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Past papers/ Cost & Mgmt/ May 2026
Paper 4 Qs
Mock Test Paper (MTP) · May 2026

CA Inter Cost & Mgmt

This page contains all 4 questions from the CA Inter Cost & Management Accounting Mock Test Paper (MTP) for the May 2026 attempt cycle, sourced from VSI Jaipur.

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Q.12 02 marks easy Activity ratio calculation ⚡ Try this Q →
Standard hours required for doing a work is 100 hours and budgeted hours is 120 hrs. while the same work is actually completed by workers in 110 hrs. You are required to calculate the activity ratio:
(A) 109.09%
(B) 83.33%
(C) 90.90%
(D) 110%
CTTP

Worked Solution

✓ Verified

Answer: (D)

Activity Ratio is a key metric in standard costing and overhead variance analysis. It measures the actual hours of work performed against the standard hours required for the same output.

The formula for Activity Ratio is:

Activity Ratio = (Actual hours / Standard hours) × 100

Given data:
- Standard hours required = 100 hours
- Budgeted hours = 120 hours
- Actual hours worked = 110 hours

Calculating Activity Ratio:
Activity Ratio = (110 / 100) × 100 = 110%

This ratio of 110% indicates that the workers required 10% more hours than the standard, signifying an efficiency loss of 10% relative to the standard benchmark. The budgeted hours (120) are contextual information but not used in the Activity Ratio formula—Activity Ratio specifically compares actual performance to the standard.

PLAN

Write it like this

Time target 3 min 36 sec

1The skeleton

- Write the formula first, before any numbers — examiners for MCQs scan for 'Activity Ratio = (Actual Hours / Standard Hours) × 100' as the first line; missing it costs the formula mark even if your answer is right.
- Label every given clearly in one line — jot 'SH = 100, BH = 120, AH = 110' so the examiner sees you identified the data correctly; it signals you won't make a substitution error.
- Cross out the red herring explicitly — state 'Budgeted hours (120) are not used in Activity Ratio'; this one line shows you know WHY, not just HOW, and separates you from students who panic about the extra number.

2Examiner-rewarded phrases

“Activity Ratio = (Actual Hours Worked / Standard Hours for Actual Output) × 100”“The activity ratio indicates the level of activity achieved relative to the standard”“Budgeted hours are relevant for Capacity Ratio, not Activity Ratio”

3Common trap

Don't fall for this

Watch out — most students either plug in Budgeted hours (120) somewhere in the formula because it feels wrong to ignore it, OR they flip numerator and denominator and get 90.9% instead of 110%. The three overhead ratios (Activity, Efficiency, Capacity) share the same three numbers but in different slots — nail which number sits where for each ratio before you enter the exam hall.

🎯 Practice more Activity ratio calculation questions →
Q.13 02 marks easy Service costing - cost per rupee of insured value ⚡ Try this Q →
BCIC Ltd. is an insurance company. It launched a new term insurance policy named as Protection Plus. The total cost for the policy during the year is ₹ 1,60,00,000. Total number of policies sold is 410 and total insured value of policies is ₹ 920 crore. What is the cost per rupee of insured value?
(A) ₹ 0.0017
(B) ₹ 0.18
(C) ₹ 575
(D) ₹ 2.24
CTTP

Worked Solution

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Answer: (A)

In service costing for insurance policies, the cost per rupee of insured value measures the cost incurred per unit of insured value. This is calculated by dividing the total cost of the policy by the total insured value.

The formula is straightforward: Cost per Rupee of Insured Value = Total Cost ÷ Total Insured Value. Since the insured value is given in crores, we must ensure unit consistency before dividing.

Service Costing PrinciplesCost Accounting Standards
PLAN

Write it like this

Time target 3 min 36 sec

1The skeleton

- Write the formula first, then substitute — examiners award method marks separately from the final answer, so a bare number with no formula shown gets zero method credit even if correct.
- Convert units BEFORE dividing — Total Cost is ₹1,60,00,000 and Insured Value is ₹920 crore; express both in crores (₹1.6 crore ÷ ₹920 crore) so the rupee-per-rupee ratio is dimensionally clean.
- Ignore the 410 policies figure deliberately — it's planted as a distractor; your working should show you considered and rejected it, which signals examiner-level understanding.

2Examiner-rewarded phrases

“Cost per rupee of insured value = Total cost of policy ÷ Total insured value”“composite cost unit / cost unit for insurance is 'per rupee of insured value'”“unit consistency must be maintained before computing the cost unit”

3Common trap

Don't fall for this

Watch out — most students divide total cost by number of policies (410) and compute 'cost per policy' instead of 'cost per rupee of insured value'. These are two different cost units in service costing, and picking the wrong denominator kills both marks even if your arithmetic is spotless.

🎯 Practice more Service costing - cost per rupee of insured valu questions →
Q.14 02 marks easy Joint cost allocation - NRV method ⚡ Try this Q →
ICT Ltd. belongs to pharmaceutical industries. The chemical process that ICT Ltd. operates converts one compound into three category of medicines viz. BetaTab, Folick and TegriCap. Though BetaTab and Folick are already converted to final product at split-off point, TegriCap needs further processing along with addition of new compound with it. The market for BetaTab and Folick is highly active, thus the production is sold at split-off point, however, TegriCap can be sold only after further processing. Following information is provided for the current year: BetaTab: 372 tons sold @ ₹ 7,500 per ton Folick: 1,054 tons sold @ ₹ 5,625 per ton TegriCap: 1,472 tons sold @ ₹ 3,750 per ton The selling price is expected to remain the same for coming years. Total joint manufacturing costs till split-off point: ₹ 62,50,000. Further processing cost for TegriCap: ₹ 31,00,000. Closing inventories (completed units): BetaTab: 360 tons; Folick: 120 tons; TegriCap: 50 tons. You are required to COMPUTE the joint cost allocated to BetaTab, Folick and TegriCap using Net Realizable Value (NRV) method.
(A) BetaTab- ₹ 15,65,481; Folick - ₹ 33,26,647 and TegriCap - ₹ 13,57,872
(B) BetaTab - ₹ 23,33,985; Folick - ₹ 28,07,478 and TegriCap - ₹ 11,08,537
(C) BetaTab - ₹ 19,27,533; Folick - ₹ 23,18,570 and TegriCap - ₹ 20,03,897
(D) BetaTab - ₹ 11,08,537; Folick - ₹ 28,07,478 and TegriCap - ₹ 23,33,985
CTTP

Worked Solution

✓ Verified

Answer: (C)

The NRV method allocates joint costs based on the Net Realizable Value of each product at the split-off point. The key is to recognize that for joint cost allocation purposes, we use the final selling prices of all products, including those requiring further processing.

Calculation Steps:

1. Determine total units produced (sold + closing inventory):
- BetaTab: 372 + 360 = 732 tons
- Folick: 1,054 + 120 = 1,174 tons
- TegriCap: 1,472 + 50 = 1,522 tons

2. Calculate NRV at split-off point using final selling prices for all products:
- BetaTab: 732 × ₹7,500 = ₹54,90,000
- Folick: 1,174 × ₹5,625 = ₹66,03,750
- TegriCap: 1,522 × ₹3,750 = ₹57,07,500
- Total NRV = ₹1,78,01,250

3. Calculate allocation ratios based on relative NRV:
- BetaTab: ₹54,90,000 ÷ ₹1,78,01,250 = 0.308403
- Folick: ₹66,03,750 ÷ ₹1,78,01,250 = 0.370771
- TegriCap: ₹57,07,500 ÷ ₹1,78,01,250 = 0.320626

4. Allocate joint cost of ₹62,50,000 in these proportions:
- BetaTab: ₹62,50,000 × 0.308403 = ₹19,27,533
- Folick: ₹62,50,000 × 0.370771 = ₹23,18,570
- TegriCap: ₹62,50,000 × 0.320626 = ₹20,03,897

Note: The further processing cost of ₹31,00,000 is a separable cost specific to TegriCap and is not deducted when calculating the split-off point value for allocation purposes. The final selling price reflects the total economic value created, and allocation is made based on proportionate value contributed by each product.

AS 16 (Accounting Standard on Borrowing Costs) for cost allocation principlesAS 2 (Valuation of Inventories) for joint product valuationText on Cost Accounting - NRV Method for Joint Cost Allocation
PLAN

Write it like this

Time target 3 min 36 sec

1The skeleton

- Start with total production = units sold + closing inventory — examiners dock marks if you allocate on sold units alone; this one step separates toppers from the rest.
- Build a 3-column NRV table (Product | Total Units | Selling Price | NRV ₹) — a clean table tells the examiner you know the method; a paragraph of numbers tells them you're guessing.
- Use final selling price for ALL products including TegriCap WITHOUT deducting further processing cost — in NRV method under ICAI's treatment here, separable costs are NOT netted off at the allocation stage; flag this explicitly so the examiner sees you know the distinction.
- Show ratio = individual NRV ÷ total NRV as a decimal or percentage before multiplying — never skip the ratio line, it's worth partial marks even if your final number is off.
- Box or bold the three final allocated amounts — for MCQ workings, your last line must visually match one of the options; if it doesn't, circle back to units, not ratios.

2Examiner-rewarded phrases

“Joint costs are allocated on the basis of Net Realisable Value (NRV) at split-off point”“Total units produced = Units sold + Closing inventory of finished goods”“Further processing cost is a separable cost and is excluded from NRV computation for allocation purposes”

3Common trap

Don't fall for this

The single biggest killer here: most students deduct the ₹31,00,000 further processing cost from TegriCap's revenue before computing NRV — that feels 'correct' by definition, but ICAI's model answer treats the final selling price as the NRV without that deduction. If you follow the 'textbook' NRV formula and subtract separable costs, you'll land on a completely different ratio and tick the wrong option.

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Q.15 02 marks easy Economic Batch Quantity (EBQ) ⚡ Try this Q →
A company manufactures eye-glass frames at the rate of 1,200 frames per month. The company wants to determine the most economical production batch size to minimize total setup and holding costs. The following information is available: Setup cost per batch = ₹ 7,200; Cost per unit = ₹ 3,240; Carrying cost = 10% per annum (including storage, cost of capital, and obsolescence). What is the Economic Batch Quantity (EBQ)?
(A) 230 frames
(B) 566 frames
(C) 800 frames
(D) 1,200 frames
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