CA Inter P4 · Chapter 6
Cost Sheet MCQs with Answers
9 multiple-choice questions on Cost Sheet for CA Inter P4 Cost and Management Accounting. Try each one before revealing the answer and explanation.
Practise this chapter interactivelyQuestion 1
From the following, calculate the prime cost: opening stock of raw material ₹40,000; purchases of raw material ₹3,20,000; carriage inward ₹8,000; closing stock of raw material ₹52,000; direct wages ₹1,85,000; direct expenses ₹24,000.
- A) ₹5,17,000
- B) ₹5,37,000
- C) ₹5,25,000
- D) ₹5,01,000
Show answer & explanation
Answer: C) ₹5,25,000
Materials consumed = ₹40,000 + ₹3,20,000 + ₹8,000 - ₹52,000 = ₹3,16,000. Prime cost = materials consumed + direct wages + direct expenses = ₹3,16,000 + ₹1,85,000 + ₹24,000 = ₹5,25,000. Carriage inward is part of the cost of material.
Question 2
Prime cost is ₹5,25,000 and factory overheads are ₹1,40,000. Opening work-in-progress is ₹30,000 and closing work-in-progress is ₹45,000. The works (factory) cost is:
- A) ₹6,50,000
- B) ₹6,65,000
- C) ₹6,80,000
- D) ₹5,10,000
Show answer & explanation
Answer: A) ₹6,50,000
Gross works cost = prime cost + factory overheads = ₹5,25,000 + ₹1,40,000 = ₹6,65,000. Works cost = gross works cost + opening WIP - closing WIP = ₹6,65,000 + ₹30,000 - ₹45,000 = ₹6,50,000.
Question 3
Cost of production for the year is ₹7,20,000. Opening stock of finished goods is ₹60,000 and closing stock of finished goods is ₹80,000. The cost of goods sold is:
- A) ₹7,40,000
- B) ₹7,20,000
- C) ₹8,60,000
- D) ₹7,00,000
Show answer & explanation
Answer: D) ₹7,00,000
Cost of goods sold = cost of production + opening finished goods - closing finished goods = ₹7,20,000 + ₹60,000 - ₹80,000 = ₹7,00,000.
Question 4
In a cost sheet, the cost of primary packing (packing without which the product cannot be sold, such as a bottle for a soft drink) is treated as part of:
- A) Selling overheads
- B) Distribution overheads
- C) General administration overheads
- D) Cost of production
Show answer & explanation
Answer: D) Cost of production
Primary packing is essential to make the product saleable, so it is included in the cost of production. Secondary packing, which is used mainly for transport or display and promotion, is treated as distribution or selling overhead.
Question 5
Which of the following items is excluded from the cost sheet?
- A) Depreciation of factory machinery
- B) Salary of the factory supervisor
- C) Loss on sale of an old machine
- D) Carriage outward on goods sold
Show answer & explanation
Answer: C) Loss on sale of an old machine
A loss on sale of a fixed asset is a purely financial item that does not form part of the cost of producing or selling goods, so it appears only in the financial accounts. Depreciation of machinery and supervisor's salary are factory overheads, and carriage outward is a distribution overhead.
Question 6
Cost of sales of a product is ₹8,40,000. The company wants to earn a profit of 20% on sales. The selling price should be:
- A) ₹10,08,000
- B) ₹11,20,000
- C) ₹10,50,000
- D) ₹6,72,000
Show answer & explanation
Answer: C) ₹10,50,000
If profit is 20% of sales, cost is 80% of sales. Sales = ₹8,40,000 / 0.80 = ₹10,50,000, and profit = ₹2,10,000, which is 20% of ₹10,50,000. Adding 20% to cost (₹10,08,000) gives a profit of only 16.67% on sales.
Question 7
Sale proceeds of normal scrap arising in the factory are generally treated in the cost sheet as:
- A) An addition to sales revenue
- B) A deduction from selling and distribution overheads
- C) A deduction from the works (factory) cost
- D) A credit to the Costing Profit and Loss Account
Show answer & explanation
Answer: C) A deduction from the works (factory) cost
Scrap arising in the normal course of production reduces the cost of manufacture, so its realisable value is deducted in arriving at works cost (and hence cost of production). Showing it as sales or in the Costing Profit and Loss Account would overstate the cost of production.
Question 8
A company produced 12,000 units and sold 10,000 units; there was no opening stock. Direct material ₹6,00,000; direct labour ₹3,60,000; factory overheads 20% of prime cost; general administration overheads (not related to production) ₹1,08,000; selling and distribution overheads ₹3 per unit sold. Following the current ICAI cost sheet format, closing stock is valued at cost of production. The cost of sales is:
- A) ₹10,98,000
- B) ₹10,80,000
- C) ₹12,90,000
- D) ₹11,04,000
Show answer & explanation
Answer: A) ₹10,98,000
Factory overheads = 20% x (₹6,00,000 + ₹3,60,000) = ₹1,92,000, so works cost = cost of production = ₹11,52,000, i.e. ₹96 per unit (in the current ICAI format only administration overheads relating to production form part of cost of production). Closing stock = 2,000 x ₹96 = ₹1,92,000, so cost of goods sold = 10,000 x ₹96 = ₹9,60,000. Add general administration overheads ₹1,08,000 (a period cost added after cost of goods sold, not carried in stock) and selling and distribution overheads 10,000 x ₹3 = ₹30,000. Cost of sales = ₹10,98,000. Treating general administration overheads as part of cost of production (the older format) would wrongly carry ₹18,000 of them in closing stock and give ₹10,80,000.
Question 9
Carriage outward incurred on delivering goods to customers is classified as:
- A) Direct expense
- B) Distribution overhead
- C) Factory overhead
- D) Part of material cost
Show answer & explanation
Answer: B) Distribution overhead
Carriage outward is incurred after production is complete, in delivering goods to customers, so it is a distribution overhead and appears after the cost of goods sold in the cost sheet. Carriage inward, by contrast, forms part of the cost of materials.