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CA Intermediate · Cost and Management Accounting · Cost Accounting Systems

Mehta Industries uses non-integrated accounts. Cost ledger balances at start: Stores ₹1,20,000; WIP ₹80,000; Finished Goods ₹1,00,000. During the period: materials purchased ₹3,00,000; materials issued to production ₹2,60,000; wages charged to WIP ₹1,50,000; factory overheads absorbed ₹1,20,000 (actual ₹1,28,000); cost of goods completed ₹5,10,000; sales at 25% above cost, cost of goods sold ₹4,80,000. Closing balance of Finished Goods is:

Closing finished goods is ₹1,30,000. It is opening finished goods of ₹1,00,000 plus goods completed at cost ₹5,10,000, less cost of goods sold ₹4,80,000. The overhead under-absorption of ₹8,000 is transferred to the costing profit and loss account, not to finished goods.

  1. A₹1,30,000Correct
  2. B₹1,00,000
  3. C₹1,58,000
  4. D₹1,10,000

Explanation

Finished goods closing = opening 1,00,000 + completed 5,10,000 − cost of goods sold 4,80,000 = ₹1,30,000. Adding or deducting overhead under-absorption of ₹8,000 does not affect finished goods, as it goes to the Costing P&L. Option 3 wrongly adds the ₹8,000 and other items.

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