to September
2026), the company expects a market demand of 262 containers of WM and 190
containers of KD. The following additional information is given:
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Raw Material
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Product WM % Product KD % of Cost per kg (`)

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of Raw Material Raw Material
W 75%
l a s - 225
M g
a25% - 440
K - 40% 315
D - 60% 380

Stock Actual Quantity as on Budgeted Quantity as
01-07-2026 on 30-09-2026

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W(kgs) 22 16

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M(kgs) 07 13
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s
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D (Kgs) 34 32

gla WM (containers) 20 18
a KD (containers) 38 28

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SUGGESTED ANSWERS INTERMEDIATE EXAMINATION: SEPTEMBER 2026

On the basis of the above Case Scenario, you are required to answer the following
MCQs: (6 to 10)
6. How many containers of KD will be produced in the quarter according to the
production budget?
(A) 190
(B) 218
(C) 180
(D) 200 (2 Marks)
7. How many kilograms of raw material M will be consumed as per raw material
budget?
(A) 195 kgs
(B) 65 kgs
(C) 65.5 kgs
(D) 78 kgs (2 Marks)
8. How many kilograms of raw material K will be purchased as per raw material
budget?
(A) 64 kgs
(B) 69 kgs
(C) 61 kgs
(D) 93 kgs (2 Marks)
9. What is the value of budgeted raw materials purchase (*) during the quarter
for WM?
(A) 65,112.50
(B) 72,807.50
(C) 72,475
(D) 73,765 (2 Marks)
10. How many kilograms of WM will be the budgeted production in the quarter?
(A) 262 kgs

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SUGGESTED ANSWERS COST AND MANAGEMENT ACCOUNTING

(B) 260 kgs
(C) 280 kgs
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(D) 244 kgs
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(2 Marks)
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11. J Ltd. uses process costing and has the following information for the month
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of August 2026:
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l Beginning work in progress, (WIP) August 1 ag
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Particulars Units
a 8,000
Started fresh units in production during August (besides
opening WIP) 50,000
Completed production during August 46,000
Ending work in progress, August 31 12,000

The beginning work in progress was 60% complete for materials and 20%

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complete for conversion costs. The ending inventory was 80% complete for

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material and 40% complete for conversion costs. Using the FIFO method,

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what will be the equivalent units of production for conversion costs?
(A) 46,000 units
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(B) 49,200 units a g
(C) 50,800 units
(D) 51,400 units (2 Marks)
12. In a factory, standard time for a job is 72 hours. The hourly-rate of wages is
` 60. Halsey Premium Plan is in operation at the factory. A worker completes
the job at less than standard time and his effective hourly-rate wages was `

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75. How many hours did he actually take to complete the work?

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(A) 60
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(B) 72

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(C) 48

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(D) 64 (2 Marks)

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SUGGESTED ANSWERS INTERMEDIATE EXAMINATION: SEPTEMBER 2026

13. The following information is available in respect of an item of inventory in a
factory that uses FIFO (First In First Out) method of valuation of issues. The
opening stock was 150 units @ ` 40 per unit. The following transactions have
taken place:

Day Received Units Rate (`) Issued Units
(in Numbers) (in Numbers)
1 25 50 -
2 300 52 -
3 - - 340
4 200 50 -
5 - - 300
6 100 40 -

The value of material issued on Day 5 is ` :
(A) 15,200
(B) 15,300
(C) 15,270
(D) 15,230 (2 Marks)
14. A company sells handcrafted labour-intensive gift items. A certain urgent
order at a fixed selling price entailed 200 overtime hours. The overtime
premium per hour was ` 300. Of these hours, 150 were due to extra work
above capacity, whereas 50 hours were due to rework that arose due to faulty
material purchased and not inspected by the "Raw Materials" Section, a cost
centre. What will be the appropriate treatment of overtime premium?
(A) The entire premium of ` 60,000 is charged to the urgent order.
(B) Premium of ` 45,000 is charged to the order and ` 15,000 is charged to
the Materials Section.
(C) ` 60,000 is charged to the Costing P and L A/c.
(D) ` 60,000 is treated as material cost and added to cost of defective
material. (2 Marks)

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SUGGESTED ANSWERS COST AND MANAGEMENT ACCOUNTING

15. A factory has installed a new machine which has a brochure claiming that it
can produce 60,000 units of product X per annum. However, the company
estimates that due to Sundays and holidays, stock taking and minor repairs,
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production can be achieved only to the extent of 50,000 units. Further, time
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lost on batch change will reduce this to 40,000 units. Which of the following
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is not correct?
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l(B) Installed Capacity is 60,000 units.
(A) Normal Capacity is 40,000 units.
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(C) Practical Capacity is not 60,000 units.
(D) Normal Idle Capacity is 10,000 units. (2 Marks)
Answer Key

MCQ No. Correct Option

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1. (C)
2. (A)
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3. (A)
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4. (B)
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5. (A) a
6. (C)
7. (B)
8. (B)
9. (D)

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10. (B)

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11. (B)

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12. (C)
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las 13. (C)
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ag 14. (B)
15. (D)

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SUGGESTED ANSWERS INTERMEDIATE EXAMINATION: SEPTEMBER 2026

Part II – Descriptive Questions
Question No. 1 is compulsory.
Attempt any four questions out of the remaining five questions.
In case, any candidate answers extra question(s)/ sub-question(s) over and
above the required number, then only the requisite number of questions first
answered in the answer book shall be valued and subsequent extra
question(s) answered shall be ignored.
Working notes should form part of the answer.
Question 1
(a) A company manufactures two products - DSP and EM. It has adopted
marginal costing for managerial decision-making and has provided the
following information for the coming year:

DSP EM Remarks
Selling Price per unit (`) 15,000 10,000 -
Variable costs per unit 9,000 4,600 -
(`)
Maximum Demand for 700 720 Any Quantity at or below
the year (in units) this limit can be readily
sold in the market
Maximum Production - - 770 units of DSP and EM
Capacity put together (any one or
both can be produced but
the overall limit is 770
units).
Fixed Expenses (`) 6,00,000 - Incurred only if DSP is
manufactured.
- 2,16,000 Incurred only if EM is
manufactured.

Other Fixed expenses - - ` 18,00,000 incurred
(excluding the above) whether any product is
made or not.

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SUGGESTED ANSWERS COST AND MANAGEMENT ACCOUNTING

Assume no inventory is built up. Whatever is produced is sold. The company
can choose to make any of the products or both the products without
affecting its future prospects.
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Requirement:

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Calculate the optimum profit for the year in rupees giving the product mix
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(in units).
(Present only relevant figures. Detailed statements are not required.) (7 Marks)a
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a(b)g Ultramagic Ltd. manufactures a product TM for tourist recreational purposes.
As per the estimates provided by the tourism industry, there will be a market
demand of 12,500 units of TM in the coming year. Ultramagic Ltd. is expected
to have a market share of 16% of the total market demand of TM.
The company produces one unit of TM from one unit of raw material RW
which is purchased at ` 2,500 per unit.
Other Information:
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Order cost per order ` 4,000
Storage rate
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la per annum
9% per
Interest rate
Obsolescence rate
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a 2% per annum
5%

Required:
(i) Compute the Economic Order Quantity (EOQ). (2 Marks)
(ii) Compute the corresponding ordering cost per annum. (2 Marks)
(c) Textiles Manufacturing Co. has two production departments: Fibers (FIB) and

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Fabrics (FAB) and two service departments which also render services to each

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other. FC and DD
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s em Service Departments' expenses before allocation:
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Amount (`)
FC 3,00,000
DD 1,20,000

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SUGGESTED ANSWERS INTERMEDIATE EXAMINATION: SEPTEMBER 2026

Usage of Services:

Fibers (FIB) Fabrics (FAB) FC DD
FC 40% 40% - 20%
DD 40% 30% 30%

Use simultaneous equation method and find out the total expenses of FC.
(3 Marks)
Answer
(a) Statement of Contribution and Ranking

Particulars DSP EM
Selling Price per unit (`) 15,000 10,000
Less: Variable Cost per unit (`) 9,000 4,600
Contribution per unit (`) 6,000 5,400
Maximum Demand (units) 700 720
Ranking (Contribution per unit of common capacity) I II

Statement Showing Optimum Product Mix and Profit
Particulars DSP EM Total
Units to be produced and sold 700 70 770
Contribution per unit (`) 6,000 5,400 —
Total Contribution (`) 42,00,000 3,78,000 45,78,000
Less: Specific Fixed Expenses (`) 6,00,000 2,16,000 8,16,000
Less: Other Fixed Expenses (`) — — 18,00,000
Optimum Profit (`) 19,62,000

Working Note:
1. 770 units of capacity available .DSP produced up to its full demand of 700
units, Balance capacity of 70 units (770 – 700) used for EM. Optimum product
mix: DSP = 700 units, EM = 70 units.
Optimum Profit for the year = ` 19,62,000.

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SUGGESTED ANSWERS COST AND MANAGEMENT ACCOUNTING

(b) Calculation of Annual Demand of Ultramagic Ltd.
Annual demand of TM = Total market demand × Market share = 12,500 units
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× 16% = 2,000 units

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Since one unit of TM requires one unit of raw material RW, annual

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consumption of RW (A) = 2,000 units
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Calculation of Carrying Cost per unit

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a Storage rate Particulars Rate
9%
Interest rate 5%
Obsolescence rate 2%
Total Carrying Cost rate / per unit (C) 16%

Cost per unit of RW = `2,500; Carrying cost per unit = 16% × `2,500 = `400
(i) Economic Order Quantity (EOQ)
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. × 4,000 = 40,000 = 200 units
2AO
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e 400
2 × 2,000
s
E.O.Q = =
C

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EOQ = 200 units
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(ii) Ordering Cost per annum

Annual Demand
No. of orders per annum =
EOQ

2,000
= = 10 orders
200

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Ordering Cost per annum = 10 orders × ` 4,000 per order = ` 40,000
m (c) Let FC = Total expenses of department FC after inter-service allocation,
. and
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DD = Total expenses of department DD after inter-service allocation.

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FC = 3,00,000 + 30% of DD ...................... (i)

ag DD = 1,20,000 + 20% of FC ...................... (ii)
Substituting equation (ii) in (i):
FC = 3,00,000 + 0.30 × (1,20,000 + 0.20 FC)

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SUGGESTED ANSWERS INTERMEDIATE EXAMINATION: SEPTEMBER 2026

FC = 3,00,000 + 36,000 + 0.06 FC
0.94 FC = 3,36,000
FC = 3,36,000 / 0.94 = ` 3,57,447 (approx.)
Total expenses of FC = ` 3,57,447
Question 2
(a) Vivida Ltd. manufactures two products Ace eyeglasses & Sharp 1 eyeglasses
using various types of materials and one grade of labour general optical
technicians who cut lenses, drill frames and align hinges. Shown below is an
extract from the company's working papers for the next month's budget:

Ace eye - Sharp eye -
glasses glasses
Budgeted sales (in units) 1,100 2,200
Standard labour hours allowed per unit of 3 4.5
product at full productivity

Labour is paid at ` 30 per hour. Overtime premium is 60% and is payable
only if a worker works for more than 45 hours a week. There are 110 direct
workers. Assume that they can work on either product equally efficiently.
Efficiency during normal working hours may be taken to be the same as in
overtime hours also.
The target productivity for the productive hours worked by the direct workers
in actually manufacturing the products is 75%. In addition, the non-
productive down-time is budgeted at 15% of the productive hours worked.
There are four 5-day weeks in the budgeted period and it is anticipated that
sales and production will occur evenly throughout the whole period.
The following information is given :

Ace eye - glasses Sharp eye – glasses
Opening Stock (units) 125 140
Closing Stock 5 day’s sales 4 day’s sales

Calculate the Wages Budget for the direct workers, showing the quantities
and values for the next month. (7 Marks)

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SUGGESTED ANSWERS COST AND MANAGEMENT ACCOUNTING

(b) Arrow Precision Components Ltd. is a manufacturer of high-quality
aerospace and defence parts. The following are the details of expenses
incurred for the year ended 31st March, 2026:
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Particulars Amount (`)

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a
(i) Opening Stock of Raw Materials 28,50,000
(ii)e Closing Stock of Raw Materials l
l a s 32,75,000
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(iii) Purchase of Raw Materials 3,45,80,000
1,68,40,000
(v) Factory Overhead 67,36,000
(vi) Administrative Overhead 42,10,000

During the financial year 2026-27, the company has received a special order
from a leading aircraft manufacturer for the supply of one type of component
manufactured by the company. The estimated cost of materials and direct
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labour for this order are 25% of last year's actual consumption and
` 72,50,000 respectively. Assume no work-in-process for both the years.

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The company follows the policy
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a Administrative Overhead as a percentage of
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percentage of Direct Labour and
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Factory Cost based on the previous year's actual costs. The cost of delivery
and installation at the customer's site is estimated at ` 8,40,000. The
company wants to safely consider an additional 10% on the calculated
estimates for material and labour. Overheads are also to be taken after
considering this factor. The company will decide on the profit margin based
on total costs considered as per its policy and market conditions.
You are required to:

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Prepare a Job Cost Sheet for the order received and determine the total cost

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to be considered as per the company's policy.
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(Present figures in rupees.)

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(Round off percentages to two decimal places and figures to the next rupee.)

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(7 Marks)
a

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SUGGESTED ANSWERS INTERMEDIATE EXAMINATION: SEPTEMBER 2026

Answer
(a) Working Notes:
1. Production Budget (in units)
No. of working days = 4 weeks × 5 days = 20 days.
Daily sales:
Ace = 1,100/20 = 55 units,
Sharp = 2,200/20 = 110 units.
Closing stock:
Ace = 5 days × 55 = 275 units.
Sharp = 4 days × 110 = 440 units.

Particulars Ace Sharp
eyeglasses eyeglasses
Budgeted Sales (units) 1,100 2,200
Add: Closing Stock (5 days'/4 days' sales) 275 440
Less: Opening Stock (125) (140)
Budgeted Production (units) 1,250 2,500

2. Standard Labour Hours for Budgeted Production

Particulars Ace Sharp Total
eyeglasses eyeglasses
Budgeted Production 1,250 2,500 —
(units)
Standard hours per unit 3 4.5 —
(at full productivity)
Standard Hours (100% 3,750 11,250 15,000
productivity)
Productive Hours 3750/75% 11,250/75% 20,000
=5,000 =15,000
Non-Productive hours 750 hours 2,250 hours 3,000
(15%)
Hours to be paid 5,750 hours 17,250 hours 23,000

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SUGGESTED ANSWERS COST AND MANAGEMENT ACCOUNTING

3. Total Hours to be Paid

Particulars Hours
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Standard hours required at 100% productivity 15,000
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Productive hours to be worked (Std. hours /75% 20,000
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e Add: Non-productive down-time (15% of productive
productivity)
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l hours)
3,000
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Total Hours to be paid 23,000

4. Normal and Overtime Hours
Normal available hours = 110 workers × 4 weeks × 45 hours per week
= 19,800 hours. Since total hours to be paid (23,000) exceed normal
available hours (19,800),
Overtime hours = 23,000 – 19,800 = 3,200 hours
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Wages Budget for Direct Workers for the Next Month
Particulars
s em Hours Rate Amount

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a
Normal hours wages
Overtime hours – Basic wages
19,800
3,200
30.00
30.00
5,94,000
96,000
Overtime hours – Premium (60% of 3,200 18.00 57,600
basic)
Total Wages Budget 23,000 7,47,600
Total Wages Budget for Direct Workers for the next month = `7,47,600

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(b) Working Notes:

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1. Statement of Cost of the Previous Year (2025-26)
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Particulars Amount

s la 28,50,000
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Opening Stock of Raw Materials

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Less: Closing Stock of Raw Materials
3,45,80,000
32,75,000
Raw Materials Consumed 3,41,55,000

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SUGGESTED ANSWERS INTERMEDIATE EXAMINATION: SEPTEMBER 2026

Add: Direct Labour 1,68,40,000
Prime Cost 5,09,95,000
Add: Factory Overhead 67,36,000
Factory Cost 5,77,31,000
Add: Administrative Overhead 42,10,000
Cost of Production 6,19,41,000

2. Rates of Overhead Absorption (based on last year's actual costs)
• Factory Overhead as percentage of Direct Labour = 67,36,000 /
1,68,40,000 × 100 = 40.00%
• Administrative Overhead as a percentage of Factory Cost
= 42,10,000 / 5,77,31,000 × 100 = 7.29% (Rounded off)
Job Cost Sheet – Special Order (F.Y. 2026-27)

Particulars Basis / Working Amount (`)
Direct Material (25% of last year's 85,38,750 × 110% 93,92,625
consumption ` 3,41,55,000, +
10%)
Direct Labour 72,50,000 × 110% 79,75,000
(given ` 72,50,000, + 10%)
Prime Cost 93,92,625 + 1,73,67,625
79,75,000
Factory Overhead 40% × 79,75,000 31,90,000
(40% of Direct Labour above)
Factory Cost 2,05,57,625
Administrative Overhead 7.29% × 14,98,651
(7.29% of Factory Cost) 2,05,57,625
Cost of Production 2,20,56,276
Add: Delivery and Installation — 8,40,000
Cost
Total Cost to be considered 2,28,96,276

Total Cost of the Order (rounded off to next rupee) = ` 2,28,96,276

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SUGGESTED ANSWERS COST AND MANAGEMENT ACCOUNTING

Question 3
(a) During the finalisation of accounts for the period ended 31st August, 2026,
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the Management of M/s. ZPT Ltd. observed that the profit disclosed by the
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Cost Accounts differed from that shown by the Financial Accounts.

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The following information was extracted from the books:
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Profit as per Cost Accounts amounted to ` 9,80,000.
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ag (i) Factory overheads were under-absorbed in the Cost Accounts by
On investigation, the following items were identified:

` 16,000.
(ii) Administration overheads were over-absorbed in the Cost Accounts by
` 9,000.
(iii) Depreciation charged in the Financial Accounts exceeded the
depreciation recovered in the Cost Accounts by ` 18,000.

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(iv) Interest on bank deposits amounted to ` 28,000.

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eamounted to ` 15,000.
(v) Provision for Income Tax was ` 1,60,000.

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agfor owned premises were ` 6,000.
(vi) Profit on sale of investments
(vii) Charges in lieu of rent
(viii)Donation amounted to ` 10,000.
Required:
Prepare a Reconciliation Statement starting from the profit as per Cost
Accounts and arrive at the profit as per Financial Accounts while maintaining
the serial order given above for adjustments. (Candidates may use shorter

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forms of the items instead of writing the whole lines as described in the

m BH Transit Services Ltd. has been awarded a contract tomoperate
question.)
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c. o (b) 72-kilometre e
intercity route using 8 deluxe buses during thesnext
a

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year. Each

las g
4 round trips per day, carrying on an average, 80% ofatheir seating capacity.
bus has a seating capacity of 60 passengers. The buses are

ag The buses will run for 26 days in a month. Assume that the buses operate as
a point to point service with no stops intervening during a single trip of
72 kilometres. The following information relates to the operating cost of the

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SUGGESTED ANSWERS INTERMEDIATE EXAMINATION: SEPTEMBER 2026

service : Garage rent: ` 48,000 per month (Total for all buses) Annual repairs
and maintenance: `1,92,000 per bus Total salaries of all drivers, conductors,
cleaners and managers for the year (Total for all buses) ` 60,28,800 Road
tax, permit fee, etc.: ` 48,000 for a quarter (Total for all buses) Total Office
expenses: ` 20,000 per month Cost of diesel per litre: ` 108, Diesel Usage: 6
kilometres per litre Annual depreciation and Insurance: 24% of cost Engine
oils and lubricants: ` 56,30,000 (Total for all buses for the whole year).
The cost of each bus is ` 60,00,000.
However, during the year, two buses are expected to be under major servicing
for one month each and therefore those buses will run only for 11 months,
while the remaining 6 buses will operate for the whole year.
The company targets a profit of one third of revenue.
Present the following figures:
(i) Kilometres run by all vehicles for the whole year.
(ii) Number of passengers in all the trips put together for the whole year for
all the buses.
(iii) Diesel Cost in total for the whole year.
Calculate the one-way bus fare to be charged from each passenger, rounding
off to the next higher rupee value. (7 Marks)
Answer
(a) Reconciliation Statement of M/s. ZPT Ltd.
for the period ended 31st August, 2026
S. Particulars Amount Amount
No. (`) (`)
Profit as per Cost Accounts 9,80,000
(i) Less: Factory Overheads under-absorbed (16,000)
in Cost Accounts
(ii) Add: Administration Overheads over- 9,000
absorbed in Cost Accounts
(iii) Less: Depreciation in Financial Accounts (18,000)
in excess of Cost Accounts

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SUGGESTED ANSWERS COST AND MANAGEMENT ACCOUNTING

(iv) Add: Interest on Bank Deposits 28,000
(v) Less: Provision for Income Tax (1,60,000)
m
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(vi) Add: Profit on Sale of Investments ( 15,000
m
(vii)
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Add: Charges in lieu of Rent on Owned 6,000
s em
m
e Less: Donation
Premises
l a
l a s
(viii) (10,000)
ag
g
a(b) WorkingProfit as per Financial Accounts 8,34,000

Note: Effective Bus-Days for the Year
6 buses run for the whole year: 6 buses × 12 months × 26 days = 1,872
bus-days
2 buses run for 11 months only (1 month under major servicing): 2 buses × 11
months × 26 days = 572 bus-days

m
Total effective bus-days for the year = 1,872 + 572 = 2,444 bus-days

. c o
(i) Kilometres Run by All Vehicles for the Whole Year
Distance per bus per day = m
s e 4 round trips × (2 × 72 km) = 4 × 144
= 576 km
l a
ag= 2,444 bus-days × 576 km = 14,07,744 km
Total km for the year
(ii) Number of Passengers in All Trips, All Buses, for the Whole Year
Passengers per leg = 60 seats × 80% = 48 passengers
Passengers per bus per day = 4 round trips × 2 legs × 48 = 384
passengers
Total passengers for the year = 2,444 bus-days × 384 = 9,38,496
passengers
m
m c. o
c. o em ÷ 6
(iii) Diesel Cost for the Whole Year

em la s
Diesel consumption = Total km ÷ 6 km per litre = 14,07,744

las = 2,34,624 litres
Diesel Cost = 2,34,624 litres × ` 108 per litre a
g
ag = ` 2,53,39,392

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SUGGESTED ANSWERS INTERMEDIATE EXAMINATION: SEPTEMBER 2026

Alternative presentation of the above calculation
(i) Kilometres Run by All Vehicles for the Whole Year

6 Buses = (72Km x 2 x 4 Round trip x 26 days = 10,78,272 Km
x 12 months x 6 buses)
2 Buses = (72Km x 2 x 4 Round trip x 26 days = 3,29,472 Km
x 11 months x 2 buses)
14,07,744 Km

(ii) Number of Passengers in All Trips, All Buses, for the Whole Year

6 Buses = (60 Passengers x 80% x 2 x 4 Round trip = 7,18,848
x 26 days x 12 months x 6 buses)
2 Buses = (60 Passengers x 80% x 2 x 4 Round trip = 2,19,648
x 26 days x 11 months x 2 buses)
9,38,496

(iii) Diesel cost for the Whole Year
14,07,744/6 x 108 = ` 2,53,39,392
Calculation of Passenger Km

6 Buses = (72Km x 48 Passenger x 2 x 4 Round trip = 5,17,57,056
x 26 days x 12 months x 6 buses)
2 Buses = (72Km x 48 Passenger x 2 x 4 Round trip = 1,58,14,656
x 26 days x 11 months x 2 buses)
Total Passenger Km 6,75,71,712

Alternative Presentation in Table
Particulars Calculation Result
Seating capacity per bus - 60 passengers
Average occupancy 60 x 80% 48 passengers
Kilometers per bus per day 72 x 2 x 4 576 km
6 buses running for 12 months 576 x 26 x 12 x 6 10,78,272
2 buses running for 11 months 576 x 26 x 11 x 2 3,29,472

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SUGGESTED ANSWERS COST AND MANAGEMENT ACCOUNTING

Total kilometers run p.a. 14,07,744
Total passenger – km p.a. 14,07,744 x 48 6,75,71,712
m
m
Statement of Total Operating Cost per Annum & One way Fare
c. o
c. o s em
m
Particulars Amount (`)

seFixed/Standing Cost
gl a
g la Salaries (Drivers, Conductors, Cleaners, Managers)
Garage Rent (` 48,000 × 12 months) 5,76,000 a
a 60,28,800
Road Tax, Permit Fee, etc. (` 48,000 × 4 quarters) 1,92,000
Office Expenses (`20,000 × 12 months) 2,40,000
Depreciation and Insurance (24% of ` 4,80,00,000) 1,15,20,000
1,85,56,800
Variable/Running Cost
Engine Oils and Lubricants 56,30,000
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Diesel Cost 2,53,39,392
.
em
3,09,69,392
Maintenance Cost
l a s
g
Annual Repairs and Maintenance (` 1,92,000 × 8
buses) a 15,36,000
Total Operating Cost 5,10,62,192
Profit 1/3 of Revenue or ½ of Cost 2,55,31,096
Revenue {(5,10,62,192 × 3/2)} or Cost +Profit 7,65,93,288
Passenger Km 6,75,71,712
Fare per Passenger Km 1.134
One way Fare (72 km×1.134) = 81.65 82 (Rounded off)
m
m
Alternatively, Calculation of One-way Bus Fare
.co
c. o Desired Profit = 1/3rd of Revenue
se
m
s em Total Cost = 2/3rd of Revenue
g l a
gla a × 3/2 = ` 7,65,93,288
Required Revenue = Total Cost × 3/2 = 5,10,62,192
a One-way Fare per Passenger = Required Revenue ÷ Total Passengers
= 7,65,93,288 ÷ 9,38,496 = ` 81.61
One-way Bus Fare (rounded off) = ` 82
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SUGGESTED ANSWERS INTERMEDIATE EXAMINATION: SEPTEMBER 2026

Question 4
(a) XYZ Ltd. employs workforce classified into Skilled, Semi-Skilled and Unskilled
categories for its manufacture of precision-engineered automobile components.
In the month of August 2026, the Production Department completed the
manufacture of 5000 units of Product X.
The following information is available:
Budgeted Labour Requirement for manufacturing 2 units of Product X.

Labour Category Standard Hours Standard Rate (` per hour)
Skilled 2 6
Semi–skilled 3 5
Unskilled 5 2
Actual Labour Details:

Labour Actual Hours paid Abnormal Actual Amount
Category (including abnormal IdIe time Rate (`) (` )
idle hours) (hours)
Skilled 6,000 200 7 42,000
Semi-skilled 8,000 300 4.5 36,000
Unskilled 11,000 400 2.5 27,500
Total 25,000 900 1,05,500

Required:
Compute category wise labour cost variances analysed into mix, efficiency,
yield and rate variances, indicating whether they are Adverse (A) or
Favourable (F). (9 Marks)
(b) New Pharma Chemicals Ltd. manufactures pharmaceutical-grade solvents
for the drug formulation industry. Production passes through a series of
processes and the company operates a FIFO process costing system to value
work-in-process and finished goods.
The following information is given:
• Opening work-in-process at the beginning of the month was 800 litres
which was 70% complete for labour and 60% complete for overheads.

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SUGGESTED ANSWERS COST AND MANAGEMENT ACCOUNTING

• Closing work-in-process at the end of the month was 160 litres which
was 30% complete for labour and 20% complete for overheads.

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• Normal loss is 10% of input; total losses during the month were 1,800
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litres, partly attributable to flood damage. Abnormal losses occurred in

. em
s
the production shop floor just before despatch to the warehouse.
m
eOutput transferred to the finished goods warehouse was 4,200 litres. g l a
s
l•a All raw materials are introduced at the commencement of the process. a
•

ag Required:
(i) Calculate the quantity (in litres) of raw material input during the month.
(2 Marks)
(ii) Calculate the quantity (in litres) of normal loss and abnormal loss.
(1 Mark)

m
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(iii) Calculate the equivalent units of labour and overheads completed in the
process.
. (2 Marks)
Answer
s em
(a) Working Notes:
g l a
Budget a Standard for actual Actual
Hours Rate Amount Hours Rate Amount Hours Rate Amount
(`) (`) (`) (`) (`) (`)
Skilled 2 6 12 5,000 6 30,000 6,000 7 42,000
Semi-skilled 3 5 15 7,500 5 37,500 8,000 4.5 36,000
Unskilled 5 2 10 12,500 2 25,000 11,000 2.5 27,500
10 37 25,000
o
92,500 25,000
m
1,05,500

m .c
c. o em
5,800 as
Idle Hours Hours worked

s em Skilled 200
gl
gla Semi-skilled 300
a
7,700

a Unskilled 400
900
10,600
24,100

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SUGGESTED ANSWERS INTERMEDIATE EXAMINATION: SEPTEMBER 2026

(i) Labour Cost Variance= (SH×SR – AH×AR)
Skilled 5,000 × 6 – 6,000× 7 = ` 12,000 (A)
Semi-Skilled 7,500 ×5 – 8,000 × 4.5 = ` 1,500 (F)
Unskilled 12,500× 2 – 11,000 × 2.5 = ` 2,500 (A)
Total ` 13,000 (A)
Or
Labour Cost Variance = (SH x SR) – (AH x AR) or Standard cost –
Actual Cost
= 92,500 – 1,05,500
= 13,000(A)
(ii) Labour Rate Variance = (SR – AR) x AH paid
Skilled (6-7) x 6,000 = 6,000(A)
Semi-Skilled (5- 4.5) x 8,000 = 4,000(F)
Unskilled (2-2.5) x 11,000 = 5,500(A)
7, 500(A)
(iii) Labour Efficiency Variance = [(SH – AH worked)] x SR
Skilled (5,000 – 5,800) x 6 = 4,800(A)
Semi-Skilled (7,500 – 7,700) x 5 = 1,000(A)
Unskilled (12,500 – 10,600) x 2 = 3,800(F)
2,000(A)
(iv) Labour Idle time Variance = Idle Hours x Standard Rate
Skilled 200 x 6 = 1,200(A)
Semi-Skilled 300 x 5 = 1,500(A)
Unskilled 400 x 2 = 800(A)
3,500(A)

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SUGGESTED ANSWERS COST AND MANAGEMENT ACCOUNTING

(v) Labour Mix Variance = (RSH – AH Worked) x SR
Std.Hours
m
Revised Std. hours (RSH) = ×TotalActual Hours

c. o
TotalStd.hours

m
.co em
5,000
Skilled ( × 24,100 i.e 4,820 – 5,800) x 6 = 5,880(A)

m s
25,000

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ag
7,500

a
Semi Skilled ( ×24,100 i.e 7,230 – 7,700) x 5 = 2,350(A)
l
25,000

ag
12,500
Unskilled ( ×24,100 i.e 12,050 – 10,600) x 2 = 2,900(F)
25,000

5,330(A)
(vi) Labour Yield Variance = (SH – RSH) × SR
Skilled (5,000 –4,820) × 6 =` 1,080 (A)
Semi- Skilled (7,500 –7,230) × 5 = ` 1,350 (A)
Unskilled (12,500 -12,050) × 2 =` 1,800 (A)
m
Total
. co ` 3 ,300 (A)
Or
s em
g l a
Labour Yield Variance = (Total Standard Hours – Total Actual Hours
a
worked) x Standard Weighted Average Rate = (25,000 – 24,100) x
92,500/25,000 = 3330(F)
Alternative Presentation
Working Notes:
1. Basic Data
Labour Std. Hrs. Std. Amount Actual Abnormal Actual Actual

m
Category for Actual Rate (`) Hrs. Idle Hrs. Hrs. Rate

m c. o
Output (SR) Paid Worked (AR) `

c. o m 7.00
(SH) (AHP) (AH)
e5,800
`

em
Skilled 5,000 6.00 30,000 6,000 200
s
la 7,700 4.50
las Semi- 7,500 5.00 37,500 8,000
a g
300

ag skilled
Unskilled 12,500 2.00 25,000 11,000 400 10,600 2.50
Total 25,000 92,500 25,000 900 24,100

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SUGGESTED ANSWERS INTERMEDIATE EXAMINATION: SEPTEMBER 2026

2. Standard Hours for actual production (5,000 units) = (Budgeted hours
for 2 units ÷ 2) × 5,000: Skilled = 5,000; Semi-skilled = 7,500; Unskilled
= 12,500.
3. Revised Standard Hours (RSH) = Total Actual Hours Worked × (SH of
category ÷ Total SH): Skilled = 24,100 × (5,000/25,000) = 4,820;
Semi-skilled = 24,100 × (7,500/25,000) = 7,230; Unskilled = 24,100
× (12,500/25,000) = 12,050.
Statement Showing Category-wise Labour Cost Variances

Variance Skilled Semi- Unskilled Total
(`) skilled (`) (`) (`)
Labour Rate Variance 6,000 (A) 4,000 (F) 5,500 (A) 7,500 (A)
(LRV) = AHP × (SR –
AR)
Labour Idle Time 1,200 (A) 1,500 (A) 800 (A) 3,500 (A)
Variance (LITV) = SR ×
Ab. Idle Hrs.
Labour Mix Variance 5,880 (A) 2,350 (A) 2,900 (F) 5,330 (A)
(LMV) = SR × (RSH –
AH)
Labour Yield Variance 1,080 (F) 1,350 (F) 900 (F) 3,330 (F)
(LYV) = SR × (SH – RSH)
Labour Efficiency 4,800 (A) 1,000 (A) 3,800 (F) 2,000 (A)
Variance (LEV) = LMV +
LYV
Labour Cost Variance 12,000 (A) 1,500 (F) 2,500 (A) 13,000 (A)
(LCV) = LRV + LITV +
LEV

(b) (i) Quantity of Raw Material Input during the Month
Opening WIP (800) + Input = Output transferred (4,200) + Closing WIP
(160) + Total Losses (1,800)
Input = 4,200 + 160 + 1,800 – 800 = 5,360 litres

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SUGGESTED ANSWERS COST AND MANAGEMENT ACCOUNTING

(ii) Normal Loss and Abnormal Loss
Normal Loss = 10% of Input = 10% × 5,360 litres = 536 litres

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Abnormal Loss = Total Losses – Normal Loss = 1,800 – 536 = 1,264
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co m
litres

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a
(iii) Equivalent Units of Labour and Overheads Completed in the

s e l
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Process

l a
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Particulars Total Labour Overheads
Units Equivalent Equivalent Equivalent Equivalent
% Units % Units
Opening WIP completed 800 30% 240 40% 320
this month
Freshly introduced and 3,400 100% 3,400 100% 3,400
completed (4,200 – 800)
Abnormal Loss 1,264 100% 1,264 100% 1,264

m
(occurring just before

co
despatch)

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em
Closing WIP 160 30% 48 20% 32

s Presentation
Equivalent Units 4,952 5,016

l a
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Alternative
Particulars Units Labour Overheads
Equivalent Equivalent Equivalent Equivalent
% Units % Units
Normal Loss 536 - - - -
Abnormal Loss 1,264 100% 1,264 100% 1,264
Closing WIP 160 30% 48 20% 32

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Equivalent 4,952 5,016

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Units

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(a) The following data is given in the books of Vikram Industries:

g a Amount (`)
a Opening Inventories:
Particulars

- Raw materials 15,00,000

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SUGGESTED ANSWERS INTERMEDIATE EXAMINATION: SEPTEMBER 2026

- Work–in–process 20,00,000
- Finished goods (12, 000 units) 10,80,000
Closing Inventories:
- Raw materials 16,50,000
- Work–in process 18,00,000
Raw materials purchase 1,68,00,000
Wages paid to production workers 40,00,000
Expenses paid for utilities 2,50,000
Office and administrative expenses paid (General) 1,50,000
Travelling allowance paid to office staff 7,00,000
Selling expenses:
Machine hours worked 24,000 hours
Machine hour rate ` 10 per hour
Units sold (on FIFO basis) 1,80,000 units
Units produced 2,10,000 units
Desired profit 20% on sales

Compute the values of the following figures in rupees as they will appear in
the Cost Sheet:
(i) Prime Cost
(ii) Cost of Production
(iii) Cost of Goods Sold
(iv) Cost of Sales
(v) Sales Revenue
(You are not required to present the entire cost sheet. Present relevant figures
only.) (5 Marks)
(b) A manufacturing company operates three production departments and it has
established a policy to allocate factory overheads using a single blanket rate
calculated as total budgeted overheads divided by budgeted direct labour
hours. Below are the relevant data for one month:

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SUGGESTED ANSWERS COST AND MANAGEMENT ACCOUNTING

Department Budgeted Actual Job 1023
Factory Direct Machine Factoroy Direct Machine Direct Machine

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Over Labour Hours Over Labour Hours Labour Hours

m
heads (` ) Hours heads Hours Hours

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(` )

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a
Cutting 4,00,000 20,000 60,000 4,20,000 22,000 62,000 40 120

s e l
a ag
Assembly 3,00,000 2,000 25,000 2,80,000 2,000 24,000 4 40

l
ag The company has a margin of 30% on sales price to cover other
Finishing 2,00,000 14,000 1,000 2,10,000 14,000 1,000 30 2

administrative and selling overheads and profit.
Required:
(i) Compute the value of factory overhead that will be used in the pricing
of Job No. 1023 as per the company's existing policy. (2 Marks)
(ii) Recommend the most appropriate method of absorbing factory

m
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overheads and calculate the value of overhead that will be used in the
pricing of Job No. 1023. (3 Marks)

e mrecovery of overheads in the Finishing
s
(iii) Calculate the total under/over

la recommendation.
g
Department based on your (2 Marks)
(Round off rates up to twoa decimal points and the final value to the next
higher rupee.)
Answer
(a) Computation of Cost Sheet Values of Vikram Industries
Raw Material consumed = ` 1,50,00,000 + ` 16,80,00,000 – ` 1,65,00,000
= ` 16,65,00,000.

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(i) Prime Cost = Raw Materials Consumed (` 1,66,50,000) + Direct Wages

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(`40,00,000) + Utilities Expense treated as direct factory expense
(` 2,50,000) = ` 2,09,00,000
e m
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s g ` 2,13,40,000
(ii) Cost of Production = Prime Cost + Factory Overhead (`2,40,000) +

gla a
Opening WIP (` 20,00,000) − Closing WIP (` 18,00,000) =

a (iii) Cost of Goods Sold = Cost of Production + Opening Finished Goods
(`10,80,000) − Closing Finished Goods (` 42,68,000, i.e., 42,000 units ×
` 101.62) = ` 1,81,51,960

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SUGGESTED ANSWERS INTERMEDIATE EXAMINATION: SEPTEMBER 2026

(iv) Cost of Sales = Cost of Goods Sold + Office & Admin Expenses
(` 30,00,000) + Travelling Allowance (` 1,50,000) + Selling Expenses
(` 7,00,000) = ` 2,20,01,960
(v) Sales Revenue = Cost of Sales ÷ (1 − 20%), since desired profit is 20%
on Sales i.e 25% on Cost of Sales = ` 2,20,01,960 ÷ 0.80 = ` 2,75,02,500
(or Cost of Sales+ Profit = ` 2,20,01,960+55,00,490 = ` 2,75,02,450)
Alternative Presentation
Computation of Cost Sheet Values of Vikram Industries
Units Produced: 2,10,000
Units Sold: 1,80,000

Raw materials purchased 1,68,00,000
Add: Opening value of raw materials 15,00,000
Less: Closing value of raw materials (16,50,000)
Materials consumed 1,66,50,000 79.29
Wages paid to Production Workers (Direct 40,00,000 19.05
Labour)
Expenses paid for Utilities 2,50,000 1.19
Prime Cost 2,09,00,000 99.53
Add: Factory Overhead (24,000 machine hrs. × 2,40,000
` 10 per hr.)
Add: Opening Work-in-Process 20,00,000
Less: Closing Work-in-Process (18,00,000)
Cost of Production (2,10,000 units produced) 2,13,40,000 101.62
Add: Opening Finished Goods (12,000 units) 10,80,000
Less: Closing Finished Goods (42,000 units × (42,68,040)
` 101.62)
Cost of Goods Sold (1,80,000 units, FIFO 1,81,51,960 100.84
basis)
Add: Office and Administrative Expenses 30,00,000 16.67
Add: Travelling Allowance paid to Office Staff 1,50,000 0.83

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SUGGESTED ANSWERS COST AND MANAGEMENT ACCOUNTING

Add: Selling Expenses 7,00,000 3.89
Cost of Sales 2,20,01,960 122.23
m
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Add: Desired Profit (20% on Sales i.e 25% on 55,00,490 30.56

c o
Cost of Sales)
. e m
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Sales Revenue 2,75,02,450 152.79
l a s
la s a g
g
Working Note:

a 1. Closing Finished Goods = Opening Finished Goods (12,000 units) +
Units Produced (2,10,000) − Units Sold (1,80,000) = 42,000 units,
valued at the current Cost of Production per unit of ` 101.62, i.e.,
` 42,68,000.
Note: Due credit shall be given for approximation of Figures like Closing stock
of finished Goods, Cost of Goods Sold, Cost of Sales, Proft and Revenue.

m
(b) (i) Factory Overhead for Job No. 1023 – Existing Policy (Single Blanket
Rate on Direct Labour Hours)
c o
. Budgeted Factory Overhead ÷ Total
m
eHours
• Blanket Overhead Rate = Total

a s
gl + 2,00,000) ÷ (20,000 + 2,000 + 14,000)
Budgeted Direct Labour

a
= (4,00,000 + 3,00,000
= 9,00,000 ÷ 36,000 = ` 25 per D.L. Hour
• Direct Labour Hours on Job 1023 = 40 + 4 + 30 = 74 hours
Factory Overhead for Job 1023 (Blanket Rate) = 74 hours × ` 25
= ` 1,850
(ii) Recommended Method of Absorption of Factory Overhead
A single blanket rate ignores the differing nature of operations across
m
m
departments and can distort job costs. A departmental overhead rate,
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c. o based on the basis most representative of each department's cost
se
m
em a
behaviour, is recommended:
s g lOverhead
gla Department Nature of Operation Recommended
a Rate

a Cutting Machine
Basis
hours Machine Hour 4,00,000 ÷ 60,000
(60,000) far exceed Rate = ` 6.67 per Machine
labour hours (20,000) Hour

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SUGGESTED ANSWERS INTERMEDIATE EXAMINATION: SEPTEMBER 2026

Assembly Machine hours Machine Hour 3,00,000 ÷ 25,000
(25,000) far exceed Rate = ` 12.00 per
labour hours (2,000) Machine hour.
Finishing Labour hours (14,000) Direct Labour 2,00,000 ÷ 14,000
far exceed machine Hour Rate = ` 14.29 per Direct
hours (1,000) Labour Hours

Overhead on Job 1023 using recommended rates:

Department Job 1023 Rate Overhead
– Hours (`) (`)
Cutting (Machine Hours) 120 6.67 800.40
Assembly (Machine Hours) 40 12.00 480.00
Finishing (Labour Hours) 30 14.29 428.70
Total Factory Overhead for 1,709.10
Job 1023

Factory Overhead for Job 1023 as per recommended departmental
rates (rounded off to next higher rupee) = ` 1,710
(iii) Under/Over Recovery of Overheads in the Finishing Department
(iv) Under/Over-Recovery — Finishing Department
Using the recommended Direct Labour Hour Rate of ` 14.29
(from part ii):

Particulars Amount
Predetermined DLH rate ` 14.29
Actual DLH worked 14,000
Overheads absorbed (14.29 × 14,000) ` 2,00,060
Actual overheads incurred ` 2,10,000
Under-recovery (Actual − Absorbed) ` 9,940

Under-recovery of overheads in Finishing = ` 9,940

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SUGGESTED ANSWERS COST AND MANAGEMENT ACCOUNTING

Question 6
(a) NS Ltd. has listed some of the costs incurred during the current period.
m
I II
m
III
c. o
(i)
c. o
Salary to office attendants
s em
(ii) mProduct blueprint cost a
s e Ire charges paid for factory machinery for a certain l
g a
l product
(iii) ag
a
(iv) Salary paid to marketing manager
(v) One time licence fee paid for software used to make
computerized graphics for a particular job
(vi) Wages paid to factory workers
(vii) Overtime wage paid to finish a certain job due urgency

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created by customer

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(viii) Specialised packing at customer’s request
Advertisement Expenses m
(ix)
s e
(x)
gl a
Royalty paid for production

Classify the above items aunder appropriate functions of cost.
(Present only columns I and III in your answer books.) (5 Marks)
(b) (i) How would you account for the amount realized on sale of molasses, a
by-product in a sugar manufacturing process? (2 Marks)
(ii) Products A and B are produced from the same raw material but Product
A requires more refining before it can be sold. How would you apportion

m
the joint costs between Products A and B using net realizable method?

c o
m (iii) Suppose that a by-product requires further processing beforembeing
. sold.
(1 Mark)

c. o s e at the point
em l a (2 Marks)
How would you determine and treat the net realizable value

las of split-off?
a g
ag (c) State how you would treat the following items in the Cost Sheet:
(i) Wages paid to idle workers during a sudden government-imposed
lockdown.

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SUGGESTED ANSWERS INTERMEDIATE EXAMINATION: SEPTEMBER 2026

(ii) A subsidy received from the State Government for using eco-friendly raw
materials.
(iii) Interest paid on a term loan taken for purchase of plant and machinery.
(iv) GST paid on purchase of raw materials, for which input tax credit is eligible.
OR
(c) What are the main distinctions between a Bill of Materials and a Material
Requisition Note in terms of their contents and utility? (4 Marks)
Answer
(a)

I II — Item III — Classification
(i) Salary to office attendants Administration Overhead
(ii) Product blueprint cost Design Cost/Direct Expenses
(iii) Hire charges paid for factory Direct Expenses/Production
machinery for a certain Cost
product
(iv) Salary paid to marketing Selling & Distribution Overhead
manager
(v) One time licence fee paid for Direct Expenses/Production
software used to make Cost
computerised graphics for a
particular job
(vi) Wages paid to factory workers Direct Labour
(vii) Overtime wages paid to finish Direct Labour / Direct Expenses
a certain job due to urgency
created by customer
(viii) Specialised packing at Selling & Distribution Cost/
customer's request Expenses attributed to
customer order
(ix) Advertisement Expenses Selling & Distribution Overhead
(x) Royalty paid for production Direct Expenses

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(b) (i) The amount realized on sale of molasses, a by-product, should be
credited to the process account of the main product (sugar) from
which it emerges, thereby reducing the cost of the main product.
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co
(ii) Based on net realizable value at the point of split off. Since A

. em
s
requires more refining, A's net realizable value at split off will be

e m l a
s
realizable value at point of sale less additional refining cost after

l a split off.
a g
ag (iii) will
Its realized value after processing and sales less further processing cost
be its net realizable value at split off and this value will reduce the
cost of the main product(s).
(c)

Item Treatment in the Cost Sheet
(i) Wages paid to idle workers This represents an abnormal idle time
during a sudden cost arising from an abnormal, non-
m
co
government-imposed recurring event. It should be excluded
.
em
lockdown from the cost sheet / cost of

s
production and charged directly to the

l a Costing Profit and Loss Account.
g the Being directly related to the raw
(ii) Subsidy received a
from
State Government for material used, the subsidy should be
using eco-friendly raw deducted from the cost of the raw
materials material concerned in the cost sheet.
(iii) Interest paid on a term Interest is a financial (finance) charge
loan taken for purchase of and is excluded from cost accounts /
plant and machinery cost sheet.

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Interest and Financing Charges shall

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be presented in the Cost Sheet as a
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c. o se
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separate item of cost of sales, distinct

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from production cost.

las g
a is eligible, the
(Any one point)

ag (iv) GST paid on purchase of Since input tax credit
raw materials, for which GST paid is recoverable and is not a
input tax credit is eligible cost. It is excluded from the cost of
raw materials in the cost sheet.

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SUGGESTED ANSWERS INTERMEDIATE EXAMINATION: SEPTEMBER 2026

OR
(c) Difference between Bill of Materials and Material Requisition Note

Bill of Materials Material Requisition Note
1. It is the document prepared by 1. It is prepared by the
the engineering or planning production or other
dept. consuming department.
2. It is a complete schedule of 2. It is a document asking Store-
component parts and raw keeper to issue materials to
materials required for a the consuming department.
particular job or work order.
3. It often serves the purpose of 3. It cannot replace a bill of
a material requisition as it materials.
shows the complete schedule
of materials required for a
particular job i.e. it can replace
material requisition.
4. It can be used for the purpose 4. It is useful in arriving historical
of quotations. cost only.
5. It helps in keeping 5. It shows the material actually
quantitative control on drawn from stores.
materials drawn through
material requisition.

(Any Four Points)

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