This chapter-wise practice test covers Chapter 6: Cost Sheet - Test 3 for CA Intermediate Group 2 students preparing for the January 2027 examination attempt. It carries 40 marks across 20 questions in case scenarios and standalone practical MCQs with a time limit of 45 minutes and no negative marking.
20 questions across 1 chapter, 40 marks and 45 minutes in the timed paper. Every answer below is shown with the working behind it and the authority it rests on.
Law and standards used: ICAI Study Material for CA Intermediate Paper 4: Cost and Management Accounting (relevant for 2027 attempt).
Questions
20
Marks
40
Time limit
45 minutes
Attempt
January 2027
Group
Group 2
Law basis
ICAI Study Material for CA Intermediate Paper 4: Cost and Management Accounting (relevant for 2027 attempt)
Content as of
2026-11-10
Chapters covered
Chapter 6: Cost Sheet (20 Q)
Questions, answers and explanations
Question 1 · 2 marks · Chapter 6: Cost Sheet · medium
Scenario. Zenith Consumer Care Ltd manufactures herbal shampoo at its Pune plant. For the year ended 31 March 2026, the cost accountant reported cost of production of ₹24,00,000 for 12,000 units. Opening finished goods were 800 units valued at ₹200 each, while closing finished goods were 1,200 units valued at cost of production per unit. General administrative overheads were ₹1,80,000. Selling overheads comprised advertisement ₹95,000 and sales staff salary ₹1,25,000. Distribution overheads comprised transport to customers ₹80,000 and warehousing ₹45,000. Secondary packing cost ₹6 per unit sold; primary packing was already included in cost of production. The company sold 11,600 units during the year and there was no abnormal loss. It also incurred interest on a term loan ₹60,000, penalty for late GST filing ₹15,000, donation ₹25,000, and earned profit on sale of an old machine ₹40,000. GST input credit is available. The management wants to fix the selling price after covering cost of sales before finance charges and earning a target profit. The accountant is preparing a conventional cost sheet and needs to classify general administration, selling and distribution costs, secondary packing and excluded items correctly. Answer the following questions.
What is the cost of sales before finance charges for the year ended 31 March 2026?
₹28,45,000
₹29,74,600
₹29,14,600 (correct answer)
₹27,34,600
Answer: C — ₹29,14,600
Explanation. COP per unit = ₹24,00,000 ÷ 12,000 = ₹200. COGS = ₹24,00,000 + 800 × ₹200 − 1,200 × ₹200 = ₹23,20,000. Secondary packing = 11,600 × ₹6 = ₹69,600. Cost of sales before finance charges = ₹23,20,000 + general admin ₹1,80,000 + selling ₹2,20,000 + distribution ₹1,25,000 + secondary packing ₹69,600 = ₹29,14,600. Option a omits secondary packing; option b includes interest; option d omits general administration.
Where it goes wrong. Omitting secondary packing or wrongly including interest and penalty in operating cost of sales.
Question 2 · 2 marks · Chapter 6: Cost Sheet · hard
If the company desires a profit of 20% on sales, what total sales revenue is required?
₹34,97,520
₹36,43,250 (correct answer)
₹35,00,000
₹36,00,000
Answer: B — ₹36,43,250
Explanation. For a target profit of 20% on sales, sales revenue = cost of sales before finance charges ÷ (1 − 0.20) = ₹29,14,600 ÷ 0.80 = ₹36,43,250. Option a adds 20% to cost, which gives 16.67% profit on sales, not 20%. Options c and d do not use the required cost base and profit margin.
Where it goes wrong. Adding profit percentage to cost instead of dividing by (1 − profit on sales percentage).
Question 3 · 2 marks · Chapter 6: Cost Sheet · medium
If profit is 20% on sales, what is the equivalent profit percentage on cost?
20%
16.67%
30%
25% (correct answer)
Answer: D — 25%
Explanation. Let sales = ₹100. Profit at 20% on sales = ₹20, so cost = ₹80. Profit on cost = ₹20 ÷ ₹80 × 100 = 25%. Option a repeats profit on sales; option b is the reciprocal conversion error; option c is an arbitrary higher percentage.
Where it goes wrong. Assuming profit on cost equals profit on sales without converting using the cost base.
Question 4 · 2 marks · Chapter 6: Cost Sheet · hard
How should interest on term loan ₹60,000 be treated in the cost statement?
Included in cost of production
Excluded from cost of production and shown separately as an item of cost of sales (correct answer)
Included in general administrative overheads
Deducted from sales revenue
Answer: B — Excluded from cost of production and shown separately as an item of cost of sales
Explanation. Interest and finance charges are not included in cost of production. As per the conventional cost sheet, they are presented separately in the cost statement as an item of cost of sales. Option a wrongly capitalises interest in production cost; option c mixes finance cost with administration; option d treats it as a revenue deduction.
Where it goes wrong. Including finance charges in cost of production or general administration.
Question 5 · 2 marks · Chapter 6: Cost Sheet · medium
Scenario. Vikram Steels Ltd produces alloy pins at its Raipur works. For the quarter ended 30 September 2026, cost of production was ₹18,00,000 for 20,000 units. Opening finished goods were 1,000 units valued at ₹90 each. Closing finished goods were 1,500 units valued at cost of production per unit. General administrative overheads were ₹1,20,000. Selling overheads included sales commission at 5% of sales revenue of ₹28,00,000 and advertisement ₹65,000. Distribution overheads were ₹75,000. Secondary packing cost was ₹5 per unit sold. The company also paid interest on a working capital loan ₹45,000 and damages for breach of contract ₹20,000. GST input credit is available. There was no abnormal loss and the company values finished goods at cost of production per unit. The accountant is preparing a conventional cost sheet to determine cost of goods sold, cost of sales before finance charges, profit before finance charges and the correct treatment of damages. Answer the following questions.
What is the cost of goods sold for the quarter ended 30 September 2026?
₹18,00,000
₹17,10,000
₹18,45,000
₹17,55,000 (correct answer)
Answer: D — ₹17,55,000
Explanation. COP per unit = ₹18,00,000 ÷ 20,000 = ₹90. COGS = cost of production ₹18,00,000 + opening FG 1,000 × ₹90 − closing FG 1,500 × ₹90 = ₹18,00,000 + ₹90,000 − ₹1,35,000 = ₹17,55,000. Option a ignores finished goods adjustment; option b deducts opening FG instead of adding; option c adds closing FG.
Where it goes wrong. Reversing opening and closing finished goods adjustment.
Question 7 · 2 marks · Chapter 6: Cost Sheet · medium
What is the profit before finance charges for the quarter?
₹6,00,000
₹5,02,500
₹5,47,500 (correct answer)
₹5,27,500
Answer: C — ₹5,47,500
Explanation. Profit before finance charges = sales revenue ₹28,00,000 − cost of sales before finance charges ₹22,52,500 = ₹5,47,500. Option b deducts interest ₹45,000 also; option d deducts damages ₹20,000 also; option a ignores the computed cost of sales and uses a round figure.
Where it goes wrong. Deducting interest or damages while computing profit before finance charges.
Question 8 · 2 marks · Chapter 6: Cost Sheet · hard
How should damages paid for breach of contract ₹20,000 be treated in the cost statement?
Included in distribution overheads
Excluded from cost as penalty and damages (correct answer)
Included in general administration overheads
Deducted from selling overheads
Answer: B — Excluded from cost as penalty and damages
Explanation. Penalty, fine, damages and demurrage are not part of cost as per cost accounting principles. They are excluded from cost of production and cost of sales. Option a and c wrongly classify damages as normal overhead; option d wrongly nets it against selling overhead.
Where it goes wrong. Treating penalty or damages as a normal administrative or distribution overhead.
Question 9 · 2 marks · Chapter 6: Cost Sheet · medium
Scenario. General administrative overheads are included in which cost head?
General administrative overheads are included in which cost head?
Cost of sales (correct answer)
Cost of production
Factory cost
Prime cost
Answer: A — Cost of sales
Explanation. General administration overheads relate to overall management and administration and are not production-related. They are added after cost of goods sold to arrive at cost of sales. Option b confuses production-related administration with general administration; option c and d are earlier cost heads.
Where it goes wrong. Including general administration in cost of production instead of cost of sales.
Question 10 · 2 marks · Chapter 6: Cost Sheet · hard
Scenario. Secondary packing cost is part of:
Secondary packing cost is part of:
Prime cost
Factory cost
Cost of production
Cost of sales (correct answer)
Answer: D — Cost of sales
Explanation. Primary packing is essential to hold and preserve the product and is included in cost of production. Secondary packing enables storage, transport and promotion and is added in cost of sales. Option a, b and c wrongly treat secondary packing as a production-stage cost.
Where it goes wrong. Confusing secondary packing with primary packing and including it in cost of production.
Question 11 · 2 marks · Chapter 6: Cost Sheet · medium
Scenario. Cost of sales is ₹8,00,000. The company wants a profit of 25% on cost. What is the selling price?
Cost of sales is ₹8,00,000. The company wants a profit of 25% on cost. What is the selling price?
₹9,60,000
₹10,00,000 (correct answer)
₹10,40,000
₹10,66,667
Answer: B — ₹10,00,000
Explanation. Selling price = cost of sales + 25% of cost = ₹8,00,000 × 1.25 = ₹10,00,000. Option a uses 20% on cost; option c uses 30% on cost; option d divides cost by 0.75, which gives 33.33% on cost and is a profit-on-sales conversion trap.
Where it goes wrong. Using cost ÷ (1 − profit on sales) when profit is stated on cost.
Question 12 · 2 marks · Chapter 6: Cost Sheet · hard
Scenario. Cost of sales is ₹9,60,000. The company wants a profit of 20% on sales. What is the selling price?
Cost of sales is ₹9,60,000. The company wants a profit of 20% on sales. What is the selling price?
₹11,52,000
₹11,80,000
₹12,00,000 (correct answer)
₹12,50,000
Answer: C — ₹12,00,000
Explanation. For profit of 20% on sales, cost is 80% of sales. Selling price = ₹9,60,000 ÷ 0.80 = ₹12,00,000. Option a adds 20% to cost, giving 16.67% profit on sales; option b and d do not follow the required conversion.
Where it goes wrong. Adding 20% to cost when the profit margin is expressed on sales.
Question 13 · 2 marks · Chapter 6: Cost Sheet · medium
Scenario. If profit is 25% on cost, what is the profit percentage on sales?
If profit is 25% on cost, what is the profit percentage on sales?
25%
30%
16.67%
20% (correct answer)
Answer: D — 20%
Explanation. Let cost = ₹100. Profit at 25% on cost = ₹25, so sales = ₹125. Profit on sales = ₹25 ÷ ₹125 × 100 = 20%. Option a repeats profit on cost; option c is the conversion for a different margin; option b is arbitrary.
Where it goes wrong. Assuming profit on sales equals profit on cost without converting using sales as the base.
Question 14 · 2 marks · Chapter 6: Cost Sheet · hard
Scenario. If profit is 16⅔% on sales, what is the equivalent profit percentage on cost?
If profit is 16⅔% on sales, what is the equivalent profit percentage on cost?
20% (correct answer)
16.67%
25%
12.5%
Answer: A — 20%
Explanation. Let sales = ₹100. Profit at 16⅔% on sales = ₹16.67, so cost = ₹83.33. Profit on cost = 16.67 ÷ 83.33 × 100 = 20%. Option b repeats profit on sales; option c is the conversion for 20% on sales; option d is an arbitrary lower rate.
Where it goes wrong. Using profit on sales as profit on cost without dividing by the cost base.
Question 15 · 2 marks · Chapter 6: Cost Sheet · medium
Scenario. Which of the following is excluded from cost accounts?
Which of the following is excluded from cost accounts?
Primary packing cost
Production-related administration cost
Penalty for late GST filing (correct answer)
Quality control cost
Answer: C — Penalty for late GST filing
Explanation. Penalty, fine, damages and demurrage are not part of cost and are excluded from cost accounts. Primary packing, production-related administration and quality control are included in cost of production. Option c is the abnormal/excluded item.
Where it goes wrong. Treating penalty for late GST filing as a normal administrative overhead.
Question 16 · 2 marks · Chapter 6: Cost Sheet · hard
Scenario. Profit on sale of an old machine ₹40,000 should be:
Profit on sale of an old machine ₹40,000 should be:
Deducted from cost of production
Excluded from cost accounts (correct answer)
Added to cost of sales
Reduced from selling overheads
Answer: B — Excluded from cost accounts
Explanation. Profit on sale of a fixed asset is a financial/abnormal item and is excluded from cost accounts. It is not deducted from cost of production or netted against selling overhead. Option b is correct; the other options wrongly mix capital/financial income with product cost.
Where it goes wrong. Reducing product cost by profit on sale of a fixed asset.
Question 17 · 2 marks · Chapter 6: Cost Sheet · medium
Scenario. Interest on a term loan in a cost statement is:
Interest on a term loan in a cost statement is:
Included in factory cost
Included in cost of production
Ignored completely in the cost statement
Presented separately as an item of cost of sales (correct answer)
Answer: D — Presented separately as an item of cost of sales
Explanation. Interest and finance charges are not included in cost of production. They are presented separately in the cost statement as an item of cost of sales. Option a and b wrongly capitalise finance charges; option c ignores a valid separate disclosure.
Where it goes wrong. Including interest in cost of production or ignoring it completely.
Question 18 · 2 marks · Chapter 6: Cost Sheet · hard
Scenario. A subsidy received from the government for using eco-friendly raw materials should be:
A subsidy received from the government for using eco-friendly raw materials should be:
Reduced from the cost of the related product (correct answer)
Added to cost of production
Treated as other income in the cost sheet
Ignored in the cost sheet
Answer: A — Reduced from the cost of the related product
Explanation. As per cost accounting principles, subsidy, grant or incentive received or receivable is reduced from the cost object to which it relates. It is not added to cost, treated as general other income, or ignored. Option a correctly reduces the related product cost.
Where it goes wrong. Adding subsidy to cost or treating it as unrelated income instead of reducing the related cost.
Question 19 · 2 marks · Chapter 6: Cost Sheet · medium
Scenario. Which of the following is a distribution overhead?
Which of the following is a distribution overhead?
Sales commission
Advertisement
Transport to customers (correct answer)
Sales staff salary
Answer: C — Transport to customers
Explanation. Distribution overheads relate to making finished goods available to customers and include transport to customers, warehousing and delivery expenses. Sales commission, advertisement and sales staff salary are selling overheads. Option c is the distribution cost.
Where it goes wrong. Classifying transport to customers as a selling overhead instead of distribution overhead.
Question 20 · 2 marks · Chapter 6: Cost Sheet · hard
Scenario. COGS is ₹5,00,000; general administration ₹40,000; selling overheads ₹35,000; distribution overheads ₹25,000; secondary packing ₹10,000. What is cost of sales before finance charges?
COGS is ₹5,00,000; general administration ₹40,000; selling overheads ₹35,000; distribution overheads ₹25,000; secondary packing ₹10,000. What is cost of sales before finance charges?
₹6,10,000 (correct answer)
₹6,00,000
₹5,75,000
₹6,20,000
Answer: A — ₹6,10,000
Explanation. Cost of sales before finance charges = COGS ₹5,00,000 + general administration ₹40,000 + selling overheads ₹35,000 + distribution overheads ₹25,000 + secondary packing ₹10,000 = ₹6,10,000. Option b omits secondary packing; option c omits general administration; option d adds an extra ₹10,000.
Where it goes wrong. Omitting secondary packing or general administration from cost of sales.
ICAI SM: Cost and Management Accounting, Chapter 6 (Cost Sheet)
Questions people ask
What does this Chapter 6: Cost Sheet - Test 3 practice test cover?
This practice test carries 40 marks across 20 questions covering core costing principles, cost accounting standards, formulas, mathematical models, and practical ICAI case scenarios.
How many questions are there and what is the time limit?
There are 20 questions carrying 2 marks each, giving a maximum score of 40 marks in 45 minutes with no negative marking.
Which study material and syllabus apply to these questions?
Questions strictly reflect the official ICAI Study Material for CA Intermediate Paper 4 Cost and Management Accounting for the 2027 examination sessions.
Can I sit this test in both exam and practice modes?
Yes. Practice mode gives immediate answers with mathematical step-by-step workings and trap explanations after each question. Exam mode simulates actual exam conditions with a live timer and issues a downloadable performance certificate.
