This chapter-wise practice test covers Chapter 12: Service Costing - Test 1 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 12: Service Costing (20 Q)
Questions, answers and explanations
Question 1 · 2 marks · Chapter 12: Service Costing · medium
Scenario. Greenline Transport Company operates 5 buses on a 100 km route between City A and City B. Each bus has a seating capacity of 50 passengers and makes 2 round trips per day. The company operates 25 days a month. On average, occupancy is 80% of seating capacity. The following costs are incurred per month: Driver and conductor salaries ₹2,00,000; Diesel and lubricants ₹4,00,000; Repairs and maintenance ₹1,00,000; Insurance and taxes ₹50,000; Depreciation ₹1,50,000; Interest on capital ₹1,00,000. Total monthly cost is ₹10,00,000. The company wants to earn a profit of 20% on total cost. The buses are well-maintained and run on all scheduled days without breakdowns. The company has a policy of charging fares on a per-passenger basis for a one-way journey. All costs are fixed for the month regardless of occupancy. The management is considering various scenarios to improve profitability. The company operates in a competitive market and wants to ensure that its pricing is both competitive and profitable. The cost data provided is for the month of April 2026. The buses are of 50-seat capacity and are licensed to carry standing passengers, but the company restricts occupancy to seating capacity only for comfort. The route is 100 km one way, and each round trip covers 200 km. The buses make two round trips daily, one in the morning and one in the evening. The company operates 25 days a month, excluding Sundays and public holidays.
What is the total passenger-km for the month?
20,00,000 (correct answer)
24,00,000
18,00,000
22,00,000
Answer: A — 20,00,000
Explanation. Number of one-way trips per month = 5 buses × 2 round trips × 2 one-way × 25 days = 500 trips. Passengers per trip = 50 × 80% = 40. Passenger-km = 500 × 40 × 100 km = 20,00,000. Option b wrongly uses 90% occupancy or forgets the one-way factor. Option c uses 75% occupancy. Option d uses 22 days instead of 25.
Where it goes wrong. Forgetting to multiply by 2 for one-way trips in a round trip or using wrong occupancy percentage.
Question 2 · 2 marks · Chapter 12: Service Costing · hard
What is the cost per passenger-km?
₹0.40
₹0.50 (correct answer)
₹0.60
₹0.55
Answer: B — ₹0.50
Explanation. Total monthly cost = ₹10,00,000 (given). Total passenger-km = 20,00,000. Cost per passenger-km = 10,00,000 ÷ 20,00,000 = ₹0.50. Option a omits some costs; option c adds profit; option d uses incorrect total passenger-km.
Where it goes wrong. Using only variable costs or forgetting to include all fixed costs in total cost.
Question 3 · 2 marks · Chapter 12: Service Costing · medium
What fare per passenger should be charged for a one-way trip to earn 20% profit on total cost?
₹50
₹55
₹60 (correct answer)
₹65
Answer: C — ₹60
Explanation. Total revenue required = ₹10,00,000 × 1.20 = ₹12,00,000. Total passengers per month = 500 trips × 40 passengers = 20,000. Fare per passenger = 12,00,000 ÷ 20,000 = ₹60. Option a is cost only; option b is 10% profit; option d is 30% profit.
Where it goes wrong. Calculating profit on revenue (12,00,000 ÷ 1.20) instead of on cost, or using total passenger-km instead of passengers.
Question 5 · 2 marks · Chapter 12: Service Costing · medium
Scenario. Bharat Cargo Movers operates a 10-tonne capacity truck between City P and City Q, a distance of 200 km. It also delivers goods to an intermediate City R, which is 120 km from P and 80 km from Q. The company charges ₹3,000 per tonne for goods from P to Q and ₹2,800 per tonne for goods from Q to P. No extra charges are billed for unloading goods at intermediate City R, and no concession is given for reduced load after unloading at R. In January 2026, the truck made the following journeys: Outward: 6 direct journeys P to Q, each carrying 8 tonnes; 2 journeys P to R carrying 10 tonnes each, then R to Q carrying 6 tonnes each; 2 journeys P to R carrying 8 tonnes each, then R to Q carrying 4 tonnes each. Return: 4 direct journeys Q to P, each carrying 10 tonnes; 2 journeys Q to R carrying 10 tonnes each, then R to P carrying 6 tonnes each; 2 journeys Q to R carrying 8 tonnes each, then R to P carrying 8 tonnes each. Monthly fixed costs are ₹60,000; maintenance charges are ₹12,000; running charges (excluding penalty) are ₹2,25,600. A penalty of ₹12,000 was paid for overloading during the month. The company wants to analyse the cost per tonne-km and the profitability for January.
What is the total absolute tonne-km for January?
29,760 (correct answer)
28,800
30,000
29,000
Answer: A — 29,760
Explanation. Sum of (load × distance) for each leg: Outward: 6×8×200=9,600; 2×10×120=2,400; 2×6×80=960; 2×8×120=1,920; 2×4×80=640. Return: 4×10×200=8,000; 2×10×80=1,600; 2×6×120=1,440; 2×8×80=1,280; 2×8×120=1,920. Total = 29,760. Option b is commercial tonne-km; option c is a rounded error; option d omits some legs.
Where it goes wrong. Confusing absolute tonne-km with commercial tonne-km or omitting return legs.
Question 6 · 2 marks · Chapter 12: Service Costing · hard
What is the total commercial tonne-km for January?
29,760
28,800 (correct answer)
28,000
30,000
Answer: B — 28,800
Explanation. Total distance = 3,600 km. Total loads over all legs = 208 tonnes. Number of legs = 26. Average load = 208 ÷ 26 = 8 tonnes. Commercial tonne-km = 3,600 × 8 = 28,800. Option a is absolute tonne-km; option c uses 7.78 average; option d uses 8.33 average.
Where it goes wrong. Using total tonnes loaded (208) instead of average load per leg, or using total distance incorrectly.
Question 9 · 2 marks · Chapter 12: Service Costing · medium
Scenario. A bus carries 50 passengers on a 60 km route. It makes 4 round trips per day for 30 days. Occupancy is 90%. What is the total passenger-km for the month?
A bus carries 50 passengers on a 60 km route. It makes 4 round trips per day for 30 days. Occupancy is 90%. What is the total passenger-km for the month?
6,48,000 (correct answer)
7,20,000
6,00,000
8,10,000
Answer: A — 6,48,000
Explanation. One-way trips = 1 bus × 4 round trips × 2 × 30 days = 240 trips. Passengers per trip = 50 × 90% = 45. Passenger-km = 240 × 45 × 60 = 6,48,000. Option b uses full occupancy; option c uses 80% occupancy; option d uses 5 round trips.
Where it goes wrong. Forgetting to double the round trips to get one-way trips or using the round trip distance instead of one-way.
Question 10 · 2 marks · Chapter 12: Service Costing · hard
Scenario. A truck starts with 20 tonnes, unloads 5 tonnes at midpoint (100 km), and delivers the remaining 15 tonnes at destination (another 100 km). What is the absolute tonne-km?
A truck starts with 20 tonnes, unloads 5 tonnes at midpoint (100 km), and delivers the remaining 15 tonnes at destination (another 100 km). What is the absolute tonne-km?
3,000
3,500 (correct answer)
4,000
2,500
Answer: B — 3,500
Explanation. Absolute tonne-km = (20 × 100) + (15 × 100) = 2,000 + 1,500 = 3,500. Option a uses 15 tonnes for both legs; option c uses 20 tonnes for both legs; option d uses 12.5 tonnes average.
Where it goes wrong. Using the same load for both legs after unloading or computing commercial tonne-km.
Question 12 · 2 marks · Chapter 12: Service Costing · hard
Scenario. A truck carries 15 tonnes from A to B (120 km), unloads 5 tonnes at B, then carries 10 tonnes to C (80 km). What is the difference between absolute and commercial tonne-km?
A truck carries 15 tonnes from A to B (120 km), unloads 5 tonnes at B, then carries 10 tonnes to C (80 km). What is the difference between absolute and commercial tonne-km?
0
50
200
100 (correct answer)
Answer: D — 100
Explanation. Absolute = (15×120) + (10×80) = 1,800 + 800 = 2,600. Total distance = 200 km. Loads = 15 and 10; average = 12.5. Commercial = 200 × 12.5 = 2,500. Difference = 100. Option a assumes both are equal; option b uses average 12.25; option c uses average 13.5.
Where it goes wrong. Computing commercial tonne-km using total tonnes (25) instead of average load, or using wrong distances.
Question 13 · 2 marks · Chapter 12: Service Costing · medium
Scenario. A transport company has fixed costs of ₹1,20,000 per month. Variable cost is ₹5 per km. It runs 20,000 km per month. What is the cost per km?
A transport company has fixed costs of ₹1,20,000 per month. Variable cost is ₹5 per km. It runs 20,000 km per month. What is the cost per km?
₹11 (correct answer)
₹10
₹12
₹13
Answer: A — ₹11
Explanation. Total cost = fixed ₹1,20,000 + variable (5 × 20,000 = ₹1,00,000) = ₹2,20,000. Cost per km = 2,20,000 ÷ 20,000 = ₹11. Option b omits fixed cost; option c uses ₹6 variable; option d uses ₹7 variable.
Where it goes wrong. Forgetting to include fixed costs or using total cost divided by total km incorrectly.
Question 14 · 2 marks · Chapter 12: Service Costing · hard
Scenario. A company operates 6 buses, each with 50 seats. Each bus makes 5 round trips daily on a 40 km route for 24 days a month. Occupancy is 80%. Total monthly cost is ₹6,91,200. What is the cost per passenger-km?
A company operates 6 buses, each with 50 seats. Each bus makes 5 round trips daily on a 40 km route for 24 days a month. Occupancy is 80%. Total monthly cost is ₹6,91,200. What is the cost per passenger-km?
Question 15 · 2 marks · Chapter 12: Service Costing · medium
Scenario. A 10-tonne truck travels from A to B (150 km) with 10 tonnes. At B, it unloads 4 tonnes and picks up 2 tonnes, then travels to C (100 km). What is the commercial tonne-km?
A 10-tonne truck travels from A to B (150 km) with 10 tonnes. At B, it unloads 4 tonnes and picks up 2 tonnes, then travels to C (100 km). What is the commercial tonne-km?
2,300
2,200
2,250 (correct answer)
2,150
Answer: C — 2,250
Explanation. Total distance = 150 + 100 = 250 km. Loads: first leg 10 tonnes; second leg = 10 − 4 + 2 = 8 tonnes. Average load = (10 + 8) ÷ 2 = 9 tonnes. Commercial tonne-km = 250 × 9 = 2,250. Option a is absolute tonne-km (10×150 + 8×100 = 2,300); option b uses average 8.8; option d uses average 8.6.
Where it goes wrong. Forgetting to adjust the load after unloading and picking up, or using total tonnes (18) instead of average.
Question 16 · 2 marks · Chapter 12: Service Costing · hard
Scenario. A bus operator has fixed costs of ₹2,40,000 per annum and variable cost of ₹8 per km. The bus runs 60,000 km per annum. If the operator wants a profit of 20% on cost, what should be the fare per km?
A bus operator has fixed costs of ₹2,40,000 per annum and variable cost of ₹8 per km. The bus runs 60,000 km per annum. If the operator wants a profit of 20% on cost, what should be the fare per km?
₹12.00
₹13.20
₹15.60
₹14.40 (correct answer)
Answer: D — ₹14.40
Explanation. Total cost = 2,40,000 + (8 × 60,000) = 2,40,000 + 4,80,000 = ₹7,20,000. Cost per km = 7,20,000 ÷ 60,000 = ₹12. Fare per km with 20% profit on cost = 12 × 1.20 = ₹14.40. Option a is cost per km; option b is 10% profit; option c is 30% profit.
Where it goes wrong. Calculating profit on revenue (12 ÷ 0.80 = 15) instead of on cost.
Question 17 · 2 marks · Chapter 12: Service Costing · medium
Scenario. A bus has a seating capacity of 45. It runs 25 days a month, making 4 round trips daily on a 30 km route. Occupancy is 80%. What is the total passenger-km for the month?
A bus has a seating capacity of 45. It runs 25 days a month, making 4 round trips daily on a 30 km route. Occupancy is 80%. What is the total passenger-km for the month?
2,16,000 (correct answer)
2,40,000
2,00,000
1,80,000
Answer: A — 2,16,000
Explanation. One-way trips = 4 round trips × 2 × 25 days = 200 trips. Passengers per trip = 45 × 80% = 36. Passenger-km = 200 × 36 × 30 = 2,16,000. Option b uses full occupancy; option c uses 90% occupancy; option d uses 30 days instead of 25.
Where it goes wrong. Using round trip distance as one-way or using wrong occupancy percentage.
Question 19 · 2 marks · Chapter 12: Service Costing · medium
Scenario. A bus operator has total cost of ₹12,00,000 per annum. The bus runs 1,20,000 km per annum. Seating capacity is 50, occupancy 80%. If the operator wants a profit of 20% on cost, what should be the fare per passenger-km?
A bus operator has total cost of ₹12,00,000 per annum. The bus runs 1,20,000 km per annum. Seating capacity is 50, occupancy 80%. If the operator wants a profit of 20% on cost, what should be the fare per passenger-km?
₹0.25
₹0.35
₹0.30 (correct answer)
₹0.40
Answer: C — ₹0.30
Explanation. Passenger-km = 1,20,000 × 50 × 80% = 48,00,000. Cost per passenger-km = 12,00,000 ÷ 48,00,000 = ₹0.25. Fare with 20% profit on cost = 0.25 × 1.20 = ₹0.30. Option a is cost; option b is 40% profit; option d is 60% profit.
Where it goes wrong. Calculating profit on revenue (0.25 ÷ 0.80 = 0.3125) or forgetting occupancy.
Question 20 · 2 marks · Chapter 12: Service Costing · hard
Scenario. A transport company has fixed costs of ₹5,00,000 and variable cost of ₹12 per km. It runs 50,000 km. If the company wants a profit of 25% on cost, what should be the fare per km?
A transport company has fixed costs of ₹5,00,000 and variable cost of ₹12 per km. It runs 50,000 km. If the company wants a profit of 25% on cost, what should be the fare per km?
₹22.00
₹25.00
₹30.00
₹27.50 (correct answer)
Answer: D — ₹27.50
Explanation. Total cost = 5,00,000 + (12 × 50,000) = 5,00,000 + 6,00,000 = ₹11,00,000. Cost per km = 11,00,000 ÷ 50,000 = ₹22. Fare with 25% profit on cost = 22 × 1.25 = ₹27.50. Option a is cost; option b is 25% of cost added as ₹3? No, 25% profit on revenue; option c is 36% profit.
Where it goes wrong. Calculating profit on revenue (22 ÷ 0.75 = 29.33) instead of on cost.
ICAI SM: Cost and Management Accounting, Chapter 12 (Service Costing)
Questions people ask
What does this Chapter 12: Service Costing - Test 1 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.
