This chapter-wise practice test covers Chapter 13: Standard Costing - Test 3 for CA Intermediate Group 2 students preparing for the January 2027 examination attempt. It carries 50 marks across 25 questions in case scenarios and standalone practical MCQs with a time limit of 60 minutes and no negative marking.
25 questions across 1 chapter, 50 marks and 60 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
25
Marks
50
Time limit
60 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 13: Standard Costing (25 Q)
Questions, answers and explanations
Question 1 · 2 marks · Chapter 13: Standard Costing · medium
Scenario. Vikram Industrial Components Ltd. manufactures precision-engineered transmission assemblies for automobile manufacturers. Its manufacturing facility operates three production shifts and has a normal monthly capacity of 5,000 assemblies. During October 2026, the company manufactured 4,600 accepted assemblies. The production engineering department maintains separate records for direct labour hours and machine utilisation. Variable factory overheads are incurred primarily in relation to direct labour hours worked, and the company uses direct labour hours as its predetermined absorption basis.
The following information relates to the month:
Particulars | Budget | Actual
Production | 5,000 units | 4,600 units
Direct labour hours | 20,000 hours | 18,800 hours
Variable overheads | ₹3,00,000 | ₹2,92,000
Machine operating hours | — | 245 hours
The approved standard production specification allows four direct labour-hours per finished assembly. The variable overhead budget includes indirect consumables, production electricity, lubricants and other variable factory expenses. The actual expenditure of ₹2,92,000 relates entirely to October production. No abnormal overhead expenditure has been transferred to another period, and there are no opening or closing overhead balances. The actual labour-hour record represents productive hours worked; no idle-time adjustment is required for this case.
The finance controller wants to analyse the overhead cost difference into expenditure and efficiency components. The production director believes the higher expenditure is entirely due to increased production activity, whereas the finance department suspects that both the hourly expenditure rate and operating efficiency have contributed. For this exercise, calculate overhead variances using the predetermined rate per direct labour-hour. Machine operating hours are supplied for operational context and should not replace the expressly specified labour-hour absorption basis. All monetary amounts are in rupees.
What is the standard variable overhead absorption rate per direct labour-hour?
₹15 per hour (correct answer)
₹12 per hour
₹16 per hour
₹18 per hour
Answer: A — ₹15 per hour
Explanation. Standard variable overhead rate = Budgeted variable overheads ÷ Budgeted direct labour-hours. Therefore, ₹3,00,000 ÷ 20,000 hours = ₹15 per hour. The standard labour-hour budget is explicitly given as 20,000 hours. Option b incorrectly divides overheads by budgeted production of 5,000 units without converting the resulting unit rate into an hourly rate. Options c and d use incorrect activity denominators.
Where it goes wrong. Using budgeted production units instead of budgeted labour-hours when the variable overhead absorption basis is specified as labour-hours.
Question 2 · 2 marks · Chapter 13: Standard Costing · hard
What is the standard variable overhead absorbed for the actual production of 4,600 assemblies?
₹2,92,000
₹2,76,000 (correct answer)
₹2,82,000
₹3,00,000
Answer: B — ₹2,76,000
Explanation. Standard hours for actual output = 4,600 units × 4 hours = 18,400 hours. Standard variable overhead absorbed = 18,400 × ₹15 = ₹2,76,000. Option a is actual overhead expenditure, while option c represents standard overhead for actual hours worked (18,800 × ₹15). Option d is the original budgeted overhead. Absorbed overhead must be calculated using standard hours allowed for actual output.
Where it goes wrong. Confusing absorbed overhead for actual production with standard overhead based on actual hours worked.
Question 3 · 2 marks · Chapter 13: Standard Costing · medium
Calculate the Variable Overhead Expenditure Variance for October 2026.
₹6,000 (F)
₹10,000 (A) (correct answer)
₹10,000 (F)
₹16,000 (A)
Answer: B — ₹10,000 (A)
Explanation. Variable overhead expenditure variance = Standard variable overhead for actual hours worked − Actual variable overhead. Standard overhead for actual hours = 18,800 × ₹15 = ₹2,82,000. Therefore, expenditure variance = ₹2,82,000 − ₹2,92,000 = ₹10,000 adverse. Option a represents the efficiency variance, while option d is the overall variable overhead cost variance. The actual expenditure exceeds the standard expenditure for the actual hours worked.
Where it goes wrong. Using standard hours for actual production instead of actual hours worked when calculating variable overhead expenditure variance.
Question 4 · 2 marks · Chapter 13: Standard Costing · hard
What is the overall Variable Overhead Cost Variance for October 2026?
₹6,000 (A)
₹10,000 (A)
₹16,000 (F)
₹16,000 (A) (correct answer)
Answer: D — ₹16,000 (A)
Explanation. Variable overhead cost variance = Standard variable overhead for actual production − Actual variable overhead incurred. The standard absorbed amount is ₹2,76,000 and actual expenditure is ₹2,92,000. Thus, the variance is ₹16,000 adverse. Reconciliation: Expenditure variance ₹10,000 A + Efficiency variance ₹6,000 A = ₹16,000 A. Option b reports only expenditure variance and omits the adverse efficiency effect.
Where it goes wrong. Reporting only expenditure variance as total variable overhead cost variance without incorporating efficiency variance.
Question 5 · 2 marks · Chapter 13: Standard Costing · medium
Scenario. Apex Engineering Systems Ltd. manufactures industrial hydraulic pumps for infrastructure and construction-equipment manufacturers. The company operates a dedicated assembly facility with a normal monthly capacity of 6,000 pumps. Fixed factory overheads include factory rent, machinery depreciation, insurance, production-management salaries and other capacity-related expenses. These costs are budgeted monthly and absorbed using standard machine-hours.
The budget approved for November 2026 is as follows:
Particulars | Budget
Production | 6,000 pumps
Machine-hours | 24,000 hours
Fixed factory overheads | ₹2,40,000
Standard machine-hours per pump | 4 hours
Actual operational information is:
Particulars | Actual
Accepted production | 5,500 pumps
Machine-hours worked | 21,000 hours
Fixed factory overheads incurred | ₹2,50,000
The production department confirmed that the actual 21,000 machine-hours were productive hours. There were no abnormal calendar changes, no strike-related stoppages and no separate idle-capacity adjustment outside the reported activity. The actual fixed overhead expenditure includes all fixed factory expenses incurred during the month and is not affected by changes in inventory valuation. The standard machine-hour requirement remained unchanged throughout the period.
Management requires an analysis of fixed overhead recovery to understand the effect of actual spending, production efficiency and utilisation of budgeted capacity. The cost accountant must first calculate the predetermined fixed overhead rate per machine-hour, followed by absorbed overhead for actual output. The expenditure variance is to be calculated by comparing budgeted fixed overheads with actual fixed overheads. Volume variance is to be split into efficiency and capacity variances. Since the actual working calendar equals the budgeted working calendar, no separate calendar adjustment is necessary. All figures should be treated as precise.
What is the predetermined fixed overhead absorption rate per machine-hour?
₹12 per machine-hour
₹10 per machine-hour (correct answer)
₹40 per machine-hour
₹8 per machine-hour
Answer: B — ₹10 per machine-hour
Explanation. Predetermined fixed overhead rate = Budgeted fixed overheads ÷ Budgeted machine-hours. Substituting ₹2,40,000 ÷ 24,000 hours gives ₹10 per machine-hour. The standard fixed overhead cost per pump is ₹40 because each pump requires four machine-hours. Option c incorrectly treats the per-unit overhead cost as the hourly rate. The distinction between the hourly rate and the unit rate is essential for subsequent variance calculations.
Where it goes wrong. Confusing the fixed overhead rate per unit of production with the fixed overhead absorption rate per machine-hour.
Question 6 · 2 marks · Chapter 13: Standard Costing · hard
Calculate the Fixed Overhead Expenditure (Budget) Variance.
₹10,000 (A) (correct answer)
₹20,000 (A)
₹10,000 (F)
₹30,000 (A)
Answer: A — ₹10,000 (A)
Explanation. Fixed overhead expenditure variance = Budgeted fixed overheads − Actual fixed overheads. Substituting ₹2,40,000 − ₹2,50,000 = ₹10,000 adverse. This variance measures the difference in actual fixed overhead spending against the approved monthly budget. Option b incorrectly includes the production-volume effect, while option d incorrectly uses the total fixed overhead cost variance. The expenditure variance is independent of the output achieved.
Where it goes wrong. Including the production-volume or absorption effect in the fixed overhead expenditure variance.
Question 8 · 2 marks · Chapter 13: Standard Costing · hard
What is the Fixed Overhead Efficiency Variance for the period?
₹30,000 (A)
₹20,000 (A)
₹10,000 (F) (correct answer)
₹10,000 (A)
Answer: C — ₹10,000 (F)
Explanation. Fixed overhead efficiency variance = Standard rate × (Standard hours for actual production − Actual hours worked). Standard hours are 5,500 × 4 = 22,000, while actual hours are 21,000. Therefore, efficiency variance = (22,000 − 21,000) × ₹10 = ₹10,000 favourable. Option a represents capacity variance, not efficiency variance. The favourable variance arises because actual hours worked are lower than standard hours allowed for actual output.
Where it goes wrong. Using budgeted hours instead of standard hours for actual production in fixed overhead efficiency variance.
Question 9 · 2 marks · Chapter 13: Standard Costing · medium
Scenario. Zenith Industrial Machinery Ltd. manufactures specialised packaging equipment used by pharmaceutical and consumer-goods manufacturers. Its factory uses a machine-hour-based absorption system for fixed production overheads. The machinery department maintains 80 identical production machines, each capable of operating for eight hours per scheduled working day. Fixed overheads include building depreciation, factory rent, machinery insurance and permanent supervisory salaries. The company has adopted a predetermined fixed overhead absorption rate based on normal monthly machine capacity.
The approved monthly budget for November 2026 is:
Particulars | Budget
Working days | 25 days
Machines available | 80 machines
Hours per machine per day | 8 hours
Fixed overheads | ₹1,60,000
Standard machine-hours per unit | 2 hours
Actual performance was:
Particulars | Actual
Working days | 26 days
Average machine-hours per day | 600 hours
Accepted production | 7,400 units
Actual fixed overheads | ₹1,65,000
The actual machine-hours per day represent the combined hours recorded by operating machines. All 26 actual working days were scheduled production days. No other change occurred in the standard production method or overhead absorption policy.
For the calendar variance analysis, use the standard machine capacity of 80 machines multiplied by eight hours per day to determine revised budgeted hours for the actual number of working days. Accordingly, revised budgeted capacity must be used when calculating the revised capacity variance. The standard fixed overhead per day is based on the original monthly budget and 25 budgeted working days. The cost accountant must separately determine efficiency, revised capacity and calendar variances and reconcile them with the overall volume variance. The expenditure variance is calculated independently using budgeted and actual fixed overhead expenditure. All calculations are to be made using the standard rate per machine-hour, without rounding.
What is the fixed overhead absorbed for the actual production of 7,400 packaging machines?
₹1,60,000
₹1,65,000
₹1,48,000 (correct answer)
₹1,56,000
Answer: C — ₹1,48,000
Explanation. Standard rate per machine-hour = ₹1,60,000 ÷ (80 × 8 × 25) = ₹10. Standard machine-hours for actual production = 7,400 × 2 = 14,800 hours. Therefore, absorbed overhead = 14,800 × ₹10 = ₹1,48,000. Option a is the original budget, and option b is actual expenditure. Absorption must use standard hours for actual output, not actual machine-hours.
Where it goes wrong. Using actual overhead expenditure or budgeted overhead instead of standard overhead absorbed for actual production.
Question 10 · 2 marks · Chapter 13: Standard Costing · hard
Calculate the Fixed Overhead Calendar Variance.
₹6,400 (A)
₹6,400 (F) (correct answer)
₹10,400 (A)
₹8,000 (A)
Answer: B — ₹6,400 (F)
Explanation. Standard fixed overhead per working day = Budgeted fixed overhead ÷ Budgeted working days = ₹1,60,000 ÷ 25 = ₹6,400. Calendar variance = Standard fixed overhead per day × (Actual working days − Budgeted working days). Therefore, (26 − 25) × ₹6,400 = ₹6,400 favourable. One additional working day increases the available production capacity. Option c represents the revised capacity variance, not calendar variance.
Where it goes wrong. Multiplying the difference in working days by the hourly rate without first calculating the standard fixed overhead per day.
Question 11 · 2 marks · Chapter 13: Standard Costing · medium
Calculate the revised Fixed Overhead Capacity Variance after accounting for the additional working day.
₹10,400 (A) (correct answer)
₹4,000 (F)
₹4,000 (A)
₹10,400 (F)
Answer: A — ₹10,400 (A)
Explanation. Revised budgeted machine-hours = 80 machines × 8 hours × 26 days = 16,640 hours. Actual machine-hours = 600 × 26 = 15,600 hours. Revised capacity variance = (Actual hours − Revised budgeted hours) × Standard rate = (15,600 − 16,640) × ₹10 = ₹10,400 adverse. Option c uses the original budgeted hours without calendar adjustment. The additional working day must be reflected in revised capacity.
Where it goes wrong. Using original budgeted hours rather than revised budgeted hours for actual working days when calendar variance is separately calculated.
Question 13 · 2 marks · Chapter 13: Standard Costing · medium
Scenario. A company budgets variable overheads of ₹2,70,000 for 18,000 direct labour-hours. Actual hours worked are 17,200 and actual variable overhead expenditure is ₹2,63,000. What is the Variable Overhead Expenditure Variance?
A company budgets variable overheads of ₹2,70,000 for 18,000 direct labour-hours. Actual hours worked are 17,200 and actual variable overhead expenditure is ₹2,63,000. What is the Variable Overhead Expenditure Variance?
₹5,000 (A) (correct answer)
₹5,000 (F)
₹7,000 (A)
₹10,000 (A)
Answer: A — ₹5,000 (A)
Explanation. Standard variable overhead rate = ₹2,70,000 ÷ 18,000 = ₹15 per hour. Standard variable overhead for actual hours worked = 17,200 × ₹15 = ₹2,58,000. Expenditure variance = ₹2,58,000 − ₹2,63,000 = ₹5,000 adverse. Option c may result from using standard hours for production without justification, while option b reverses the expenditure direction.
Where it goes wrong. Using standard hours for actual production instead of actual hours worked as the expenditure variance base.
Question 14 · 2 marks · Chapter 13: Standard Costing · hard
Scenario. A factory budgets 9,000 units of production and ₹2,70,000 variable overheads. Standard time is two machine-hours per unit. Actual production is 8,600 units and actual variable overhead expenditure is ₹2,65,000. Calculate the Variable Overhead Cost Variance.
A factory budgets 9,000 units of production and ₹2,70,000 variable overheads. Standard time is two machine-hours per unit. Actual production is 8,600 units and actual variable overhead expenditure is ₹2,65,000. Calculate the Variable Overhead Cost Variance.
₹5,000 (A)
₹7,000 (A) (correct answer)
₹7,000 (F)
₹10,000 (A)
Answer: B — ₹7,000 (A)
Explanation. Budgeted machine-hours = 9,000 × 2 = 18,000. Standard variable overhead rate = ₹2,70,000 ÷ 18,000 = ₹15 per hour. Standard hours for actual output = 8,600 × 2 = 17,200 hours. Standard variable overhead for actual output = 17,200 × ₹15 = ₹2,58,000. Cost variance = ₹2,58,000 − ₹2,65,000 = ₹7,000 adverse.
Where it goes wrong. Using actual hours worked for the cost variance instead of standard hours allowed for actual production.
Question 15 · 2 marks · Chapter 13: Standard Costing · medium
Scenario. A factory budgets variable overheads of ₹1,44,000 for 4,000 units, each requiring two standard labour-hours. Actual production is 5,000 units and actual productive hours worked are 10,600. Calculate the Variable Overhead Efficiency Variance.
A factory budgets variable overheads of ₹1,44,000 for 4,000 units, each requiring two standard labour-hours. Actual production is 5,000 units and actual productive hours worked are 10,600. Calculate the Variable Overhead Efficiency Variance.
₹9,000 (F)
₹10,800 (F)
₹10,800 (A) (correct answer)
₹12,600 (A)
Answer: C — ₹10,800 (A)
Explanation. Budgeted labour-hours = 4,000 × 2 = 8,000 hours. Standard variable overhead rate = ₹1,44,000 ÷ 8,000 = ₹18 per hour. Standard hours for actual output = 5,000 × 2 = 10,000 hours. Efficiency variance = (10,000 − 10,600) × ₹18 = ₹10,800 adverse. Actual productive hours exceed the standard allowance. Option b reverses the direction.
Where it goes wrong. Applying the standard overhead rate to the difference between actual production and budgeted production instead of the difference in standard and actual hours.
Question 16 · 2 marks · Chapter 13: Standard Costing · hard
Scenario. The standard variable overhead rate is ₹15 per labour-hour. Standard hours for actual production are 7,500 hours. Actual variable overhead incurred is ₹1,20,000 and the Variable Overhead Expenditure Variance is ₹4,500 adverse. Determine the actual productive hours worked.
The standard variable overhead rate is ₹15 per labour-hour. Standard hours for actual production are 7,500 hours. Actual variable overhead incurred is ₹1,20,000 and the Variable Overhead Expenditure Variance is ₹4,500 adverse. Determine the actual productive hours worked.
7,500 hours
7,400 hours
7,900 hours
7,700 hours (correct answer)
Answer: D — 7,700 hours
Explanation. Expenditure variance = (Actual hours × Standard rate) − Actual expenditure. Let actual hours be AH. Then 4,500 adverse means 15 × AH − ₹1,20,000 = −₹4,500. Hence, 15 × AH = ₹1,15,500 and AH = 7,700 hours. The difference from standard hours is 200 hours, producing efficiency variance of ₹3,000 adverse. Option a incorrectly substitutes standard hours for actual hours.
Where it goes wrong. Confusing the adverse expenditure variance with an amount to be added to actual overhead expenditure without preserving the variance equation's direction.
Question 17 · 2 marks · Chapter 13: Standard Costing · medium
Scenario. For a reporting period, budgeted fixed factory overheads were ₹4,50,000, while actual fixed factory overheads amounted to ₹4,62,000. Calculate the Fixed Overhead Expenditure Variance.
For a reporting period, budgeted fixed factory overheads were ₹4,50,000, while actual fixed factory overheads amounted to ₹4,62,000. Calculate the Fixed Overhead Expenditure Variance.
₹12,000 (A) (correct answer)
₹12,000 (F)
₹6,000 (A)
₹18,000 (A)
Answer: A — ₹12,000 (A)
Explanation. Fixed overhead expenditure variance = Budgeted fixed overhead − Actual fixed overhead. Substituting ₹4,50,000 − ₹4,62,000 gives ₹12,000 adverse. The actual fixed expenditure exceeded the budget by ₹12,000. Option d incorrectly introduces the volume effect into the expenditure variance. Options b and c either reverse the sign or use an incorrect amount. Production volume does not affect this particular variance.
Where it goes wrong. Including fixed overhead absorption or production-volume differences in a variance that measures actual expenditure against the fixed overhead budget.
Question 18 · 2 marks · Chapter 13: Standard Costing · hard
Scenario. A company budgets 12,000 units of production and fixed overheads of ₹3,60,000. Actual production is 11,500 units and actual fixed overhead expenditure is ₹3,55,000. Calculate the Fixed Overhead Cost Variance.
A company budgets 12,000 units of production and fixed overheads of ₹3,60,000. Actual production is 11,500 units and actual fixed overhead expenditure is ₹3,55,000. Calculate the Fixed Overhead Cost Variance.
₹5,000 (F)
₹15,000 (A)
₹10,000 (A) (correct answer)
₹10,000 (F)
Answer: C — ₹10,000 (A)
Explanation. Standard fixed overhead per unit = ₹3,60,000 ÷ 12,000 = ₹30. Absorbed fixed overhead for actual production = 11,500 × ₹30 = ₹3,45,000. Fixed overhead cost variance = Absorbed overhead − Actual overhead = ₹3,45,000 − ₹3,55,000 = ₹10,000 adverse. Option a is the difference between budgeted and actual expenditure only, not the total cost variance.
Where it goes wrong. Calculating fixed overhead expenditure variance instead of fixed overhead cost variance, thereby ignoring the reduction in absorbed overhead caused by lower output.
Question 19 · 2 marks · Chapter 13: Standard Costing · medium
Scenario. A factory budgets fixed overheads of ₹2,40,000 for 12,000 machine-hours. Actual production is 5,500 units, requiring two standard machine-hours per unit. Actual machine-hours worked are 10,700. Calculate the Fixed Overhead Efficiency Variance.
A factory budgets fixed overheads of ₹2,40,000 for 12,000 machine-hours. Actual production is 5,500 units, requiring two standard machine-hours per unit. Actual machine-hours worked are 10,700. Calculate the Fixed Overhead Efficiency Variance.
₹4,000 (A)
₹6,000 (F) (correct answer)
₹6,000 (A)
₹10,000 (F)
Answer: B — ₹6,000 (F)
Explanation. Standard fixed overhead rate = ₹2,40,000 ÷ 12,000 = ₹20 per machine-hour. Standard hours for actual production = 5,500 × 2 = 11,000 hours. Efficiency variance = (11,000 − 10,700) × ₹20 = ₹6,000 favourable. Actual machine-hours are lower than the standard allowance for achieved production. Option a incorrectly uses a different rate or hours difference.
Where it goes wrong. Using actual output units directly in the efficiency variance instead of converting them into standard machine-hours.
Question 20 · 2 marks · Chapter 13: Standard Costing · hard
Scenario. Budgeted fixed overheads are ₹3,00,000 for 20,000 machine-hours. Actual machine-hours worked were 21,500. There was no change in the number of working days. Calculate the Fixed Overhead Capacity Variance.
Budgeted fixed overheads are ₹3,00,000 for 20,000 machine-hours. Actual machine-hours worked were 21,500. There was no change in the number of working days. Calculate the Fixed Overhead Capacity Variance.
₹15,000 (A)
₹15,000 (F)
₹22,500 (A)
₹22,500 (F) (correct answer)
Answer: D — ₹22,500 (F)
Explanation. Standard fixed overhead rate = ₹3,00,000 ÷ 20,000 = ₹15 per machine-hour. Fixed overhead capacity variance = Standard rate × (Actual hours − Budgeted hours). Therefore, (21,500 − 20,000) × ₹15 = ₹22,500 favourable. Actual hours exceed budgeted hours, indicating higher capacity utilisation. Option b uses an incorrect hourly rate or hours differential, while option c reverses the variance direction.
Where it goes wrong. Reversing the difference between actual and budgeted hours, thereby classifying additional capacity utilisation as adverse.
Question 21 · 2 marks · Chapter 13: Standard Costing · medium
Scenario. A factory has budgeted fixed overheads of ₹1,44,000 for 24 working days. During the actual period, 26 working days were available. Calculate the Fixed Overhead Calendar Variance.
A factory has budgeted fixed overheads of ₹1,44,000 for 24 working days. During the actual period, 26 working days were available. Calculate the Fixed Overhead Calendar Variance.
₹12,000 (F) (correct answer)
₹12,000 (A)
₹6,000 (F)
₹6,000 (A)
Answer: A — ₹12,000 (F)
Explanation. Standard fixed overhead per day = ₹1,44,000 ÷ 24 = ₹6,000. Calendar variance = Standard fixed overhead per day × (Actual working days − Budgeted working days). Thus, (26 − 24) × ₹6,000 = ₹12,000 favourable. Two additional working days increase the time available for production. Option c considers only one additional working day, while option b reverses the favourable direction.
Where it goes wrong. Calculating the calendar variance using the number of additional days but forgetting to multiply the difference by the standard fixed overhead per day.
Question 22 · 2 marks · Chapter 13: Standard Costing · hard
Scenario. A factory has budgeted fixed overheads of ₹1,80,000 for 12,000 machine-hours over 25 working days. During the actual period, it worked for 24 days, recorded 10,500 machine-hours and produced output requiring 11,000 standard hours. Calculate the Fixed Overhead Volume Variance.
A factory has budgeted fixed overheads of ₹1,80,000 for 12,000 machine-hours over 25 working days. During the actual period, it worked for 24 days, recorded 10,500 machine-hours and produced output requiring 11,000 standard hours. Calculate the Fixed Overhead Volume Variance.
Where it goes wrong. Ignoring the calendar adjustment when decomposing fixed overhead volume variance, or using original budgeted hours for revised capacity variance.
Question 23 · 2 marks · Chapter 13: Standard Costing · medium
Scenario. A manufacturing unit reports budgeted fixed overheads of ₹5,00,000, actual fixed overheads of ₹5,18,000 and absorbed fixed overheads of ₹4,90,000. What is the overall Fixed Overhead Cost Variance, after reconciliation with expenditure and volume variances?
A manufacturing unit reports budgeted fixed overheads of ₹5,00,000, actual fixed overheads of ₹5,18,000 and absorbed fixed overheads of ₹4,90,000. What is the overall Fixed Overhead Cost Variance, after reconciliation with expenditure and volume variances?
₹18,000 (A)
₹28,000 (A) (correct answer)
₹10,000 (F)
₹28,000 (F)
Answer: B — ₹28,000 (A)
Explanation. Fixed overhead expenditure variance = ₹5,00,000 − ₹5,18,000 = ₹18,000 adverse. Volume variance = ₹4,90,000 − ₹5,00,000 = ₹10,000 adverse. Fixed overhead cost variance = Absorbed overhead − Actual overhead = ₹4,90,000 − ₹5,18,000 = ₹28,000 adverse. The reconciliation is ₹18,000 A + ₹10,000 A = ₹28,000 A. Option a reports only expenditure variance.
Where it goes wrong. Considering expenditure variance as total fixed overhead variance and omitting the under-absorption arising from production volume.
Question 24 · 2 marks · Chapter 13: Standard Costing · hard
Scenario. A factory operates 100 machines for eight hours per day over 25 budgeted working days. Actual working days are 24, and actual machine-hours are 760 per day. Budgeted fixed overheads are ₹1,60,000. Calculate the revised Fixed Overhead Capacity Variance after accounting for the calendar difference.
A factory operates 100 machines for eight hours per day over 25 budgeted working days. Actual working days are 24, and actual machine-hours are 760 per day. Budgeted fixed overheads are ₹1,60,000. Calculate the revised Fixed Overhead Capacity Variance after accounting for the calendar difference.
₹6,400 (F)
₹9,600 (A)
₹7,680 (F)
₹7,680 (A) (correct answer)
Answer: D — ₹7,680 (A)
Explanation. Budgeted hours = 100 × 8 × 25 = 20,000. Standard rate = ₹1,60,000 ÷ 20,000 = ₹8 per hour. Revised budgeted hours for 24 days = 100 × 8 × 24 = 19,200. Actual hours = 760 × 24 = 18,240. Revised capacity variance = (18,240 − 19,200) × ₹8 = ₹7,680 adverse. Option b uses the original budgeted hours rather than the revised calendar-adjusted hours.
Where it goes wrong. Failing to revise budgeted hours for the actual number of working days before computing the revised capacity variance.
Question 25 · 2 marks · Chapter 13: Standard Costing · medium
Scenario. A manufacturing company budgets variable overheads of ₹3,00,000 for production of 5,000 units. Each unit requires 1.5 standard machine-hours. Actual production is 4,800 units, actual machine-hours worked are 7,500 and actual variable overhead expenditure is ₹2,98,000. Direct labour-hours recorded were 8,100 hours, but machine-hours are the expressly specified variable overhead absorption basis. Calculate the Variable Overhead Cost Variance.
A manufacturing company budgets variable overheads of ₹3,00,000 for production of 5,000 units. Each unit requires 1.5 standard machine-hours. Actual production is 4,800 units, actual machine-hours worked are 7,500 and actual variable overhead expenditure is ₹2,98,000. Direct labour-hours recorded were 8,100 hours, but machine-hours are the expressly specified variable overhead absorption basis. Calculate the Variable Overhead Cost Variance.
₹12,000 (A)
₹2,000 (F)
₹10,000 (A) (correct answer)
₹10,000 (F)
Answer: C — ₹10,000 (A)
Explanation. Budgeted machine-hours = 5,000 × 1.5 = 7,500 hours. Standard variable overhead rate = ₹3,00,000 ÷ 7,500 = ₹40 per machine-hour. Standard hours for actual output = 4,800 × 1.5 = 7,200 hours. Absorbed overhead = 7,200 × ₹40 = ₹2,88,000. Cost variance = ₹2,88,000 − ₹2,98,000 = ₹10,000 adverse. The 8,100 labour-hours are irrelevant because the absorption basis is machine-hours.
Where it goes wrong. Substituting direct labour-hours for machine-hours despite the question expressly specifying machine-hours as the variable overhead absorption basis.
ICAI SM: Cost and Management Accounting, Chapter 13 (Standard Costing)
Questions people ask
What does this Chapter 13: Standard Costing - Test 3 practice test cover?
This practice test carries 50 marks across 25 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 25 questions carrying 2 marks each, giving a maximum score of 50 marks in 60 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.
