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100+ Free CA Inter Paper 4 Practice Questions

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Key Facts: CA Inter Paper 4 Exam

100

Maximum Marks

ICAI New Scheme 2023

3 hrs

Exam Duration

ICAI

~30%

MCQ Weight

ICAI Exam Pattern

40%

Paper Pass Mark

ICAI Passing Criteria

100

Free Practice MCQs

OpenExamPrep

CA Intermediate Paper 4 (Cost and Management Accounting) is an ICAI Group II paper worth 100 marks over 3 hours, with approximately 30% compulsory MCQs (no negative marking) and 70% descriptive questions under the New Scheme 2023. It covers cost concepts, material, employee and overhead costing, activity based costing, the cost sheet, unit, job, batch, process, operation, joint, by-product and service costing, standard costing, marginal costing and budgetary control. Passing requires 40% in the paper and 50% aggregate across the group. This free bank offers 100 MCQs mapped to the official chapters.

Sample CA Inter Paper 4 Practice Questions

Try these sample questions to test your CA Inter Paper 4 exam readiness. Each question includes a detailed explanation. Start the interactive quiz above for the full 100+ question experience with AI tutoring.

1Under the ICAI cost accounting framework, what is the primary objective of cost accounting as distinct from financial accounting?
A.Ascertainment of cost and control of cost for managerial decision-making
B.Preparation of statutory financial statements for external stakeholders
C.Computation of taxable income under the Income-tax Act, 1961
D.Recording of transactions in compliance with the Companies Act, 2013
Explanation: Cost accounting focuses on ascertainment, allocation and control of cost to support internal managerial decisions, pricing, and cost reduction. Financial accounting, by contrast, is oriented toward external reporting and statutory compliance.
2Which of the following best describes a 'cost centre' under ICAI terminology?
A.A unit of product or service for which cost is computed
B.A location, person or item of equipment for which cost is ascertained and used for cost control
C.A department that generates revenue independently
D.A statement summarising total cost of production
Explanation: A cost centre is a location, person, item of equipment (or group of these) in respect of which costs are ascertained and used for the purpose of cost control. It is the smallest segment of activity for which costs are accumulated.
3Management accounting differs from cost accounting primarily because management accounting:
A.Is restricted only to the ascertainment of historical product cost
B.Is mandatory under the Companies (Cost Records and Audit) Rules
C.Uses cost data along with other financial and non-financial information for planning and decision-making
D.Records only past transactions in a double-entry system
Explanation: Management accounting is broader: it draws on cost accounting data plus other financial and non-financial information to assist management in planning, controlling and decision-making. Cost accounting is one input feeding management accounting.
4A cost that does not change in total within a relevant range despite changes in the level of activity is termed:
A.Variable cost
B.Semi-variable cost
C.Marginal cost
D.Fixed cost
Explanation: A fixed cost remains constant in total over a relevant range of activity, even though its per-unit amount falls as output rises. Examples include factory rent and supervisory salaries.
5Which classification of cost is most relevant for decision-making because it represents the benefit foregone by choosing one alternative over another?
A.Opportunity cost
B.Sunk cost
C.Conversion cost
D.Prime cost
Explanation: Opportunity cost is the value of the benefit sacrificed when one course of action is chosen over the next best alternative. It is highly relevant for decision-making though it is not recorded in the books of account.
6Prime cost is defined as the sum of:
A.Direct labour and factory overheads
B.Direct material, direct labour and direct expenses
C.Direct material and works overheads
D.All direct and indirect costs of production
Explanation: Prime cost equals direct material cost plus direct (productive) labour cost plus direct expenses. It represents the total of all directly traceable production costs before overheads are added.
7The Economic Order Quantity (EOQ) for a material is computed where annual demand is 24,000 units, ordering cost is Rs 60 per order and carrying cost is Rs 2 per unit per annum. The EOQ is:
A.1,000 units
B.1,600 units
C.1,200 units
D.2,400 units
Explanation: EOQ = sqrt(2 x Annual demand x Ordering cost / Carrying cost per unit) = sqrt(2 x 24,000 x 60 / 2) = sqrt(1,440,000) = 1,200 units. EOQ minimises the total of ordering and carrying costs.
8Under the FIFO method of pricing material issues, the closing stock is valued at:
A.Prices of the earliest purchases
B.Weighted average of all purchases
C.Standard price fixed in advance
D.Prices of the most recent purchases
Explanation: Under First-In-First-Out, the earliest-received materials are issued first, so the closing stock comprises the most recently purchased units and is valued at the latest (most recent) prices.
9The re-order level of a material is best computed as:
A.Maximum usage x Maximum lead time
B.Minimum usage x Minimum lead time
C.Average usage x Average lead time
D.Maximum usage x Minimum lead time
Explanation: Re-order level = Maximum usage x Maximum re-order (lead) period. Setting the level at the highest expected consumption during the longest lead time ensures stock does not run out before fresh supply arrives.
10Labour turnover measured under the 'Separation Method' is calculated as:
A.(Number of replacements / Average number of workers) x 100
B.(Number of separations / Average number of workers) x 100
C.(Number of accessions / Average number of workers) x 100
D.(Separations + Replacements) / Average number of workers
Explanation: Under the separation method, labour turnover = (Number of separations during the period / Average number of workers during the period) x 100. It measures the rate at which workers leave the organisation.

About the CA Inter Paper 4 Exam

CA Intermediate Paper 4, Cost and Management Accounting, is a 100-mark Group II paper under the ICAI New Scheme 2023. It tests cost concepts, costing methods, standard and marginal costing, and budgetary control through about 30% objective and 70% descriptive questions in a three-hour examination.

Assessment

Question count not published by the exam provider

Time Limit

3 hours

Passing Score

40% in the paper and 50% aggregate across the group

Exam Fee

Included in the consolidated ICAI CA Intermediate examination fee; no separate per-paper fee is published (Institute of Chartered Accountants of India (ICAI))

CA Inter Paper 4 Exam Content Outline

Introductory

Overview of Cost and Management Accounting

Nature, objectives and scope of cost and management accounting, cost concepts and classification, cost centre and cost unit, and cost reduction versus cost control.

Foundational

Ascertainment of Cost and Cost Accounting System

Elements of cost, classification by behaviour, function, traceability and normality, segregation of semi-variable cost, and the cost ascertainment framework.

High

Methods of Costing (Material, Employee, Overheads, ABC, Cost Sheet, Systems)

Material cost and inventory control, employee cost and incentives, overhead absorption, activity based costing, cost sheet, and integrated and non-integrated systems.

Moderate

Single (Output/Unit) Costing

Cost per unit for a single homogeneous product produced continuously and preparation of output cost statements.

Moderate

Job and Batch Costing

Cost accumulation for individual jobs or orders, batch costing, and the Economic Batch Quantity model for optimum batch size.

High

Process and Operation Costing

Process accounts, normal and abnormal loss and gain, equivalent production, inter-process profit, and operation costing.

Moderate

Joint Products and By-Products

Apportionment of joint cost by physical units and net realisable value, by-product accounting, and sell-or-process-further decisions.

Moderate

Service (Operating) Costing

Costing of transport, hospitals, hotels and power, composite cost units, and operating cost statements.

High

Standard Costing

Setting standards, material, labour, overhead and sales variance analysis, reconciliation, and management by exception.

High

Marginal Costing

Contribution, P/V ratio, break-even, margin of safety, marginal versus absorption costing, and decision-making applications.

High

Budget and Budgetary Control

Fixed and flexible budgets, functional and master budgets, cash budget, zero-based and performance budgeting, and budgetary control.

How to Pass the CA Inter Paper 4 Exam

What You Need to Know

  • Passing score: 40% in the paper and 50% aggregate across the group
  • Assessment: Question count not published by the exam provider
  • Time limit: 3 hours
  • Exam fee: Included in the consolidated ICAI CA Intermediate examination fee; no separate per-paper fee is published

Keys to Passing

  • Work through all 100 available questions
  • Review every answer and explanation
  • Track weak areas and revisit them
  • Use our AI tutor for tough concepts

CA Inter Paper 4 Study Tips from Top Performers

1Practise full process-costing and variance-analysis problems under timed conditions, as these chapters carry significant marks.
2Memorise core formulas (EOQ, break-even, P/V ratio, variances) and be able to derive them, not just recall them.
3Use the cost sheet format repeatedly so that classification of items between prime cost, works cost, and cost of sales becomes automatic.
4Attempt the compulsory MCQ section first to lock in quick marks, since there is no negative marking.
5Revise standard and marginal costing together because both feed decision-making questions.
6Solve ICAI study material illustrations and past papers rather than relying only on summary notes.

Frequently Asked Questions

How many marks is CA Intermediate Paper 4 worth?

CA Intermediate Paper 4, Cost and Management Accounting, is a 100-mark paper assessed over three hours under the ICAI New Scheme 2023.

What is the MCQ pattern for CA Inter Paper 4?

ICAI assesses the paper with roughly 30% objective-type (MCQ) questions and 70% descriptive questions. The objective portion is compulsory and carries no negative marking.

What is the passing criteria for CA Inter Cost and Management Accounting?

A candidate must secure at least 40% marks in the paper and an aggregate of 50% across all papers of the group to pass, as per ICAI rules.

Which chapters are covered in CA Inter Paper 4?

The paper covers cost concepts, material, employee and overhead costing, activity based costing, the cost sheet, cost accounting systems, unit, job, batch, process, operation, joint, by-product and service costing, standard costing, marginal costing, and budgetary control.

Is there negative marking in the CA Inter Paper 4 MCQs?

No. ICAI has confirmed that the objective-type questions in CA Intermediate papers, including Paper 4, carry no negative marking.

How long should I study for CA Inter costing?

Most candidates devote about 150 to 200 hours to Cost and Management Accounting across the study cycle, with heavy emphasis on numerical practice in process, standard and marginal costing.