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CA Inter Suggested answers for Cost and Management Accounting Subject
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CA Inter Suggested answers for Cost and Management Accounting Subject

CA Inter Suggested answers for Cost and Management Accounting Subject

  • 22-January-2022
  • CA-Inter
CA Inter Dec 2021 Cost and Management Accounting Question Paper:

ICAI CA Inter Dec 2021 Question 1 (a)

XYZ Ltd uses two types of raw materials - ‘Material A’ and ‘Material B’ in the production process and has provided the following data in the year ended on 31st March 2021:

ParticularsMaterial A (Rs.)Material B (Rs.)
Opening stock as on 01.04.202030,00032,000
Purchase during the year90,00051,000
Closing stock as on 31.03.202120,00014,000

(i) You are required to calculate:

(a) The inventory ratio of ‘material A’ and ‘Material B’.

(b) The number of days for which the average inventory is held for both materials ‘A’ and ‘B’.

(ii) Based on above calculations, give your comments.

(Assume 360 days in a year.)

ICAI CA Inter Dec 2021 Question 1 (b)

The Accountant of KPMR Ltd. has prepared the following budget for the coming year 2022 for its two products ‘AYE’ and ‘ZYE’:

ParticularsProduct ‘AYE’Product ‘ZYE’
Production and Sales (in Units)4,0003,000
 Amount (in Rs.)Amount (in Rs.)
Selling Price per unit200 180
Direct Material per unit8070
Direct Labour per unit4035
Variable Overhead per unit2025

After reviewing the above budget, the management has called the marketing team for suggesting some measures for increasing the sales. The marketing team has suggested that by promoting, the products can be increased by 5%. Also, the selling price per unit will go up by 10%. But this will result in increase in expenditure on variable overhead and fixed overhead by 20% and 5% respectively for both the products.
You are required to prepare flexible budget for both the products:

(i) Before promotion on social media,

(ii) After promotion on social media.

ICAI CA Inter Dec 2021 Question 1 (c)

A skilled worker is paid a guaranteed wage rate of Rs. 150 per hour. The standard time allowed for a job is 10 hours. He took 8 hours to complete the job. He has been paid the wages under Rowan Incentive Plan.

You are required to:

Calculate an effective hourly rate of earnings under Rowan Incentive Plan.

Calculate the time in which he should complete the job, if the worker is placed under Halsey Incentive Scheme (50%) and he wants to maintain the same effective hourly rate earnings.

ICAI CA Inter Dec 2021 Question 1 (d)

A product passes through Process-I and Process-II.

Particulars pertaining to the Process-I are:

Materials issued to Process-I amount to Rs. 80,000, Wages Rs. 60,000 and manufacturing overheads were Rs. 52,500. Normal Loss anticipated was 5% of input. 9,650 units of output were produced and transferred out from Process-I to Process II. Input raw material issued to Process I were 10,000 units.
There were no opening stocks.

Scrap has realizable value of Rs. 5 per unit.

You are required to prepare:

Process-I Account

Abnormal Gain/Loss Account

ICAI CA Inter Dec 2021 Question 2 (a)

G Ltd. manufactures leather bags for office and school purpose.

The following information is related with the production of leather bags for the month of September 2021.

1) Leather sheets and cotton clothes are the main inputs, and the estimated requirement per bag is two meters of leather sheets and one meter of cloths. 2,000 meters of leather sheets and 1,000 meters of cotton cloths are purchased at Rs. 3,20,000 and Rs. 15,000 respectively. Freight paid on purchases is Rs. 8,500. 

2) Stitching and finishing need 2,000-man hours at Rs. 80 per hour.

Other direct costs of Rs. 10 per labor hour is incurred.

G Ltd have 4 machines at a total cost of Rs. 22,00,000. Machines have a life of 10 year with a scrap value of 10% of the original cost. Depreciation is charged on a straight-line method.

5) The monthly cost of administration and sales office staffs are Rs. 45,000 and Rs. 72,000 respectively. G Ltd pays Rs. 1,20,000 per month as rent for a 2,400 sq. feet factory premises. The administrative and sales office occupies 240 sq. feet and 200 sq. feet respectively of factory space.

Freight paid on delivery of finished bags is Rs. 18,000.

 During the month, 35kgs of scrap (cuttings of leather and cotton) are sold at Rs. 150 per kg.

There are no opening and closing stocks of input materials. There is a finished stock of 100 bags in stock at the end of the month.

You are required to prepare a cost sheet in respect of above for the month of September 2021 showing:

(i) Cost of Raw Material Consumed

(ii) Prime Cost

(iii) Works/Factory Cost

(iv) Cost of Production

(v) Cost of Goods Sold

(vi) Cost of Sales

ICAI CA Inter Dec 2021 Question 2 (b)

AZ company has prepared its budget for the production of 2,00,000 units. The variable cost per unit is Rs. 16 and fixed cost is Rs. 4 per unit. The company fixes its selling price to fetch a profit of 20% on total cost.

You are required to calculate:

i)  Present break-even sales (in Rs and in quantity).

ii)  Present profit-volume ratio.

iii) Revised break-even sales in Rs and the revised profit-volume ratio, if it reduces its selling price by 10%.

iv)What would be revised sales – in quantity and the amount, if a company desire a Profit increase of 20% more than the budgeted profit and selling price is reduced by 10% as above in point(iii).

ICAI CA Inter Dec 2021 Question 3 (a)

Paras Travels provides mini buses to an IT company for carrying its employees from home to office and dropping back after office hours. It runs a fleet of 8 mini buses for this purpose. The buses are parked in a garage adjoining the company’s premises.The company is operating in two shits (one shift in the morning and one shift in the afternoon). The distance travelled by each mini bus one way is 30kms. The company works for 20 days in a month.

The seating capacity of each mini bus is 30 persons. The seating capacity is normally 80% occupied during the year. The details of expenses incurred for a year are as under:

Driver’s salaryRs. 20,000 per drive per month
Lady attendant’s salary (mandatorily required for each mini bus)Rs. 10,000 per attendant per month
Cleaner’s salary (One cleaner for 2 mini buses)Rs. 15,000 per cleaner per month
Diesel (Avg. 8 kms per litre)Rs. 80 per litre
Insurance charges (per annum)2% of Purchase Price 
License fees and taxesRs. 5,080 per mini bus per month
Garage rent paid
Rs. 24,000 per month
Repair & maintenance including engine oil and lubricants (for every 5,760 kms)
Rs. 2,856 per mini bus
Purchase Price of mini bus
Rs. 15,00,000 each
Residual life of mini bus
8 Years
Scrap value per mini bus at the end of residual life
Rs. 3,00,000

Paras Travels charge two types of fare from the employees. Employees coming from a distance of beyond 15 kms away from the office are charged double the fare which is charged from employees coming from a distance of up-to 15kms. Away from the office. 50% of employees travelling in each trip are coming from a distance beyond 15 kms. From the office. The charges are to be based on average cost.

You are required to:

i. Prepare a statement showing expenses of operating a single mini bus for a year,
ii. Calculate the average cost per employee per month in respect of:

a. Employees coming from a distance up to 15 kms. from the office.
b. Employees coming from a distance beyond 15 kms. from the office.

ICAI CA Inter Dec 2021 Question 3 (b)

A Drug store is presently selling three types of drugs namely ‘Drug A’, ‘Drug B’ and ‘Drug C’. Due to some constraints, it has decided to go for only one product line of drugs. It has provided the following data for the year 2020-21 for each product line:

 Drugs Types
Revenues (in Rs.)74,50,0001,11,75,0001,86,25,000
Cost of goods sold (in Rs.)41,44,50068,16,7501,20,63,750
Number of purchase orders placed (in nos.)560810630
Number of deliveries received
Hours of shelf-stocking time
Units sold (in Nos)

The following additional information is also provided:

ActivityDescription of activityTotal Cost (Rs.)Cost-allocation base
Drug License feeDrug License fee5,00,000To be distributed in ratio 2:3:5 between A,B and C
OrderingPlacing of orders for purchases8,30,0002,000 purchase order
DeliveryPhysical delivery and receipt of goods 18,20,0002,800 deliveries
Shelf stockingStocking of goods32,40,0004,500 hours of shelf-stocking time
Customer SupportAssistance provided to customers28,20,0004,70,000 units sold

You are required to:

i. Calculate the operating income and operating income as a percentage (%) of revenue of each product line if:

    aAll the support costs (Other than cost of goods sold) are allocated in the ratio of cost pf goods sold.,

     b. All the support costs (Other than cost of goods sold) are allocated using activity-based costing system.

ii. Give your opinion about choosing the product line on the basis of operating income as a percentage (%) of revenue of each product line under both the situations as above.

ICAI CA Inter Dec 2021 Question 4 (a)

A construction company has obtained a contract of Rs. 30 lakhs contract price.
The following details are available in respect of this contract for the year ended March 31, 2022:

Materials purchased2,00,000
Materials issued from stores8,00,000
Wages paid1,50,000
Plant Supervisor Salary2,40,000
Drawing and maps 
Sundry expenses
Electricity charges
Plant hire expenses paid
Sub-contract cost
Materials returned to stores
Materials returned to suppliers

The following balances related to the contract for the year ended on March 31,2020, and March 31, 2022 are available:

 As on 31st March, 2020 (Rs.)As on 31st March, 2021 (Rs.)
Work certified2,50,00070% of Contract Price
Work uncertified10,000?
Materials at site 35,00025,000
Wages outstanding 15,00022,000
Plant hire charge outstanding 

Further information are as under:

1. An additional plant was used for 270 days costing Rs. 5,00,000 with a residual value of Rs. 20,000 having life of 4 years.

2. During the year, material costing Rs. 40,000 was sold for Rs. 20,000.

3. Plant supervisor has devoted 1/3rd of his time to this contract.

4. As on 31-03-2021, 80% of the contract was completed.

You are required to prepare Contract Account and show the notional profit or loss as on 31st March, 2021. (Assume 360 days in a year.)

ICAI CA Inter Dec 2021 Question 4 (b)

R Ltd. showed a Net Profit of Rs. 3,60,740 as per their cost accounts for the year ended 31st March, 2021.

The following information was revealed as a result of scrutiny of the figures from the both sets of accounts:

Sr. No.ParticularsRs.
i.Over recovery of selling overheads in cost accounts10,250
ii.Over valuation of closing stock in cost accounts7,300
iii.Rent received credited in financial accounts5,450
iv.Bad debts provided in financial accounts 3,250
v.Income tax provided in financial accounts15,900
vi.Loss on sale of capital asset debited in financial accounts
vii.Under recovery of administration overheads in cost accounts


Prepare a reconciliation statement showing the profit as per financial records.

ICAI CA Inter Dec 2021 Question 4 (b)

What is Bill of material? Describe the uses of bill of Material in following departments:

i. Purchases Department

ii. Production Department

iii. Store Department

iv. Stores Department

v. Cost/Accounting Department

ICAI CA Inter Dec 2021 Question 5 (a)

In a manufacturing company the standard units of production for the year were fixed at 1,20,000 units and overhead expenditures were estimated to be as follows:

ParticularsAmount (Rs.)
Semi-variable  (60% expenses are of fixed nature and 40% are of variable nature)1,80,000

Actual production during the month of April,2021 was 8,000 units. Each month has 20 working days. During the month there was one public holiday. The actual overheads were as follows:

 Amount (Rs.)
Semi-variable (60% expenses are of fixed nature and 40% are variable)19,200

You are required to calculate the following variances for the month of April 2021:

i. Overhead Cost variance

ii. Fixed Overhead Cost variance

iii.Variable Overhead Cost variance

iv.Fixed Overhead Volume variance

v. Fixed overhead Expenditure Variance

vi Calendar Variance

ICAI CA Inter Dec 2021 Question 5 (b)

XYZ Ltd. manufactures a single product. It recovers factory overheads at a pre-determined rate of Rs.20 per man-day.

During the year 2020-21, the total factory overheads incurred and the man-days actually worked were Rs.35.50 lakhs and 1.50 lakh days respectively. Out the amount of  Rs. 35.50 lakhs, Rs.2.00 lakhs were in respect of wages for strike period and Rs.1.00 lakh was in respect of expenses of pervious year booked in this current year. During the period, 50,000 units were sold. At the end of the period, 12,000 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 20,000 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. You are required to:

(i) Calculate the amount of unabsorbed overheads during the year 2020-21.

(ii) Show the accounting treatment of unabsorbed overheads in cost accounts and pass journal entry.

ICAI CA Inter Dec 2021 Question 6 (a)

Briefly explain the ‘techniques of costing’.

ICAI CA Inter Dec 2021 Question 6 (b)

Narrate the teams ‘Joint Products’ and ‘By-Products’ with an example of each term.

ICAI CA Inter Dec 2021 Question 6 (c)

Discuss the steps involved in setting labour time standards .

ICAI CA Inter Dec 2021 Question 6 (d)

What is ‘Budgetary Control System’ and discuss the components of the same.

ICAI CA Inter Dec 2021 Question 6 (e)

Describe the difference between ‘Cost Control’ and ‘Cost Reduction.’

 To Download Question Paper, Click Here

Suggested answers for ICAI CA Dec 21 exams Accounting subject were discussed in Youtube Live Sessions by Yash Sir. Watch the videos below:

ICAI CA Dec 21 Suggested Answers | Cost and Management Accounting - Day 5

ICAI CA Dec 21 Suggested Answers | Cost and Management Accounting - Day 6

 To Check ICAI Suggested Answers, Click Here

We hope your doubts are cleared now and the suggested answers helped you.

All the best for your results!

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