10% debentures

revenue 200 640

cost ofcurrent
sales liabilities 90 350
retained
machinery earnings
at net book value 150 120
landfor
The profit from operations and
thebuildings
year wasat$65
net000
book value
and the finance90
costs were $20 000.
motor vehicles at net book value 20

A 3.21%
Job and Batch OrderD Costing
What is the return on capital employed for 2017?
current assets
B 4.64%
50
5.91% C 5.7%
equity 210
1 2018 FEB P12 Q18
18 What
Whichwas
business would use assets
the non-current a job costing system of accounting?
turnover?
8
A a beauty
1.26 timesparlour
20 The following information is available for G Limited for the year ended 31 December 2019.
B a chocolate
2.29 times factory
C a dairy
2.78 milk farmer
times $

D
D an oiltimes
3.05 refinery
share capital 275 000

2 2018 JUN P12 long-term bank loan 180 000

Q20
19 A
20 What is areceives
baker directcurrent
cost?
one order for 350 loaves of bread.
liabilities 120 000
A onecosting
Which that can be from
profit
method traced to abaker
cost item
willoperations
the use? 244 000
B one that is always fixed
A absorptionbank loan
costing interest 34 000
C one that isretained
always semi-variable
earnings including profit for the year 400 000
B batch costing
D one that is always variable
C
Whatjob costing
was the return on capital employed?
D unit
A company costing
21.54% B 24.56%
20 A pays its employees $6.80 per Chour25.03% D week.
for a basic 40-hour 28.54% An overtime premium of
50% is payable together with a production bonus of $0.25 per unit for all units produced over 350.
3 2020 JUN P11 Q21
21 Employees are guaranteed a weekly wage ofplus
$330.
21 A
A business
companypays a salesman
has been asked atobasic salary,
prepare commission
a quotation based
to print 100 on how
leaflets for much he sells.
a customer. The total
cost of direct materials, direct labour and a share of overheads
One employee worked 45 hours last week and produced 410 units. is $820 and a profit of 25% on
Which
cost hastype of cost
been is the salesman’s total earnings?
added.
What
A fixedwas the employee’s gross pay that week?
Which costing method is this an example of?
A $330
B semi-variable B $338 C $372 D $474
A absorption costing
C stepped
B job costing
D variable
C marginal costing
D unit costing
© UCLES 2018 9706/12/F/M/18 [Turn over
4 2021 JUN P11 Q22
22 Which expense for a business may be classified as a stepped cost?

A direct labour
B direct materials
© UCLES
C 2018
factory rent 9706/12/M/J/18

D telephone
 equity at the end of the year 500 000
long-term bank loan 150 000

What is the return on capital employed? 8

A 14%
20 The B 15.08%
following information is available for C 18.2%for the year
G Limited D ended
19.6%
31 December 2019.
5 2016 NOV P13 Q22
$
22 A business provided the following information.
share capital 275 000
budgeted overheads $20 000
long-term bank loan 180 000
budgeted direct labour hours 2000
current liabilities 120 000
direct labour rate $20 per hour
profit from operations 244 000
A job used materials costing
bank loan $45 and 6 hours of direct labour.
interest 34 000

Overheads areretained
chargedearnings including
on the basis profitlabour
of direct for the yearused.
hours 400 000

What
What was
was the
the cost ofon
return thecapital
job before adding any profit?
employed?
A
A $165
21.54% B
B $175
24.56% C
C $180
25.03% D
D $225
28.54%

6 2020 JUN P13 Q21

21 A company has been asked to prepare a quotation to print 100 leaflets for a customer. The total
23 What is a reason for overhead absorption in a manufacturing business?
cost of direct materials, direct labour and a share of overheads is $820 and a profit of 25% on
cost
A to has been overhead
control added. expenditure

Which costing method

B to determine is realisable
the net this an example of?inventory
value of
C
A to enable overheads
absorption costing to be apportioned to cost centres
D
B to
jobestablish
costing costs per unit of product
C marginal costing
D unit costing

22 Which expense for a business may be classified as a stepped cost?

A direct labour
Worksheet 1
© UCLES 2016 9706/13/O/N/16
B direct materials
C factory rent
D telephone

© UCLES 2020 9706/13/M/J/20

 Absorption Costing
8
1 2016 FEB P12 Q23
23 A production centre uses 20 000 machine hours and 17 000 labour hours each month.

Which formula is used to calculate the overhead absorption rate?

A total machine hours

total overhead cost

B total overhead cost

total labour hours
total overhead cost
C
total (labour hours machine hours) 2

total overhead cost

D
total machine hours
9
2 2016 FEB P12 Q26
Thebusiness
24 A
26 followingproduces
information
and is available.
sells watches. In 2015, 4000 watches were produced and 3600
watches were sold. Other information for the year included the following:
budget actual
$ per unit
overheads $60 000 $66 000
directdirect materials30 000 hours
labour 60 hours
35 000
direct labour 80
The overhead absorption rate is based on direct labour hours.
variable selling expenses 15
What is the amount of overhead over-absorbed or under-absorbed?
fixed manufacturing overheads 45
A $4000 over fixed administrative costs 50
B $4000 under
What is the cost of goods sold for 2015 if the business uses absorption costing?
C $6000 over
A $558 000 B $666 000 C $720 000 D $740 000
D $6000 under
10
3 2016 FEB P12 Q29
27 Which
29 itemshas
A business arethe
included in the
following marginal
budgeted andcost of a results
actual unit of production?
for a period.
25 A particular cost is classified as ‘semi-variable’.
A direct labour, direct materials, fixed production costs and variable production overheads
What effect will a 20% reduction in activity have on the unit cost? $
B direct labour, direct materials, fixed costs and variable production overheads
A decrease by 20% budgeted fixed overheads 354 000
C direct labour, direct materials and variable production overheads only
B decrease by less than actual
20% fixed overheads 360 000
D direct labour and direct materials only
C increase by 20% under-absorption of overheads 3 000

D
28 The increase
fixed
Which by less
overheads
statements thancost-volume-profit
are
about 20%
absorbed per unit. analysis are correct?

The budgeted number

1 Profits areofcalculated an000.
units wereon118 absorption costing basis.
2 actual
What is the Profitslevel
are of
calculated
activity inonunits?
a marginal costing basis.

A 3 It only applies
118 000 B 119where
000 there isCa constant
120 000 sales mix.
D 121 000
4 It only applies where there is a changing sales mix.
What1 are
30 A andthe
3 main purposes
B 1 and of 4budgeting?
C 2 and 3 D 2 and 4
1 to control expenditure

© UCLES 2016 2 to forecast future expenditure

9706/12/F/M/16
 A 1, 2, 3 and 4
company 4 uses marginal costing
B 1, 2 and 3 only
The investor wishes to invest in companies with the best underlying profitability.
C 1 and 3 only
Which companies should he select?
D 2 and 4 only
A 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4
4 2016 JUN P11 Q26
26 A business incurs the following costs.
8
25 A company is classifying its costs. It discovers that for any level of output between 10 000 and
20 15 000 ratio
units
1 the freight
direct costefficiently
material per
andunit is
direct always thecontrols
same figure
labour costs of $2 per unit.
Which indicates how a company its overheads?
2 indirect factory production overheads
Of
A which type
current of cost is this an example?
ratio
3 administrative expenses
A
B fixed
grosscost
margin
4 distribution costs
B
C semi-variable
profit margin cost
C
D stepped
Which costs fixed costturnover
are included
trade receivables
in the cost per unit using absorption costing?

D
A variable cost4
1, 2, 3 and B 1 and 2 only C 1 only D 2, 3 and 4 only
21 A company produces the following information.
5 2016 NOV P11 Q26
26 When does under absorption of overheads occur?
profit from operations 98 000
1 Actual expenditure is less than budgeted.
profit for the year 91 000
2 Actual expenditure is more than budgeted.
equity at the end of the year 500 000
3 Production is lower than planned.
long-term bank loan 150 000
4 Production is higher than planned.
What is the return on capital employed?
A 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4
A 14% B 15.08% C 18.2%
9 D 19.6%
6 2016 NOV P11 Q27
© UCLES 2016 9706/11/O/N/16
27 The following information is available in respect of department 1.
22 A business provided the following information.
actual forecast
© UCLES 2016 budgeted overheads 9706/11/M/J/16 $20 000 [Turn over
direct labour hours 45 000 40 000
budgeted direct labour hours 2000
machine hours 12 000 10 000
direct labour rate $20 per hour
overheads to be apportioned to department 1 $90 000
A job used materials costing $45 and 6 hours of direct labour.
The company has been asked to quote for an order. The expected time taken in department 1 will
Overheads
be are
four direct charged
labour onand
hours the seven
basis of direct labour
machine hours.hours used.
What was the cost of the job before adding any profit?
How much overhead should be charged to the order as it passes through department 1?
A $165 B $175 C $180 D $225
A $8.00 B $9.00 C $52.50 D $63.00

7 2016 NOV P13 Q23

28
23 A business
What manufactures
is a reason a single
for overhead product.inThe
absorption following information
a manufacturing is available.
business?

A to control overhead expenditure estimated

this year
B to determine the net realisable value of inventory$ next year
$
C to enable overheads to be apportioned to cost centres
selling price per unit 25 25
D to establish costs per unit of product
variable cost per unit 15 17
total fixed costs 80 000 84 000
profit for the year 20 000

How many units must be sold to achieve the same profit next year?

A 10 000 B 10 500 C 12 500 D 13 000

© UCLES 2016 9706/13/O/N/16
 A fixed
B semi-variable
C stepped
D variable

8 2016 NOV P13 Q26

26 A business absorbs overheads on the basis of direct labour hours. The following information is
available.

budgeted labour hours 6600 hours

actual labour hours 7100 hours
budgeted overheads $75 900
actual overheads 10 $74 250

27 A manufacturing
What is the valuebusiness has two
of overheads overproduction departments: assembly and painting.
or under absorbed?
The following
A $5625 information is available.
over
B $5625 under assembly painting
C $7400 over
machinery at net book value ($) 150 000 100 000
D $7400 under
machinery repair costs ($) 14 000 6 000
10
9 2016 NOV P13machine
Q27 operating hours 60 000 15 000
27 A manufacturing business
number has two production departments:
of machines 30assembly and painting.
10
The following information is available.
The total machinery insurance cost for the year was $5000.

How much insurance should be apportioned to the assembly painting

assembly department?

A $3000 machinery
B at net book valueC ($)$3750 150 000 D
$3500 100 000
$4000
machinery repair costs ($) 14 000 6 000
© UCLES 2016 9706/13/O/N/16 [Turn over
machine operating hours 60 000 15 000
28 Which costs will change with an increase in activity?
number of machines 30 10
A unit fixed costs and total fixed costs
The total machinery insurance cost for the year was $5000.
B unit fixed costs and total variable costs
How much
C unit insurance
fixed should
costs and be apportioned
unit variable costs to the assembly department?
A
D $3000 B and
unit variable costs $3500
total variable C
costs$3750 D $4000

10 2016 NOV P13 Q29

29 The table shows figures for a week’s production.
28 Which costs will change with an increase in activity?

A unit fixed costs and total fixed

expected costs
production 10 000 units
B unit fixed costs and total variable
expected costs
production overheads $50 000
C unit fixed costs and unit
actual variable costs
production overheads $60 000
D unit variable costs andabsorption
under total variable costs
of overheads $5 000

What is the actual amount of production in the week?

29 The table shows figures for a week’s production.
A 9000 units B 9167 units C 11 000 units D 13 000 units
expected production 10 000 units
expected production overheads $50 000
actual production overheads $60 000
under absorption of overheads $5 000

What is the actual amount of production in the week?

 8
11 2017 FEB P12 Q23
23 A business absorbs overheads based on machine
9 hours.

During
26 The the lastinformation
following quarter it had the following budgeted and actual results.
is available.

actual overheads $ 505

$118
actual machine
direct hours
materials 6 230
20 000
budgeted overheads9 $126 725
direct labour 45 000
budgeted machine hours 6 850
22 Which item is a direct cost? direct expenses 6 000
variableoroverheads
under absorbed? 11 000
A how
By carriage
muchinwards on production
were overheads over materials
fixed overheads 38 000
B cleaning
A materials
over absorbed for the factory
by $3250

C factory
B rent
over absorbed by $8220 sales 240 000

D wages
C under
What of the factory
is theabsorbed tomanager
by $3250
contribution sales ratio?

A under
D 50% absorbed B by $8220
54.58% C 65.83% D 70.42%
23 A business has the following information available.
12 2017 FEB P12 Q27
27 Actual
24 output
A company exceedsthe
provides budgeted
followingoutput.
information.
selling price per unit $35
Which cost is higher than budgeted?
direct labour
budgeted per unit
overheads $9000
$136
A fixed costs per unit
direct material
budgeted labourper unit
hours $6568
10
B total fixed costs budgeted
actual sales
overheads 8000
$146units
000
C total variable costs marginlabour
actual of safety
hours 200010units
110
D variable costs per unit
What is
What is the
the value of fixed
overhead costs? rate per labour hour?
absorption

25 A
A $40 000manufactures
B
B $120 000 C
C $160 000 information
DD $200
is 000
$12.87 $13.45 $13.82 $14.44
A company three products. The following obtained in respect of next
month’s budgeted production.
13 2017 JUN P11 Q24
24 A
28 company
The has
following allocated its
information costs
is for between different departments as shown.
a business.
product X product Y product Z
production $6production
$ $8maintenance
detailsper unit
contribution $7
department 1 department 2 department
contributionbudgeted
per kilo fixed costs per $3 month $42000 $6
allocated costs targetrequired
profit per month $80 000 $60
3000 000 $10 000
kilos of material 400 600 1000
split of maintenance department
for production
budget costs
variable cost per 60%
unit 40%
15
direct labour hours unit180020kilos
000 840000
The company has beenselling advised price
thatper
only of material will be available for production
next month.
What is the overhead absorption rate per labour hour for production department 1?
Fixed costs are expected to increase by $500 per month and variable costs increase by $5 per
A $3.70
unit.
What is the maximum B contribution
$4.00 C $4.20
the company can earn? D $4.30

A $9000
Which $9600
B will
value of revenue $13 000
C achieve
be required to the target D $13 200
profit?
25 Vikram is paid $10 an hour for a 40-hour week and at time and a half for overtime.
A $8000 B $8800 C $10 000 D $11 000
He is expected to produce four units an hour. If he produces more than this, a bonus of $2 per
extra unit is paid.

Last week Vikram worked 41 hours and produced 161 units.

© UCLES 2017 9706/12/F/M/17
How much was Vikram paid?
[Turn over
A $410 B $412 C $415 D $417
© UCLES 2017 9706/12/F/M/17
 B direct labour hours
C floor area
D number of employees
10
14
27 2017 JUNapportions
A business P11 Q26some of its overhead expenses across its production departments.
26 A business operated a staff canteen at a cost of $12 000.
Why might building maintenance costs not be included with the other overheads being
What is the most appropriate basis of apportioning this overhead cost?
apportioned?
A
A book value
Building of canteen costs
maintenance equipment
are fixed.
B
B direct labour
Building hours
maintenance is not necessary for production to take place.
C
C floor area basis for apportionment can be found.
No suitable
D
D number
They canofbe
employees
identified with specific cost centres.

15 2017 JUN P11 Q28

27
28 A business
The apportions
following some
information of its overhead
is available expenses across its production departments.
for a business.

Why might building maintenance costs not 10 be included with the other overheads being
budgeted manufacturing overhead $234 000
apportioned?
26 The budgeted incomebudgeted
statement of J Limited shows
direct labour hours the following.
45 000
A Building maintenance costs are fixed.
actual manufacturing overhead $ $243 600
B Building maintenance is not necessary for production to take place.
actual direct labour hours 42 000
sales 400 000
C No suitable basis for apportionment can be found.
How much overhead was under variable
or overcosts
absorbed? 240 000
D They can be identified with specific cost centres.
A $25 200 over absorbed fixed costs 132 000

28 B
The $25
following information
200 under profit forfor
is available
absorbed thea year
business. 28 000

C $27
What is 000 over absorbed
the margin ofbudgeted
safety in manufacturing
dollars? overhead $234 000
D
A $27
$70 000
000 under absorbed
Bbudgeted
$160 000 C hours
direct labour $268 000 D 45$330
000 000

16 2017 JUN P12 Q27 actual manufacturing overhead $243 600

27 The following details actual
are supplied by a company
direct labour hours for the month of42August.
000

budgeted
How much overhead was under machine
or over hours
absorbed? 36 000
budgeted overheads $162 000
A $25 200 over absorbed
actual machine hours 36 500
B $25 200 under absorbed
actual overheads $155 000
C $27 000 over absorbed
What$27
D is the
000under
underorabsorbed
over absorption of the overheads?

A $2250 over absorbed

B 2017
© UCLES $2250 under absorbed 9706/11/M/J/17

C $9250 over absorbed

D $9250 under absorbed

28 A company has fixed costs of $40 000 per month. It provided the following information.

March units April units

production 30 000 15 000

Total
© UCLES production
2017 costs for March were $90 000.
9706/11/M/J/17

What were the total production costs for April?

A $45 000 B $65 000 C $70 000 D $110 000

 The units are sold for $16 each.

What is the break-even point in units?

A 2700 B 3000 C 4000 D 4800

8
17 2017 JUN P13 Q27 9
21
27 The following
A company information
uses is available
direct labour hours tofor the inventory
calculate of a business.
the overhead absorption rate.
24 The following information is forecast for next period.
What results in over-absorption?
July 1 opening inventory 60 units at $4.50 per unit
units
15
1 actual overheads issued
exceed40budgeted
units overheads
opening inventory 54 275
23
2 actual overheads purchased 120budgeted
are less than units at $5.20 per unit
overheads
closing inventory 60 120
3 budgeted29 issued
production 65 unitsthan actual production
is greater
$
4 budgeted production is less than actual production
What is the value of the inventory on 31 July based on AVCO?
profit using marginal costing 300 600
A $337.50
A 1 and 3 B 1$363.75
and 4
B profit C
C 2$382.50
and 3 DD 2$390.00
and 4
using absorption costing 390 780
18 2017 NOV P11 Q22
What
28 A is the overhead
A business
company’s absorption
limiting factor rate permaterials.
unit?
22 manufactures aissingle
production
product. It manufactures three different products.
A $5.00
Which product Bit manufacture
$6.50 first C $7.20
to maximise D $15.43
Which cost canshould
be allocated in order
to its production departments? profits?

A administrative
A the product making the highest contribution per kilo of materials
expenses
25 A business has total fixed costs of $240 000. Products have a unit selling price of $25 and a unit
B direct
B the product
variable cost making the highest number of unit sales
of $15.
materials
C factory
C the product
light making
and the most contribution per unit
How many units needheat
to be sold to break even?
D the product
D using the least materials per unit
A factory
6000 rent B 9600 C 16 000 D 24 000

19 2017 NOV P12 Q26

23 The
26 The budget data of information
table contains N Limited isprovided
as follows.
by a company.

production level total costs

budgeted direct labour hours 8000
15 000 units $406 000
actual direct labour hours worked 7500
25 000 units $546 000
budgeted overhead expenditure $104 000
actual
What is the budgeted fixed overhead expenditure
cost? $112 500

A
What$196 000
is the B $238
over or under 000 of overheads?
recovery C $336 000 D $357 000
© UCLES 2017 9706/13/M/J/17
A $8500 over recovered
24 A business pays its employees on a time rate basis at $8 per hour. It also pays a weekly bonus of
B $8500
$1.20 underunit
for every recovered
of production over 100 units, plus an additional $0.80 for all production over
120 units.
C $15 000 over recovered
Employees
D $15 000are guaranteed
under a minimum weekly wage of $335.
recovered
An employee worked 37.5 hours last week and produced 129 units.

What was the employee’s wage for that week?

A $335.00 B $342.00 C $358.00 D $365.20

© UCLES 2017 9706/11/O/N/17

© UCLES 2017 9706/12/O/N/17 [Turn over
 A AVCO in periods of rising cost prices
B AVCO in periods of rising selling prices
C FIFO in periods of rising cost prices
D FIFO in periods of rising selling prices

20 2017 NOV P13 Q24

24 A manufacturing business has the following data.

budgeted factory overheads $144 000

budgeted machine hours 40 000
actual factory overheads $147 600
actual machine hours 36 000

What is the overhead absorption rate per machine hour?

A $3.60 B $3.69 C $4.00 D $4.10

25 Which values can be calculated when absorption costing is used?

1
Worksheet 1
an inventory value which includes all production costs
2 the margin of safety at the current level of production
3 the selling price of the product

A 1 and 2 B 1 and 3 C 1 only D 2 and 3

26 Whose wages would be treated as an indirect cost?

A assemblers at a car manufacturer

B lorry drivers at an engineering company
C sewers at a dress-making business
D welders at a building construction company

© UCLES 2017 9706/13/O/N/17 [Turn over

 budgeted factory overheads $144 000
In a week, each employee produced 145 units.
budgeted machine hours 40 000
What were the total wages for the
actual week?
factory overheads $147 600
A $7020 B actual
$9984machine hours
C $10 764 36
D000$10 920

What is the overhead absorption rate per machine hour?

A $3.60 B $3.69
Absorption Costing
23 A business had the following transactions relating to inventory.
89
C $4.00
$4.10 D
22
21
1 Which
Adam records
2017 NOV hisMarch
cost is treated
P13 as1variable
inventory
Q25 opening
using cost inventory
of a motor
the AVCO (perpetual 20company?
transport items at
inventory) to $7.50 each
calculate its value.
25 Which
A values can be calculated
advertising 3 saleswhen absorption costing12isitems
of inventory used?at $9 each
Which statement is correct?
B driver1 insurance 6 value
an inventory purchases of inventory
which includes 18 items
all production at $8.20 each
costs
A He only values it at the end of the month.
C fuel
What was2 thethe margin
cost per of safety at the current level of production
B He only values it atunit of closing
the year-end. inventory on 7 March using the AVCO (perpetual) method?
D $7.29 3 licence
vehicle the selling price of the product
A
C He values it at theB same
$7.85 C the
price throughout $7.98
year. D $8.23
A His
D 1 and 2
inventory B 1 and
is valued after3every purchase
C 1 onlyand issue. D 2 and 3
23 Adam is paid $4 per hour and his expected output is 500 units per week. He is also paid a bonus
24 Which statements about marginal costing are correct?
2 $1 for every
2018 FEB 20P12 perfect
Q22units made above the total of 500.
26
22 Whosestatements
Which wages would be absorption
about treated as an indirect cost?
1 The marginal cost of acosting
productare correct?
includes an allowance for fixed overheads.
In one week he worked for 40 hours and made 880 units, but 40 were faulty and were scrapped.
A assemblers
1
2 ItThe atmarginal
can a car
be manufacturer
used as
costa basis for calculating
of a product the selling
represents price of a cost
the additional product.
of making one extra
How much was Adam
unit. paid for the week?
B lorry2drivers at an engineering
It ensures company
that all the costs of the business are charged to the production.
A
C $177 3 If ainventory
sewers B $179decreases duringC a$202 D $204
period, the profits under absorption costing will be
3 at dress-making
It ensures that onlybusiness
variable costs are charged to production.
lower than under marginal costing.
D welders4 atIt isa used
building construction
to calculate company
the factory cost for a unit of production.
24 A business values
1, 2 and 3 their inventory
B 1 only using Cthe AVCO
2 and 3method.
only The
D 2inventory
only on 1 June 2017 was
100 units
A 1 and 2 valued at $2.40 each.
B 1 and 4 C 2 and 4 D 3 and 4

25 The2017
How
©3UCLES
following took place.
is an overhead absorption rate per machine hour calculated?
9706/13/O/N/17 [Turn over
23 How is the margin of safety calculated?
June 5 purchased
A by dividing actual overheads with actual40 units athours
machine $2.50 per unit
A actual contribution less budgeted
7 sold contribution
B by dividing actual overheads with60 units at machine
budgeted $3.50 perhours
unit
B actual profit less budgeted profit
C
Whatbywas
dividing budgeted
the value of theoverheads with
inventory on actual2017
8 June machine
to thehours
nearest dollar?
C budgeted contribution less break-even point
D
A by$194dividing budgeted
B $196overheads withCbudgeted
$200 machine D hours
$224
D budgeted sales less break-even point
4 2018 JUN P12 Q25
25 The following budgeted information is available for a hotel for the next financial year.
24 A business provides the following information about a product.

fixed overheads $ 000

$192
direct costs $240 000
variable cost per unit 16
number of guests 2400
selling price per unit 30
average guest stay 4 nights
total fixed costs 35 000
What
© UCLES is
2018 budgeted
the overhead absorption profit
rate per guest night? 95 000
9706/11/M/J/18 [Turn over

A $20
How B it$45
many units should C the
produce to achieve $80budgeted profit?
D $180

A 4286 B 4334 C 6786 D 9286

© UCLES 2018 9706/12/F/M/18

© UCLES 2018 9706/12/M/J/18 [Turn over
 D
D to
to understand
understand the
the impact
impact of
of the
the business
business on
on the
the economy
economy

19 A
19 A business
business has
has provided
provided the
the following
following information.
information.

costs
costs of
of sales
sales 11 $240 000
$240 000
5 2018 JUN P12 Q29
gross margin
gross margin 25%
25%
29 The direct material cost of 20 000 units is $8000. 400 direct labour hours are required at a cost of
$6000. Overheads are absorbed at
profit 150%
for theof the
year
profit for the year cost of
$16 000 labour.
direct
$16 000

What was
What is thethe
cost per unit?to revenue ratio to the nearest whole percent?
expenses
What was the expenses to revenue ratio to the nearest whole percent?
A
A $0.40
15% B
B $0.70
18% C
C $0.85
20% D
D $1.15
27%
A 15% B 18% C 20% D 27%
6 2018 JUN P13 Q20
30 A
20 Why might aapportions
business prepare a budget?
20 A business
business apportions some
some of
of its
its overhead
overhead expenses
expenses across
across its
its production
production departments.
departments.
A to determine
Why the amount of bankcosts
loan it needs
Why might
might building
building maintenance
maintenance costs not not be
be included
included with
with the
the other
other overheads
overheads being
being
apportioned?
apportioned?
B to determine the skills of labour force
A
C
A Building
to identifymaintenance
Building costs
costs are
its market share
maintenance are fixed.
fixed.
B
D
B Building
to identifymaintenance
Building the quality ofis
maintenance not
isits necessary
necessary for
notproducts for production
production to
to take
take place.
place.
C
C No
No suitable
suitable basis
basis for
for apportionment
apportionment can
can be
be found.
found.
D
D They
They can
can be
be identified
identified with
with specific
specific cost
cost centres.
centres.

7 2018 JUN P13 Q21

21
21 The
The following
following information
information is
is provided
provided by
by a
a hotel
hotel for
for a
a 30
30 day
day period.
period.

rooms
rooms with
with single rooms
single rooms
two
two beds
beds
number
number of
of letting
letting bedrooms
bedrooms 180
180 60
60
average
average number
number of
of rooms
rooms occupied
occupied per
per day
day 150
150 50
50
number
number of
of guests
guests in
in period
period 5250
5250
average
average length
length of
of stay
stay 2
2 days
days
payroll
payroll and
and cleaning
cleaning costs
costs $300
$300 000
000

What is
What is the
the average
average cost
cost per
per occupied
occupied bed
bed per
per day?
day?

A
A $23.80
$23.80 B
B $28.57
$28.57 C
C $50.00
$50.00 D
D $57.14
$57.14
8
8 2018 JUN P13 Q22
22 The following information is available for a manufacturing business.

What could cause an under-absorption of9706/13/M/J/18

© UCLES
UCLES 2018
2018
overheads? [Turn over
over
© 9706/13/M/J/18 [Turn
actual budget

A machine hours 2 000 1 000

B overhead expenditure ($) 8 000 10 000
C production units 3 000 5 000
D sales units 6 000 5 000

23 A business produces two products for the month of January. Overheads are absorbed using the
direct labour hour rate. The production details are as follows.

© UCLES 2018 9706/12/M/J/18

product
P Q
 A machine hours 2 000 1 000
B overhead expenditure ($) 8 000 10 000
C production units 3 000 5 000
D sales units 6 000 5 000

9 2018 JUN P13 Q23

23 A business produces two products for the month of January. Overheads are absorbed using the
direct labour hour rate. The production details are as follows.

product
P Q

units manufactured and sold 5000 2000

direct labour hours per unit 1.5 1

Direct costs for the month were $23 750.

The fixed overheads were $6500. 9

What will
25 What wasresult
the overhead absorption
in an increase in therate?
margin of safety for a business?
A
A $0.68 per hour
accepting higher trade discounts from suppliers and offering overtime to labour
B
B $2.50 per hour
accepting higher trade discounts from suppliers but not offering overtime to labour
C
C $3.18
not per hourhigher trade discounts from suppliers but offering overtime to labour
accepting
D
D $3.39
not per hourhigher trade discounts from suppliers and not offering overtime to labour
accepting

10 2018 JUN P13 Q26

24 The
26 A following
chemical information
plant producesrelates
a batchto of
a business for aDirect
50 000 units. year. materials cost $400 000. Direct labour is
1000 hours at a cost of $60 000, and overheads are absorbed at the rate of $60 per direct labour
hour. $

What is the cost of one unit?selling price per unit 100

A $8.00 B variable costs

$9.20 C per$10.40
unit 60
D $14.00
total fixed costs 10 90 000
11 2018 JUN P13 Q29
27 A
29 A company
company paid
usesthe following
a direct telephone
profit
labour for the
rate costs.
year per hour to
of $5.40 15absorb
000 production overhead. Each unit
of product manufactured requires four direct labour hours.
How many units were sold for the year? number of total cost
month
The following information is available for a period.
customer enquiries $
A 1750 B 1875 C 2250 D 2625
1 250 000 425 000$
2 350 000 575 000
actual production overhead 518 400
Telephone costs are under
a semi-variable
absorbed cost.
production overhead 32 400
© UCLES 2018 9706/13/M/J/18

What
What would beactual
was the the total telephone
output for the costs incurred for 305 000 enquiries?
period?
A
A $501 071
22 500 units B $507 500 C $508 333 D $518 500

B 24 000 units
28 The production of a business is limited by a shortage of direct material.
C 25 500 units
What
D 90must
000 be calculated to prepare the most profitable production plan?
units
A contribution per unit of limiting factor
30 What should notper
B contribution be a reason
unit for business planning?
of production
A
C to assist
profit perwith
unit management decision making
of limiting factor
B
D to avoid
profit perdepartmental conflict
unit of production
C to identify staff redundancy opportunities
 112
9
What is the total variable cost per unit of the product?
24 A business manufactures 175 units of a product each month.
A $75 B $79 C $94 D $97
The following information is available for the month.
12 2018 NOV P11 Q25
25 A business absorbs overheads based on machine hours.
Per unit $

revenue
During last month it had the following results. 580
variable costs 230
actual overheads $158 200
fixed overheads 90
actual machine hours 7310
What is the break-even point in units?
budgeted overheads $168 200
A 45 units B 61 units C 88 units D 160 units
budgeted machine hours 8410

Which isstatement
25 When marginal is correct?
costing less useful than absorption costing?
A
A Overheads
when were
choosing toover-absorbed
make or buy a by $10 000.
product
B
B Overheads
when were
dealing a limiting factorby $12 000.
withover-absorbed
C
C Overheads
when wereaunder-absorbed
producing special order by $10 000.
D
D Overheads
when were
valuing under-absorbed
closing inventory by $12 000.

13 2018 NOV P12 Q26

26 A company
© UCLES 2018 manufactures a single product with a selling price of $75 per unit. The table shows
9706/11/O/N/18
the costs based on sales and production volume of 8000 units.

direct costs 158 000

variable manufacturing overheads 74 000
fixed manufacturing overheads 80 000
variable selling overheads 20 000
fixed administration overheads 100 000

If absorption costing is applied, what is the gross profit on each unit sold?

A $21.00 B $36.00 C $43.50 D $46.00

© UCLES 2018 9706/12/O/N/18 [Turn over

 A –$60 000
B –$45 000
C +$45 000
D +$60 000

14 2018 NOV P12 Q28

28 A business provides the following information.

budgeted overhead costs $280 000

budgeted labour hours 25 000
budgeted machine hours 20 000
actual overhead cost $336 000
actual labour hours 35 000
actual machine hours 30 000

What is the over-absorption or under-absorption of overheads?

A $56 000 over absorbed

B $56 000 under absorbed
C $84 000 over absorbed
D $84 000 under absorbed
8
15 2019 FEB P12 Q21
29
21 A
A business
business provides
provided the
the following
following budgeted information.
information.

contribution to sales ratio

budgeted overheads 60%
$127 000
budgeted
budgeted sales
machine hours $240 000
10 450
budgeted production units
actual overheads 40 000
$149 000

What is the contribution peractual

unit? machine hours 9 300

A
What$3.60 B $3.75
was the absorption C hour?
rate per machine $9.60 D $10.00

A $12.15 B $13.66 C $14.26 D $16.02

22 Which costs are stepped costs?

© UCLES 2018 9706/12/O/N/18

1 Increase in indirect materials cost.

2 Increase in variable overheads.
3 Renting further factory space.

A 1 and 2 B 1 only C 2 and 3 D 3 only

23 An employee worked a normal 35-hour week and was paid $15 per hour. He also worked 5 hours
of overtime which was paid at $20 per hour and received a bonus of $50.

What was his total pay for the week?

A $525 B $600 C $625 D $675

24 A company uses machine hours to absorb its overheads.

The following information is provided for a month.

actual budgeted
23 An employee worked a normal 35-hour week and was paid $15 per hour. He also worked 5 hours
of overtime which was paid at $20 per hour and received a bonus of $50.

What was his total pay for the week?

A $525 B $600 C $625 D $675

16 2019 FEB P12 Q24

24 A company uses machine hours to absorb its overheads.

The following information is provided for a month.

actual budgeted

overheads $237 010 $253 450

machine hours 12 460 13 700
8
Which statement regarding overheads is correct?
21 A business uses the First In First Out (FIFO) method to value its inventory.
A $6500 over-absorbed
The following inventory transactions took place during a month. There was no opening balance.
B $6500 under-absorbed
C $16 440 over-absorbed receipts issues
date
D $16 440 under-absorbed units $ per unit units
9
17 2019 JUN P11 Q23 1 July 100 15.50
23 A factory employs a large 6number
July of staff
100who pack15.60
different products for different customers.

What would be the most 10 July basis to absorb the packing department
suitable 80 overheads?

A customer 20 July 50 15.80

© UCLES 2019 9706/12/F/M/19
B labour hours 25 July 100

C machine
What was thehours
value of inventory at the end of the month?
D
A product
$1085 B $1092 C $1102 D $1106

18 2019 JUN P12 Q22

24 A
22 The followinghas
business information is available.
two production departments: assembly and machinery. The following budgeted
information is available.
budget actual
assembly machinery
overhead cost $ 60 000 66 000
labour hours hours
direct labour 5600
30 000 1350
35 000
machine hours 1200 6900
Overheads are absorbed on the basis of direct labour hours.
overheads $75 000 $80 000
What was the amount of over absorption or under absorption of overheads?
What is the overhead absorption rate for the assembly department?
A $4000 over
A $13.39 per labour hour
B $4000 under
B $19.14 per machine hour
C $6000 over
C $22.30 per labour hour
D $6000 under
D $62.50 per machine hour

25 A business employs machinists to make a single product.

23 A shortage caused a business to pay more for its purchases of raw materials.
As demand increases more machinists are employed. Every time eight extra machinists are
employed,
What is theone extra
effect supervisor is needed.
of this?
How are total labour costs best described?
break-even point marginal cost contribution

A machinists
decrease supervisors
decrease increase
A
B fixed
decrease variable
decrease decrease
 A Selling costs have increased.
9
B Selling costs have not changed.
23 Inventory cost prices are rising for a business. The company uses AVCO rather than FIFO to
C The
value inventory has increased.
its inventory.
D The inventory has not changed.
What is the effect on inventory valuation and profit of using AVCO rather than FIFO?
19 2019 NOV P11 Q24
inventory
24 A business uses an overhead
profitabsorption rate based on direct labour hours.
valuation
The following information is provided for its last year.
A higher higher
B higher lower actual budgeted

C lower higher
overheads $120 000 $100 000
D lower direct lower
labour hours 10 000 8000
indirect labour hours 2000 4500
24 A company calculates its profit using marginal costing as $90 000 for a month.
Which statement regarding overheads is correct?
Opening inventory was 4000 units and closing inventory 6000 units.
A They were over absorbed by $5000.
The
B fixed
They production
were underoverhead
absorbedabsorption
by $5000. rate is $20 per unit.
C They
What is thewere over
profit absorbed
under by $24
absorption 000.
costing?
D
A They
$10 000 $50 000by $24 000.
were underB absorbed C $130 000 D $170 000

20 2019 NOV P12 Q25

25 A
25 A manufacturing
business has provided
businessthe following
has providedinformation about
the following a product.
information.

budgeted labour hours $ 12 000

unitabsorption
budgeted overhead contribution
rate 6 per labour hour
$7.50
actual overhead cost
total fixed costs 16 800 $101 250
actual labour hours 15 000
It is proposing to increase the unit selling price from $18 to $20.
What
What is the over
would or effect
be the under of
absorption ofbreak-even
this on the overheads?quantity?

A
A $11 250 under
decrease absorbed
by 700 units
B
B $11 250 over
increase absorbed
by 700 units
C
C $20 250 under
decrease absorbed
by 1400 units
D
D $20 250 over
increase absorbed
by 1400 units

Worksheet 2
© UCLES 2019 9706/11/O/N/19

© UCLES 2019 9706/12/O/N/19 [Turn over

 What is the impact on profit if the manufacturer is considering using either marginal costing or
absorption costing?

A The profit is the same if using either marginal costing or absorption costing.
B The profit using absorption costing is higher because the inventory includes fixed overheads.
C
D
Absorption Costing
The profit using absorption costing is lower because all the fixed overheads are deducted.
The profit using absorption costing is lower because fixed overheads are under absorbed.

1 2019 NOV P13 Q24

24 A business has provided the following costing information for its production departments.

machining assembly

total production overheads $180 000 $260 000

machine hours 65 000 38 000
labour hours 42 000 76 000

What would be a suitable overhead absorption rate for each department?

machining assembly
$ $

A 2.77 3.42
B 2.77 6.84
C 4.29 3.42
D 4.29 6.84
9
2 2019 NOV P13 Q25
25 A company uses a machine hour basis to absorb its overheads.

The2019
© UCLES following information is provided for its last period.
9706/13/O/N/19

actual budgeted

overheads $299 000 $350 000

machine hours 46 000 50 000

Which statement regarding overheads is correct?

A They were over absorbed by $23 000.

B They were under absorbed by $23 000.
C They were over absorbed by $51 000.
D They were under absorbed by $51 000.

26 A business provided the following information about a product.

per unit
$

selling price 15.00

variable cost 9.00
fixed cost 4.20

Budgeted production and sales were 1200 units.

What was the profit made for actual production and sales of 1500 units?
 The business
The business uses
uses the
the first
first in
in first
first out
out (FIFO)
(FIFO) method
method of
of inventory
inventory valuation.
valuation.

What
What was
was the
the value
value of
of inventory
inventory at
at the
the end
end of
of March?
March?
A
A $250
$250 B
B $275
$275 C
C $283
$283 D
D $300
$300
3 2020 JUN P11 Q24
24
24 A
A company
company uses
uses absorption
absorption costing
costing based
based on
on predetermined
predetermined absorption
absorption rates.
rates.

Which
Which statement
statement about
about absorption
absorption rates
rates is
is correct?
correct?
A
A They
They will
will be
be based
based on
on budgeted
budgeted costs
costs and
and outputs.
outputs.
B
B They
They will
will be
be calculated
calculated only
only when
when actual
actual costs
costs and
and outputs
outputs are
are known.
known.
C
C They
They will
will be
be changed
changed each
each time
time outputs
outputs and
and costs
costs change.
change.
D
D They
They will
will be
be set
set for
for a
a period
period of
of more
more than
than one
one year.
year.

4 2020 JUN P11 Q25

25 A
25 business absorbs
A business absorbs fixed
fixed overheads
overheads using
using direct
direct labour
labour hours.
hours.

The
The following
following information
information is
is provided.
provided.

actual
actual budgeted
budgeted
overheads
overheads $525
$525 000
000 $525
$525 000
000
direct
direct labour
labour hours
hours 16
16 300
300 15
15 000
000
indirect
indirect labour
labour hours
hours 2700
2700 2500
2500

Which
Which statement
statement is
is correct?
correct?
A
A Overheads were
Overheads were over
over absorbed
absorbed by
by $45
$45 000.
000.
B
B Overheads were
Overheads were under
under absorbed
absorbed by
by $45 000.
$45 000.
C
C Overheads
Overheads were
were over
over absorbed
absorbed by $45 500.
by $45 500.
D
D Overheads
Overheads were
were under
under absorbed
absorbed by $45 500.
by $45 500.
9
5 2020 JUN P12 Q21
21 A business provided the following information.

budgeted overheads $20 000

©
© UCLES
UCLES 2020
2020 budgeted direct 9706/11/M/J/20
labour hours
9706/11/M/J/20 2000 [Turn
[Turn over
over

direct labour rate $20 per hour

A job used materials costing $45 and 6 hours of direct labour.

Overheads are charged on the basis of direct labour hours used.

What was the cost of the job before adding any profit?

A $105 B $165 C $180 D $225

22 A business has produced the following estimates of labour costs for next month.

units produced 600 800 1100

total labour cost $5690 $6170 $6890

What was the monthly fixed labour cost?

A $480 B $1200 C $2640 D $4250

 units produced 600 800 1100
total labour cost $5690 $6170 $6890

What was the monthly fixed labour cost?

A $480 B $1200 C $2640 D $4250

6 2020 JUN P12 Q23

23 Why are service centre costs apportioned to production departments?

A to act as a check on service centre managers

B to ascertain whether service centres are cost effective
C to ensure the service centre costs are included in selling prices
D to minimise the total costs of service centres
10
7 2020 JUN P12 Q24
24 The following data were available for a department for July.

budget actual

direct labour hours 40 000 41 950

machine hours 60 000 60 900
overheads $480 000 $499 200

What was the over or under absorption of overheads for July?

A $4200 over absorbed

B $4200 under absorbed
C $12 000 over absorbed
D $12 000 under absorbed

8
©
2020 NOV P11 Q24 [Turn over
25UCLES 2020statements
Which about marginal costing9706/12/M/J/20
are correct?

1 It cannot be used as a basis to calculate contribution.

2 It is useful for decision-making.
3 It recognises the importance of fixed costs.

A 1 and 2 B 2 and 3 C 2 only D 3 only

26 A company with fixed costs of $50 000 and a contribution to sales ratio of 40% makes a profit of
$30 000.

What are the total costs?

A $130 000 B $170 000 C $175 000 D $200 000

27 What is not an assumption made in cost–volume–profit analysis?

A Unit fixed cost is constant.

B Unit selling price is constant.
C Unit variable cost is constant.
D Units produced are all sold.
 9 2020 NOV P11 Q25

10 2020 NOV P12 Q25

11 2020 NOV P13 Q23

12 2020 NOV P13 Q24

13 2020 NOV P13 Q25

14 2021 JUN P11 Q23

15 2021 JUN P11 Q24

16 2021 JUN P12 Q23

17 2021 JUN P13 Q24

23 A production centre uses 20 000 machine hours and 17 000 labour hours each month.

Which formula is used to calculate the overhead absorption rate?

A total machine hours

total overhead cost

B total overhead cost

total labour hours
total overhead cost
C
total (labour hours machine hours) 2

total overhead cost

D
total machine hours

18 2016 FEB P12 Q24

24 The following information is available.

budget actual

overheads $60 000 $66 000

direct labour 30 000 hours 35 000 hours

The overhead absorption rate is based on direct labour hours.

What is the amount of overhead over-absorbed or under-absorbed?

A $4000 over
B $4000 under
C $6000 over
D $6000 under

25 A particular cost is classified as ‘semi-variable’.

What effect will a 20% reduction in activity have on the unit cost?

A decrease by 20%
B decrease by less than 20%
C increase by 20%
D increase by less than 20%
 4 January 3 at $200 each –
13 January – 2 at $400 each
26 January 3 at $250 each –
28 January – 2 at $400 each
10
The business used the first in first out (FIFO) method of inventory valuation.
19 2016 JUN P11 Q27
27 A company absorbs overheads using machine hours. The following information is available.
What was the gross profit for January?

A $250 B $650 C $700

overheads machine $750
D hours

budgeted $200 000 40 000 hours

24 A manager is preparing a quotation for Job 88. A specialised technician is hired to work for this
actual $240 000 60 000 hours
job only. He will use machinery that the company already owns.
What was
Which the over
statement is or underabout
correct absorption of overheads?
expenses for Job 88?
A
A $40 000
Both over depreciation and technician wage are direct.
machinery
B
B $40 000
Both under depreciation and technician wage are indirect.
machinery
C
C $60 000 over
Machinery depreciation is direct and technician wage is indirect.
D
D $60 000 under
Machinery depreciation is indirect and technician wage is direct.

20 2016 JUN P12 Q25

25 How is margin
28 Budgeted of safety
overhead calculated?
expenditure was $180 000 and budgeted labour hours were 12 000. Actual
overheads amounted to $196 000 and actual labour hours were 12 200.
A actual sales minus break-even sales
What was the
B actual under
sales or over
minus absorption
budgeted sales of overheads?
A
C $3000 over minus cost of sales
actual sales
B
D $3000 under
budgeted sales minus cost of sales
C $13 000 over
A company
29 D incurs total costs of $2200 for producing 100 units and $4600 for 300 units. The
$13 000 under
selling price per unit is $20.

Worksheet 3
Whatmight
26 Why is theatotal profit or
business useloss at a production
marginal costing? level of 200 units?
A $4001 lossto calculate break-even units
B $6002 profit
to decide on the most profitable use of limited resources
C $9333 profit
to decide whether to make a product or buy it
D $1600 profit
A 1 and 2 only B 1, 2 and 3 C 2 only D 3 only

30 A company provides the following information in respect of its carriage costs.

© UCLES 2016 9706/12/M/J/16

total cost
units carried
$

2 000 6 000
5 000 13 500

When more than 5000 units are carried the cost will increase the fixed charge by a further $2000.

What will be the cost to carry 6000 units?

A $15 500 B $16 200 C $18 000 D $20 000

© UCLES 2016 9706/11/M/J/16

 Absorption Costing
10
10
1 2016 JUN P13 Q26
26
26 A
A business
business incurs
incurs the
the following
following costs.
costs.
1
1 direct
direct material
material and
and direct
direct labour
labour costs
costs
2
2 indirect
indirect factory
factory production
production overheads
overheads
3
3 administrative
administrative expenses
expenses
4
4 distribution
distribution costs
costs
Which
Which costs
costs are
are included
included in
in the
the cost
cost per
per unit
unit using
using absorption
absorption costing?
costing?
A
A 1,
1, 2,
2, 3
3 and
and 4
4 B
B 1
1 and
and 2
2 only
only C
C 1
1 only
only D
D 2,
2, 3
3 and
and 4
4 only
only

2 2016 JUN P13 Q27

27
27 A
A company
company absorbs
absorbs overheads
overheads using
using machine
machine hours.
hours. The
The following
following information
information is
is available.
available.

overheads
overheads machine
machine hours
hours
budgeted
budgeted $200
$200 000
000 40
40 000
000 hours
hours
actual
actual $240
$240 000
000 60
60 000
000 hours
hours

What
What was
was the
the over
over or
or under
under absorption
absorption of
of overheads?
overheads?
A
A $40
$40 000
000 over
over
B
B $40 000
$40 000 under
under
C
C $60 000
$60 000 over
over
D
D $60
$60 000
000 under
under
9
3 2016 NOV P12 Q25
28 How
28 In
25 How is
is margin
margin of
of safety
a manufacturingsafety calculated?
calculated?
business the following could occur.
A
A actual
1 sales
actual sales minus
minus
Actual break-even
paidsales
break-even
overheads sales
are less than budgeted overheads.
B
B actual
2 sales
actual sales minus
minus
Actual budgeted
budgeted
overheads sales
sales
paid are more than budgeted overheads.
C
C actual
3 sales
actual sales minus
minus
Actual cost
cost
units of
of sales
salesare less than budgeted units.
produced
D
D budgeted
budgeted sales minus
sales units
4 Actual cost
cost of
of sales
minusproduced sales
are more than budgeted units.

Which situations would result in an under absorption of overhead expenditure?

29
29 A
A company
company incurs
incurs total
total costs
costs of
of $2200
$2200 for
for producing
producing 100
100 units
units and
and $4600
$4600 for
for 300
300 units.
units. The
The
selling
selling
A price
price
1 and per unit is
3 per unit B $20.
is $20.
1 and 4 C 2 and 3 D 2 and 4

What
What is
is the
the total
total profit
profit or
or loss
loss at
at a
a production
production level
level of
of 200
200 units?
units?
26 A company makes and sells a single product for $12 per batch.
A
A $400
$400 loss
loss
The variable cost is $4 per batch.
B
B $600
$600 profit
profit
C $933
Fixed
C per
$933 profit
costs have been absorbed based on a normal activity level of 1000 batches at
profit
$3 batch.
D
D $1600
$1600 profit
profit
What is the profit under marginal costing if the company makes and sells 1500 batches?

A $6000 B $7500 C $9000 D $12 000

 A book value of canteen equipment
B direct labour hours
C floor area
D number of employees

4 2017 JUN P11 Q27

27 A business apportions some of its overhead expenses across its production departments.

Why might building maintenance costs not be included with the other overheads being
apportioned?

A Building maintenance costs are fixed.

B Building maintenance is not necessary for production to take place.
C No suitable basis for apportionment can be found.
D They can be identified with specific cost centres.
9
5 2017 NOV P11 Q25
28 A
25 The following
business information
absorbs is available
overheads basedfor
onamachine
business.
hours.

During the last quarter it had the

budgeted following budgeted
manufacturing and actual
overhead results.
$234 000
budgeted direct labour hours 45 000
actual overheads $127 346
actual manufacturing overhead $243 600
actual machine hours 5 490
actual direct labour hours 42 000
budgeted overheads $129 375
budgeted
How much overhead was under machine
or over hours
absorbed? 5 625

A $25 200 over absorbed

By how much were overheads under or over absorbed?
B $25 200 under absorbed
A over absorbed by $1076
C $27 000 over absorbed
B over absorbed by $2029
D $27 000 under absorbed
C under absorbed by $1076
D under absorbed by $2029
9
6 2017 NOV P12 Q24
26 The
24 Which statements
following about marginal
information costing
is forecast areperiod.
for next correct?

1 It only uses fixed and variable costs in calculations.

units
2 It only uses variable costs in calculations.
opening inventory 54 275
3 It should only be used for long-term planning decisions.
closing inventory 60 120
4 It should only be used for short-term planning decisions.
$
A 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4
profit using marginal costing 300 600
© UCLES 2017 profit using absorption costing
9706/11/M/J/17 390 780
27 A business has the following budget for April.
What is the overhead absorption rate per unit?
$
A $5.00 B $6.50 C $7.20 D $15.43
sales revenue 1 000 000
contribution
25 A business has total fixed costs 550 000
of $240 000. Products have a unit selling price of $25 and a unit
variable cost of $15. fixed production costs 275 000
fixedtoselling
How many units need to be sold breakcosts
even? 55 000

A 6000
What B sales
is the break-even 16 000
9600revenue forCApril? D 24 000

A $450 000 B $500 000 C $600 000 D $670 000

26 The table contains information provided by a company.
 A Business can choose either FIFO and AVCO for inventory valuation.
B Inventory can become obsolete easily.
C Inventory is the slowest current asset to be converted into cash.
D The value of inventory fluctuates.

7 2018 NOV P11 Q22

22 A business uses absorption costing and applies an overhead absorption rate based on direct
labour hours.

Why does the business distinguish between direct and indirect labour?

1 to aid the preparation of a quote

2 to assist when planning production
3 to help when purchasing materials

A 1 only B 1, 2 and 3 C 2 and 3 only D 3 only

9
8 2018 NOV P13 Q26
© UCLES 2018 9706/11/O/N/18 [Turn over
26 A manufacturer has the following overheads for two different levels of production.
9

total overheads
23 A factory employs a large number production
of staff who pack different products for different customers.
$ units
What would be the most suitable basis to absorb the packing department overheads?
400 000 40 000
A customer
432 000 60 000
B labour hours
What is the total fixed overhead cost?
C machine hours
A
D $32 000
product B $96 000 C $336 000 D $432 000

9 2019 JUN P11 Q24

27
24 A business
The makes
following and sells
information four products.
is available.

Which product should be produced first when labour hours are not sufficient to produce all four
budget actual
products?
overhead cost $ 60 000 66 000
selling price variable costs labour hours
direct labour hours 30 000 35 000
$ $ $
Overheads
A are
10absorbed on the15
basis of direct labour
1 hours.
B was the35
What 10
amount of over absorption or under 5absorption of overheads?

A C $4000 over
50 30 2

B D $4000 under
75 57 3

C $6000 over
28 Why is cost–volume–profit
D $6000 under analysis used by management?

1 for planning purposes

25 A business
2 employs machinists
to calculate over ortounder
makeabsorbed
a single product.
overheads
As demand
3 increases more
to determine machinists
actual profit are employed. Every time eight extra machinists are
employed, one extra supervisor is needed.
A 1 and 2 B 1 only C 2 and 3 D 3 only
How are total labour costs best described?

29 A business of safety of $10 000.

has a marginsupervisors
machinists

A does fixed
What this mean? variable

A B It will stepped variable

break even if profit is reduced by $10 000.
C variable fixed
B It will break even if sales revenue is reduced by $10 000.
 B 10 September
fixed factory cost purchased 30 4.80
21 September sold 15
C variable factory cost
Whatvariable
D was theadministrative
cost of each unit
costsold?

A $4.00 B $4.30 C $4.40 D $4.80

22 A manufacturer uses the weighted average cost (AVCO) method of inventory valuation. Opening
10 2019 JUN
inventory wasP13 Q24at $50 each.
10 units
24 What may cause the under absorption of overheads?
During the month:
1 Overheads have been lower than budgeted.
30
2 units were purchased
Overheads have beencosting
higher $70
thaneach.
budgeted.
20
3 units were sold
Production at $80have
volumes each.
been lower than budgeted.

What was4 theProduction volumes

value of the have
inventory at been higher
the end than
of the budgeted.
month?
A
A 1 and 3
$1200 B
B 1$1300
and 4 CC 2$1400
and 3 DD 2$1600
and 4

11 2020 FEB P12 Q23

25 Which
23 Which statement
changes would resultwhen
is correct in a fall in profit?increases?
production

A Total1fixed
Marginal cost per unit increases.
costs fall.
B Total2variable
Total costs
fixed cost
fall. decreases.
C The 3fixedSales volume
cost per unit increases.
falls.
D The 4 Selling
variable price
cost per per
unitunit decreases.
falls.
A 1 and 2 B 1 and 4 C 21010and 4 D 3 and 4
12 2020 FEB P12 Q24
24
24 Why
Why
© UCLES
might
might absorption
2020 absorption costing
costing be
be used?
used? 9706/12/F/M/20 [Turn over
1
1 to
to calculate
calculate contribution
contribution
2
2 to
to decide
decide whether
whether or
or not
not to
to accept
accept a
a special
special order
order
© UCLES 2019 3
3 to
to make
make long-term
long-term decisions
decisions9706/13/M/J/19 [Turn over
4
4 to
to set
set the
the selling
selling price
price of
of a
a product
product
A
A 1
1 and
and 3
3 B
B 1
1 and
and 4
4 C
C 2
2 and
and 3
3 D
D 3
3 and
and 4
4

13 2020 FEB P12 Q25

25 The following
25 The following information
information is
is available
available for
for a
a business.
business.

fixed
fixed overheads
overheads hours
hours
$
$
budget
budget 180
180 000
000 10
10 000
000
actual
actual 190
190 000
000 11
11 000
000

What
What was
was the
the over-absorption
over-absorption or
or under-absorption
under-absorption of
of fixed
fixed overheads?
overheads?
A
A $8000
$8000 over
over
B
B $8000
$8000 under
under
C
C $10 000
$10 000 over
over
D
D $10 000
$10 000 under
under

26
26 A
A business
business plans
plans to
to sell
sell all
all the 10 000
the 10 000 units
units produced
produced next
next year
year at
at the
the same
same price
price as
as this
this year.
year.
Direct
Direct costs
costs are
are forecast
forecast to
to decrease
decrease by
by $2
$2 per
per unit
unit and
and total
total fixed
fixed costs
costs will
will increase
increase by
by $40
$40 000.
000.
What
What will
will be
be the
the effect
effect of
of this?
this?

total
total cost
cost break-even
break-even point
point
 March 200

The
The business
business uses
uses the
the first
first in
in first
first out
out (FIFO)
(FIFO) method
method of
of inventory
inventory valuation.
valuation.
What
What was
was the
the value
value of
of inventory
inventory at
at the
the end
end of
of March?
March?
A
A $250
$250 B
B $275
$275 C
C $283
$283 D
D $300
$300
14 2020 JUN P13 Q24
24
24 A
A company
company uses
uses absorption
absorption costing
costing based
based on
on predetermined
predetermined absorption
absorption rates.
rates.
Which
Which statement
statement about
about absorption
absorption rates
rates is
is correct?
correct?
A
A They
They will
will be
be based
based on
on budgeted
budgeted costs
costs and
and outputs.
outputs.
B
B They
They will
will be
be calculated
calculated only
only when
when actual
actual costs
costs and
and outputs
outputs are
are known.
known.
C
C They
They will
will be
be changed
changed each
each time
time outputs
outputs and
and costs
costs change.
change.
D
D They
They will
will be
be set
set for
for a
a period
period of
of more
more than
than one
one year.
year.

15 2020 JUN P13 Q25

25
25 A
A business
business absorbs
absorbs fixed
fixed overheads
overheads using
using direct
direct labour
labour hours.
hours.
The
The following
following information
information is
is provided.
provided.

actual
actual budgeted
budgeted
overheads
overheads $525
$525 000
000 $525
$525 000
000
direct
direct labour
labour hours
hours 16
16 300
300 15
15 000
000
indirect
indirect labour
labour hours
hours 2700
2700 2500
2500

Which
Which statement
statement is
is correct?
correct?
A
A Overheads
Overheads were
were over
over absorbed
absorbed by
by $45
$45 000.
000.
B
B Overheads
Overheads were
were under
under absorbed
absorbed by $45 000.
by $45 000.
C
C Overheads
Overheads were
were over
over absorbed
absorbed by $45 500.
by $45 500.
D
D Overheads
Overheads were
were under
under absorbed
absorbed by $45 500.
by $45 500.

16 2021 FEB P12 Q24

©
© UCLES
UCLES 2020
2020 9706/13/M/J/20
9706/13/M/J/20 [Turn
[Turn over
over
17 2021 FEB P12 Q25

18 2021 NOV P11 Q23

19 2021 NOV P11 Q24

20 2021 NOV P12 Q23

21 2021 NOV P12 Q24

22 2021 NOV P13 Q24

23 2021 NOV P13 Q25

Worksheet 4
 The overhead absorption rate is based on direct labour hours.

What is the amount of overhead over-absorbed or under-absorbed?

A $4000 over
B $4000 under
C
Cost Concepts and Cost Classifications
$6000 over
D $6000 under

1 2016 FEB P12 Q25

25 A particular cost is classified as ‘semi-variable’.
9
What effect will a 20% reduction in activity have on the unit cost?
24 A business pays its employees $2 for each unit of X they assemble and $3.20 for each unit of Y.
A decrease
Monthly outputbyis20%
1800 units of X and 1000 units of Y. The factory supervisor is paid $1000 per
B decrease by less than 20%
month.

C increase
What by 20%
is the direct labour cost per month?
D
A increase
$6800 by less B
than$7760
20% C $7800 D $8760

2 2016 JUN P11 Q25

8
25 A garage owner paid the following costs.
23 A business was started on 1 January. The purchases and sales of inventory for January were as
follows. 1 mechanics’ wages

2 garage equipment
date repairspurchases sales

3 spare parts used to repair

4 January 3 atvehicles
$200 each –

4 13for
rent paid January
garage premises – 2 at $400 each
26 January 3 at $250 each –
© UCLES 2016 of
Which these are direct costs? 9706/12/F/M/16
28 January – 2 at $400 each
A 1, 2, 3 and 4
The
B 1,business
2 and 3used
only the first in first out (FIFO) method of inventory valuation.
C 1 was
What and the
3 only
gross profit for January?
D
A 2 and 4 only
$250 B $650 C $700 D $750

3 2016 JUN P12 Q24

A business
26 A
24 manager incurs the following
is preparing costs.for Job 88. A specialised technician is hired to work for this
a quotation
job only. He will use machinery that the company already owns.
1 direct material and direct labour costs
Which statement is correct about expenses for Job 88?
2 indirect factory production overheads
A Both3machinery depreciation
administrative and technician wage are direct.
expenses
B Both4machinery depreciation
distribution costs and technician wage are indirect.
C Machinery depreciation is direct and technician wage is indirect.
Which costs are included in the cost per unit using absorption costing?
D Machinery depreciation is indirect and technician wage is direct.
A 1, 2, 3 and 4 B 1 and 2 only C 1 only D 2, 3 and 4 only

25 Budgeted overhead expenditure was $180 000 and budgeted labour hours were 12 000. Actual
overheads amounted to $196 000 and actual labour hours were 12 200.

What was the under or over absorption of overheads?

A $3000 over
B $3000 under
C $13 000 over
D $13 000 under
 The investor wishes to invest in companies with the best underlying profitability.
1 March purchased 1000 units at $65 per unit
Which companies should he
2 Marchselect?
purchased 1200 units at $66 per unit
A 1 and 3 B 4 March C units
1 and 4 sold 1850 2 andat3 $68 per D
unit 2 and 4
4 2016 NOV P11 Q25
What was the value of closing inventory?
25 A company is classifying its costs. It discovers that for any level of output between 10 000 and
15
A 000
$22units
750 the freight
B cost
$22per
941unit is always the same
C $23 100 figure Dof $2$23
per800
unit.

Of which type of cost is this an example?

A fixed cost
23 A manufacturing company employs 20 workers who are paid a basic rate of $30 per hour for a
40-hour week. To meet a special order, the workers each worked 50 hours and were paid a
B semi-variable
premium costbasic rate for the overtime.
of 40% over

C
Whatstepped
was thefixed cost
value of wages paid to meet the special order?
D
A variable
$30 000 cost B $32 400 C $33 600 D $42 000
9
5 2016 NOV P12 Q24
26 When does underbusiness
absorption of overheads occur?
24 The
24 following inventory
A manufacturing transactions areoperating
is currently availableatforfull
a capacity.
business.
As part 1of an
Actual expenditure
expansion is less than
programme budgeted.
to increase production capacity, the business intends to
opening inventory on 1 January 16 items at $525 each
2 Actual expenditure is more than budgeted.
employ an additional factory supervisor.
receipts on 3 January 24 items at $675 each
How are 3totalProduction
supervisoryis salaries
lower than planned.
classified?
issues on 5 January 28 items
A fixed4costProduction is higher than planned. 10
The business
and 3 uses the
B AVCO andmethod to C
value inventory.
27 A D 2 andand
B 1semi-variable cost 1 has 4 production 2departments:
and 3 4 painting.
A manufacturing business two assembly
What was thecost
C stepped value of closing inventory on 7 January?
The following information is available.
© UCLES 2016 9706/11/O/N/16
AD $6300
variable cost B $7200 C $7380 D $8100
assembly painting
6 2016 NOV P13 Q25
machinery
25 A business entered atcontract
into a net bookfor
value
the ($)
support of150 000
its computer 100 000
systems. There was an annual
fee of $5000 plus a charge of $30 per hour for solving computer problems. At the end of the year
machinery repair costs ($) 14 000 6 000
the cost of computer support totalled $11 330.
© UCLES 2016 9706/12/O/N/16
machine operating hours 60 000 15 000
Which type of cost was this?
number of machines 30 10
A fixed
The total machinery insurance cost for the year was $5000.
B semi-variable
How much insurance should be apportioned to the assembly department?
C stepped
A
D $3000
variable B $3500 C $3750 D $4000

7 2016 NOV P13 Q28

26
28 A business
Which costsabsorbs overheads
will change on the basis
with an increase of direct labour hours. The following information is
in activity?
available.
A unit fixed costs and total fixed costs
B budgeted
unit fixed costs and total variablelabour
costs hours 6600 hours

C actual
unit fixed costs and unit labour
variable hours
costs 7100 hours
budgeted overheads $75 900
D unit variable costs and total variable costs
actual overheads $74 250

29 The
Whattable shows
is the valuefigures for a week’s
of overheads production.
over or under absorbed?

A $5625 over expected production 10 000 units

B $5625 under expected production overheads $50 000
C $7400 over actual production overheads $60 000
D $7400 under under absorption of overheads $5 000
 retained earnings 710 000
8% debentures
actual overheads 400
$118000
505
actual machine hours
What is the value of total equity? 6 230
budgeted overheads8 $126 725
A $1 910 000 B $2 030 000 C $2 310 000 D $2 430 000
19 A company provides the following
budgetedinformation.
machine hours 6 850
8 2017 FEB P12 Q20
20 Which
By howitem
muchis awere
direct cost?
overheads over or under absorbed? $
A
A cost
over of production
absorbed profit from operations
materials
by $3250 16 000
B
B factory finance
supervisor’s
over absorbed salary costs
by $8220 4 000
C
C machine cleaning
under absorbed ordinary
$3250 share capital ($1 shares)
bymaterials 50 000
D
D stores bynon-current
staff wages
under absorbed $8220 liabilities 4 000

9 2017 FEB P12 Q24 retained earnings 20 000

Samueloutput
21 Actual
24 manufactures a single product.
exceeds budgeted output. Total cost per unit is $70 when production is 100 units
What
per is theand
week, return on capital
$62.50 employed?is 160 units per week.
when production
Which cost is higher than budgeted?
A 16.22%
What are the total fixed B costs
17.14%per week? C 21.62% D 22.86%
A fixed costs per unit
A $450 B $750 C $1200 D $2000
20 B
The total
following
fixed financial
costs information is available for a business. All purchases and sales are made
on credit.
22 Howtotal
C is thevariable
issue of costs
inventory from stores valued 9 when using FIFO?
D variable costs per unit $
22 A
Jamal uses
It is the AVCO
calculated usingsystem to valuepurchase
the average his inventory.
9
priceHe provides
of goods. the following information:
purchases 121 980
10 2017
B It is JUN P11 Q22
calculated using the price paid for the earliest delivery of goods.
22 Which
25 A companyitem is March
a direct
manufactures 1 three
cost? revenueno openingThe
products. inventory
following 209 980
information is obtained in respect of next
C It is the
month’s same as
budgeted the current replacement cost.
production.
6 trade 60payables
units were purchased at45 $120
448 per unit
A carriage inwards on production materials
D It is the same as the most recent price paid for the goods.
17 trade 100 units were
receivables purchased
product X at $116
28 765Y per product
product unit Z
B cleaning materials for the factory
contribution23per unit 110 units were$7 sold for $150$6 per unit $8
C
Whatfactory
is the rent
average collection period?
Whatwages
D
A 50wasdaysthe costfactory
of the ofBsales
contribution for
per
manager
79 daysMarch? C 86
kilo $3
days
$4
D 136 days
$6
kilos of material required 400 600 1000
11 2017
A $5875
JUN P12 Q21 B $12 925
for production
C $13 000 D $18 800
23
21 A
Howbusiness has the
are stepped following
costs information available.
best described?
23 The
A
A business
company
costs that makes
has wedding dresses.
been advised
are always variable
thatEach
only machinist
1800 kilosis ofpaid $30 a day
material andavailable
will be each supervisor $40 a
for production
day. month.
next Each supervisor can work sellingwith
priceupper
to unit
10 machinists$35 and each machinist can produce one
wedding
B costsdress a day.
that have both a fixed
What is the maximum contribution directand variable
labour element
per unit
the company can earn? $9
C
If 95fixed
weddingcostsdresses
that areaalways arethe
daydirect same amount
produced,
material unitisatthe
what
per anydaily
level of output
labour
$6 cost?
A $9000 B $9600 C $13 000 D $13 200
D
A fixed
$2850costs whichBincrease in totalsales
budgeted
$3210 once
C a$3230
certain level
8000ofunits
output
D $3250is reached

12 2017 JUN P12 Q24 margin of safety

© UCLES 2017 9706/12/F/M/17 2000 units [Turn over
24 Which statement best describes variable costs?
What is the value of fixed costs?
A costs that are the same in total up to a certain level then increase with output
A $40 000 B $120 000 C $160 000 D $200 000
B 2017
© UCLES costs that are the same in total over any output level
9706/12/F/M/17

C company
24 A costs that
hasare constant
allocated itsper unitbetween
costs as output increases
different departments as shown.
D costs that increase per unit as output increases
production production maintenance
details
department 1 department 2 department
25 A company manufactures and sells chairs. The following per unit information is available.
allocated costs $80 000 $60 000 $10 000
split
© UCLES 2017 of maintenance department costs 60%
9706/12/M/J/17 $ 40%

direct labour hours selling price 20 000 258 000

direct material and labour 12
What is the overhead absorption rate per labour hour for production department 1?
other variable production costs 3
A $3.70 B $4.00 C $4.20 D $4.30
 per 100 units.
$
In one week each worker produces 2600 units. All workers work the full number of hours.
current liabilities 15 000
What will be the week’s gross wage for one worker?
non-current liabilities 40 000
A $240 B $252 C $292 D $304
ordinary shares 120 000
13 2017 JUN P13 Q23
8
23 Actual production is less than general
forecastreserve
production. 10 000

18 Which
The opening retained earnings
was $60 000. The46 000 inventory was $80 000.
cost is inventory forforecast?
higher than a business closing
interest paid 11 000
Inventory
A turnover
fixed cost for the year was 10 times.
per unit
Profit
B for the year
costwas $23 000.
The total
grossfixed
margin was 30%.
C total
What wasvariable coston capital employed?
the return
What were the sales for the year?
D variable
A 10.65% cost perBunit13.07% C 15.74% D 19.32%
A $300 000 B $700 000 C $720 000 D $1 000 000
14 2017 NOV P12 Q23
23 Which item is an indirect cost?
19 A company had a profit after interest of $25 000.
A carriage inwards
Interest charged was $5000.
B production materials
The company’s statement of financial position showed the following.
C wages of machine operators
D wages of stores staff $
10
15 2017 NOV P12 Q27
ordinary share capital 100 000
27 The diagram illustratesnon-redeemable
the cost behaviour of a typical
preference telephone 50
shares invoice.
000
© UCLES 2017 9706/12/O/N/17
reserves 75 000
debentures (2021–2023) 15 000
bank overdraft 10 000
total cost
$
What
© UCLES 2017was the return on capital employed?
9706/13/M/J/17

A 10.00% B 10.42% C 12.00% D 12.50%

0 level of activity
20 Which statement about the limitations of comparing accounting ratios between similar businesses
Which term
and over best
time describes the behaviour of this cost?
is correct?
A fixed
The ratios are best used when the businesses trade in different markets.
B semi-variable
The ratios are only useful when the businesses have different accounting policies.
C stepped
The ratios never explain the cause of difference between the results of the two businesses.
D
D variable
The ratios always take into account seasonal factors.

16 2017 NOV P13 Q21

28
21 Which
Which statements about the limitations of marginal costing are correct?
cost is fixed?

A 1 charges
freight Finance costs are not included in the manufacturing overheads.

B 2 Variable cost per unit changes at different levels of activity.

insurance
C 3 rate
piece Some costs
labour costmay be semi-variable costs.
D
A 1sales
and commission
2 B 1 only C 2 and 3 D 3 only

29 A product has a variable cost of $31.32 per unit. Total fixed costs are $93 600.

When production is 13 000 units the margin of safety is 5000 units.

What
© UCLES is
2017 the selling price per unit? 9706/13/O/N/17
 1 an inventory value whichearnings
retained includes all production
150 costs
19 The following has been extracted from the financial statements of a business.
2 the margin of safety at the current level of production
The profit from operations for the year was $65 000 and the finance costs were $20 000.
3 the selling price of the product statement of financial
What is theincome
return onstatement
capital employed for 2017?$ $
position
A 1 and 2 B 1 and 3 C 1 only D 2 and 3
A 3.21% B 4.64% C 5.7% D 5.91%
profit from operations 48 000 7% debenture 65 000
17 2017 NOV P13 Q26
debenture
26 Whose wagesinterest
would be treated as an indirect(4cost?
550) ordinary share capital 95 000
18 Which business would use a job costing system of accounting?
Alossassemblers
on disposalatofanon-current asset
car manufacturer (3 250) share premium 7 500
A a beauty parlour
Bprofit for drivers
lorry the yearat an engineering company40 200 retained earnings 35 000
B a chocolate factory
C sewersthe
What at return
a dress-making
on capitalbusiness
C a was dairy milk farmer employed (ROCE)?
D 19.9%
A
D welders
an at a building
oil refinery construction company
B 23.7% C 29.2% D 34.9%

18 2018 FEB P12 Q19

20
19 What would affect
is a direct the current ratio of a business?
cost?
© UCLES 2017 9706/13/O/N/17 [Turn over
A one that can
purchase be traced by
of inventory to acash
cost item

B one that isofalways

purchase fixed
new machinery by cheque
C one thatofiscash
receipt always semi-variable
from a credit customer
D
D one that is always
revaluation variable asset
of a non-current

19 2018 JUN P11 Q21

20 A
21 A restaurant
company pays
has its
theemployees $6.80inper
following costs hour for a basic 40-hour week. An overtime premium of
a period.
50% is payable together with a production bonus of $0.25 per unit for all units produced over 350.
Employees
1 are guaranteed
wages a weekly
of the kitchen wage of $330.
staff
One employee worked 45 hours
2 depreciation last week
of kitchen and produced 410 units.
equipment

What was3 thecosts of ingredients

employee’s for that
gross pay meals
week?

A $3304 rent paid

B for$338
the restaurantCbuilding
$372 D $474

What are indirect costs for an individual meal?

A 1, 2, 3 and 4
B 1, 2 and 3 only
© UCLES 2018 9706/12/F/M/18 [Turn over
C 1 and 2 only
D 2 and 4 only

© UCLES 2018 9706/11/M/J/18

 11
20 2018 JUN P11 Q29
29 The graph shows the way in which a cost increases according to the level of activity of the
business.

total cost

0
level of activity (units)

Which cost follows this pattern?

A administrative salaries
B commission on sales
C depreciation of factory
D office rent

30 Why does a business prepare budgets?

Worksheet 1
1 co-ordinate business activities
2 meet IAS requirements
3 motivate management

A 1 and 3 B 1 only C 2 and 3 D 2 only

© UCLES 2018 9706/11/M/J/18

20 A baker receives one order for 350 loaves of bread.

Which costing method will the baker use?

A absorption costing
B batch costing

Cost Concepts and 7Cost Classifications

C job costing
D unit costing

1 2018
19 JUN P12
The following Q21 is available for a business for the year.
information
21 A business pays a salesman a basic salary, plus commission based on how much he sells.
$
Which type of cost is the salesman’s total earnings?
revenue 2 400 000
A fixed
cost of sales 1 100 000
B semi-variable
administration expenses 400 000
C stepped
distribution costs 500 000
D variable
finance costs 9 25 000
2 2018 JUN P12 Q22
profit for the year 375 000
22 Which cost is treated as variable cost of a motor transport company?
Whatadvertising
A is the operating expenses to revenue ratio for the year?

A
B 37.5%insurance B
driver 38.54% C 45.83% D 83.33%

C fuel
20 A company’s financial statements include the following.
D vehicle licence
© UCLES 2018 9706/12/M/J/18
8
3 2018 NOV P12 Q21 $
23 Adam
21 To makeis paid $4 per
a single unithour and his
of output expected
a business output material
requires is 500 units per $1000.
costing week. He is also paid a bonus
profit before
$1 for every 20 perfect units made above interest
the total of 500.200 000
When 20 items are produced,profitthe total costyear
for the of the material is 000
140 $20 000.
In one week he worked for 40 hours and made 880 units, but 40 were faulty and were scrapped.
What best describes this cost? issued share capital 500 000
How much was Adam paid for the week?
A fixed cost reserves 160 000
A $177 B $179non-current C $202
liabilities D $204
380 000
B semi variable cost
C
Whatstepped cost
is the return
24 A business valueson capital
their employed?
inventory using the AVCO method. The inventory on 1 June 2017 was
100 variable
D units valued
cost at $2.40 each.
A 19.2% B 21.2% C 30.3% D 40.0%
The following
4 2018 NOV P13 took Q21
place.
22
21 Which costs would following
A business has the total
be included inoverheads for two different
the manufacturing overheadsoutput
for levels.
a computer assembly plant?
June 5 purchased 40 units at $2.50 per unit
1 7 total
soldoverheads
assembly line employees’ 60wages output
units at $3.50 per unit
$ (units)
2 cost of components used to make computers
What was the value of the inventory on 8 June 2017 to the nearest dollar?
200 000 20 000
3 depreciation of factory machinery
A $194 B $196 C $200 D $224
216 000 30 000
4 production supervision costs

25 What
The
A 1
is the total
following fixed overhead
and 2 budgeted
cost?
B information
1 and 4 is available
C 2 and for a3hotel for D
the next
3 andfinancial
4 year.
A $16 000 B $48 000 C $168 000 D $216 000
fixed overheads $192 000
direct
23 A retailer uses the FIFO method forcosts
inventory valuation.$240
The 000
following information is available.
number of guests 2400
June $
average guest stay 4 nights
1 opening inventory 300 units at $12 per unit 3 600
What is the overhead
10 absorption
purchasedrate perunits
1000 guestat night?
$12.50 per unit 12 500
A 2018
© UCLES $20 B $45 C $80
9706/13/O/N/18 D $180 [Turn over
 actual overheads $149 000
actual machine hours 9 300

8
What was the absorption rate per machine hour?

20 A
The $12.15
following information is available forCG Limited
B $13.66 $14.26 for the year
D ended
$16.0231 December 2019.

5 2019 FEB P12 Q22

$
22 Which costs are stepped costs?
share capital 275 000
1 Increase in indirect materials cost.
long-term bank loan 8 180 000
2 Increase in variable overheads.
current liabilities 120 000
18 The rate3of inventory turnover
Renting further of a company
factory space. has been calculated for two successive periods.
profit from operations 244 000
A 1 andcurrent2 period
B 1 only 5.6 times C 2 and 3 D 3 only
bank loan interest 9 34 000
previous period 4.8 times
6 2019 JUN P12 Q24earnings including profit for the year
retained 400 000
23 Which
24 An employee worked
statement best adescribes
normal 35-hour
a week
stepped andcost?
fixed was paid $15 per hour. He also worked 5 hours
The
of following
overtime statements
which was paidhave been
at $20 permade about
hour and the change.
received a bonus of $50.
What was the return on capital employed?
A It changes in direct proportion to changes in output.
What was1 his Inventory
total pay foris moving
the week? more slowly in the current period.
B It changes in proportion to changes inCprime
A 21.54% B 24.56% 25.03%
cost. D 28.54%
2 Inventory is moving more quickly in the current period.
A $525 B $600 C $625 D $675
C It remains at a constant amount until output changes significantly.
3 Management of inventory has been more efficient in the current period.
21 A company has been asked to prepare a quotation to print 100 leaflets for a customer. The total
D
cost Itofrepresents
direct a constant
materials, amount
direct labourof and
total acost.
share of overheads is $820 and a profit of 25% on
24 A company
Which uses
statements machine hoursthe
may explain to absorb
change? its overheads.
cost has been added. 9
7 2019 NOV P11 Q26
The following
A company information
1 and 3produces B 1isthan provided for aCmonth.
only 2 and 3period. D 2 only
25
26 A
Which
Which cost fall as less
willmethod
costing is this anit example
production sells in a of?
is reduced?particular

Which statement
A absorption
fixed is correct?
costs costing
per unit actual budgeted
19 A
The following items appear on a statement of financial position.
B Reported
A
B totalcosting
job fixedprofit
costsis the overheads $237 010or marginal
same whether absorption $253 450
costing is used.
$
C Reported
B
C total variable
marginal costsismachine
profit
costing
hours
the difference 12 460 absorption
between 13 700and marginal costing closing
inventories. inventory 20 000
D unit
variable
Which
D statement
costingcostsregarding
per unit overheads is correct?
C Reported profit is lower using absorption costing.
cash and cash equivalents 3 500
A $6500
8 2020 JUN over-absorbed
P11 Q22
27 D
22
Reported
A company
Which expense hasprofit
theais
for
lower
following using
trade
business
marginal costing.
information.
payables 11 000
may be classified as a stepped cost?
B $6500 under-absorbed
provision for doubtful debts 500
A $16
direct labour sales and 20 000 units
C
26 Which 440 over-absorbed
statements are true about theproduction
preparation of a break-even chart?
The
B current
direct ratio
materialsis
D $16 440 under-absorbed 3 : 1. $
1 Costs are easily classified into fixed and variable.
C factory
How much do total sales owe?
rentthe trade receivables 600 000
2 Fixed costs always change as output changes.
D total costs 200 000
A telephone
$95003 The break-even B $10 000 C seen.
point is clearly $12 000 D $12 500
total fixed costs 80 000
9 2020 JUN P12 Q20
A 1 and 2 only B 1, 2 and 3 C 2 and 3 only D 3 only
20 What
Whichiscosts are indirect?
the company’s contribution to sales ratio?
© UCLES 2019 9706/12/F/M/19
A 20%
27 When 1 bought-in
a company had components
B sales
33% revenueusedCin a000,
of $600 finished
67% productcosts
its variable D 80% were $300 000.
2 materials used for factory maintenance
At the break-even point, its sales were $400 000.
28 A company 3 forecasts that inused
raw materials Julyinitsasales volume
finished will decline by 10% and its contribution per unit
product
will decline
How by 5%
much profit compared
did it make whento June.
sales were $600 000?
4 spare parts bought for factory machinery
A $100it 000
In June made andBsold$200 50 000000units. Total
C $300 000
contribution wasD$80$400
000.000
Its fixed costs were $2000
and these
A were
1, 2 and 3 unchanged
B 1, 2inand July.
4 C 2 and 4 only D 3 and 4

28 A
Bycompany provided
how much the following
will its profit information.
fall in July compared to June?

A $4000 B $8000 C $11 600 D $13 600

total sales $400 000
© UCLES 2020 9706/11/M/J/20
production and sales (units) 10 000
29 Which statement about a negative margin of safety is correct?
total costs $250 000
A Sales are greater than the break-even point.
total fixed costs $60 000
B Sales are less than the break-even point.
10 2020 NOV P11 Q21

11 2020 NOV P12 Q21

12 2021 JUN P11 Q21

13 2021 JUN P12 Q20

14 2021 JUN P13 Q22

23 X supplies goods on credit. He looked at the financial statements of two other businesses to see
if he wanted to trade with them. He found the following information.

credit purchases trade payables

business
$ $

G 21 8009 2320
15 2016 JUN P12 Q27
H
27 A business provided the following 49 500for the past two5750
information months.

X only trades with businesses with a trade payables

number of turnover of 42 days or less.
total overheads
month
labour hours $
With which business(es) did X decide to trade?
February 64 000 918 000
A both G and H
March 76 000 1 062 000
B G only
What was the monthly fixed overhead cost?
C H only
D
A neither
$144 000G nor H B $150 000 C $768 000 D $912 000

16 2016 JUN P13 Q24

24 A
28 A company
business uses
pays marginal
its employees
costing.$2 for each unit of X they assemble and $3.20 for each unit of Y.
Monthly output is 1800 units of X and 1000 units of Y. The factory supervisor is paid $1000 per
month.costs are included in its inventory valuation?
Which

A variable manufacturing cost, fixed manufacturing overhead and variable selling expenses
What is the direct labour cost per month?
B variable manufacturing cost and fixed manufacturing overhead only
A $6800 B $7760 C $7800 D $8760
C variable manufacturing cost and variable selling expenses only

25 D
A garage owner
variable paid the following
manufacturing costs.
cost only

1 mechanics’ wages
29 The break-even sales of a company are 1000 units when the variable costs are $30 000 and fixed
costs are2$20garage
000. equipment repairs

3 profit
What is the spare parts
if 70 used
units to repair
above vehicles point are sold?
the break-even

A $7004 rent paid

B for$1400
garage premises
C $2100 D $3500

Which of these are direct costs?

30 Who should be on the budget committee?
A 1, 2, 3 and 4
A accounting and finance staff only
B 1, 2 and 3 only
B sales manager and production manager only
C 1 and 3 only
C sales staff only
D 2 and 4 only
D senior management representing every department in the organisation
 Monthly output is 1800 units of X and 1000 units of Y. The factory supervisor is paid $1000 per
month.

What is the direct labour cost per month?

A $6800 B $7760 C $7800 D $8760

17 2016 JUN P13 Q25

25 A garage owner paid the following costs.

1 mechanics’ wages

2 garage equipment repairs

3 spare parts used to repair vehicles

4 rent paid for garage premises

Which of these are direct costs?

A 1, 2, 3 and 4
B 1, 2 and 3 only
C 1 and 3 only
D 2 and 4 only
11
18 2016 JUN P13 Q30
30 A company provides the following information in respect of its carriage costs.

total cost
units carried
$

2 000 6 000

© UCLES 2016 5 000 9706/13/M/J/16 13 500 [Turn over

When more than 5000 units are carried the cost will increase the fixed charge by a further $2000.

What will be the cost to carry 6000 units?

A $15 500 B $16 200 C $18 000 D $20 000

10
19 2016 NOV P12 Q28
28 A business that uses flexible budgets shows the following:

units of output 100 000 110 000

total fixed and variable costs $400 000 $425 000

What are fixed costs?

A $125 000 B $150 000 C $250 000 D $275 000

29 A company makes a product for which the following information is given.

per unit
$

selling price 100

direct materials 40
direct labour 30

Total fixed costs are $40 000.

Planned production is 1000 units.

 non-current assets 250 000
capital employed 310 000

What is the non-current asset turnover?

A 1.18 times B 1.24 times C 1.44 times D 2.28 times

20 2017 JUN P13 Q20

20 The manufacture of product X incurs a specific cost. Data relating to this is as follows.

units produced 6000 9000

cost per unit $3 $2

Of which cost is this an example?

A fixed
B semi-variable
C stepped
D variable

Worksheet 2
© UCLES 2017 9706/13/M/J/17 [Turn over
 Overheads are absorbed on the basis of direct labour hours.
27 A business has provided the following information.
What was the amount of over absorption or under absorption of overheads?
$
A $4000 over
total fixed costs 12 500
B $4000 under
unit selling price 10

Cost Concepts and Cost Classifications

C $6000 over
D $6000 under
unit variable cost 6

Fixed costs and unit selling prices are expected to remain unchanged.
1 2019 JUN P11 Q25
25 A business
Which employs
percentage machinists
increase to make
in variable a single
costs wouldproduct.
result in a break-even quantity of 5000 units?

A demand
As 20% B more
increases 25% machinistsCare33% D time
employed. Every 42% eight extra machinists are
employed, one extra supervisor is needed.

28 How
The following
are total information
labour costsisbest
available for a product.
described?

machinists supervisors
selling price per unit
9 $25

A fixed total fixed costs

variable $30 000
20 A business has the following current assets and current liabilities.
B stepped break-even point
variable 5000 units

C is the
variable fixed(C/S) ratio?
$
What contribution to sales
D variable stepped trade receivables 6000
A 19.4% B 24% C 31.6% D 76%
bank overdraft 1500
2 2019 JUN P13 Q29
cash decreases?
29 Which cost will increase as production in hand 50
trade payables 5050
1 fixed costs per unit
The only 2other item
total in the
fixed working capital is inventory.
costs

The current
3 ratio 2 : 1. costs
totalisvariable

4 value
What is the variable cost
of the per unit
inventory?
© UCLES 2019 9706/11/M/J/19 [Turn over
A
A 1 only
$2550 B
B 1$4050
and 3 CC 2$5550
and 4 DD 4$7050
only

3 2020 FEB P12 Q21

21 A mechanic carries out regular factory machine maintenance. He is paid an annual salary of
$20 000.

Which type of cost is this?

A 2019
© UCLES direct labour cost 9706/13/M/J/19

B fixed factory cost

C variable factory cost
D variable administrative cost

22 A manufacturer uses the weighted average cost (AVCO) method of inventory valuation. Opening
inventory was 10 units at $50 each.

During the month:

30 units were purchased costing $70 each.

20 units were sold at $80 each.

What was the value of the inventory at the end of the month?

A $1200 B $1300 C $1400 D $1600

23 Which statement is correct when production increases?

 bank loan interest 34 000
retained earnings including profit for the year 400 000

What was the return on capital employed?

A 21.54% B 24.56% C 25.03%

11 D 28.54%
4 2020 JUN P12 Q28
28 The actual output for a business is lower than that forecast.
21 A company has been asked to prepare a quotation to print 100 leaflets for a customer. The total
cost of direct materials, direct labour and a share of overheads is $820 and a profit of 25% on
Which costs would normally still be the same as forecast?
cost has been added.
1 fixed cost per unit
Which costing method is this an example of?
2 total fixed cost
A absorption costing
3 total variable cost
B job costing
4 variable cost per unit
C marginal costing
A
D 1 and
unit 2
costing B 2 and 3 C 2 and 4 D 3 and 4

5 2020 JUN P13 Q22

29 A manufacturer
22 Which produces
expense for a single
a business mayproduct. The following
be classified information
as a stepped cost? is available.

A direct labour $
B direct materials selling price per unit 14
C factory rent variable costs per unit 8
D telephone fixed costs per annum 96 000

6 2021
There FEB P12toQ21
are plans reduce the selling price by $3 per unit and to reduce variable costs by $1 per
unit. Fixed costs will remain unchanged.

What will be the new break-even point?

A 9600 units
B 12 000 units
C 24 000 units
D 48 000 units

30 A company
7 2021 FEB has
P12recently
Q23 introduced a system of budgetary control.
© UCLES 2020 9706/13/M/J/20
Workers have given the following reasons for failing to achieve the budget targets.

1 ‘We need more training.’

2 ‘The budget is unrealistic.’
3 ‘The budget needs to be changed to reflect actual conditions.

Which reasons should be considered when evaluating a worker’s performance?

A 1, 2 and 3
B 2 and 3 only
C 2 only
D 3 only

© UCLES 2020 9706/12/M/J/20

 8 2021 NOV P11 Q21

9 2021 NOV P11 Q22

10 2021 NOV P12 Q21

11 2021 NOV P13 Q22

12 2021 NOV P13 Q23

Worksheet 3
 revenue 220 000
opening inventory 25 000
purchases 120 000

Labour Costing
closing inventory (31 000)
cost of goods sold114 000
gross profit 106 000

1 2016 JUN theP11 Q24 turnover?

9
What was inventory
24 A business pays its employees $2 for each unit of X they assemble and $3.20 for each unit of Y.
Monthly
A output is 1800 units of X and 1000 units of Y. The factory supervisor is paid $1000 per
86 days
month.
B 90 days 8
What is the direct labour cost per month?
C 95 days
21 Owusu Limited has a constant level of annual sales and a constant gross margin. Each year the
inventory
A $6800
D 100 daysincreases. B $7760 C $7800 D $8760

2 2016
Which JUN
effectsP12 Q22
does this have on the inventory holding period and on inventory turnover?
22 An employee works athe
25 A garage owner paid following
standard costs.week. In that time he is expected to make 200 complete
40-hour
units. inventory holding inventory turnover
1 (inmechanics’
days) wages (times)
He is paid a bonus of $10 for every hour saved in production.
2 garage equipment repairs
A decrease decrease
For week325 he worked 44 hours and
spare parts used to repairproduced
vehicles250 units.
B decrease increase
How
C much
4 was hispaid
rent
increasebonus payment
for garage for week 25?
premises
decrease
A D $30
Which increase
of these B $40
are direct costs? increaseC $50 D $60
8
2016
©3UCLES 1, NOV
A 2016 P11
2, 3 and 4 Q23 9706/12/M/J/16 [Turn over
23
22 AA manufacturer
business usesoperates
the AVCO a bonus system.
method He provides
of inventory the following information.
valuation.
B 1, 2 and 3 only
The
C 1 following output
transactions
and 3 only required
took place.from each worker 175 units
D 2 and 4 only time allowed to complete output 10.5 hours
1 March purchased 1000 units at $65 per unit
actual time worked by Fred 7 hours
2 March purchased 1200 units at $66 per unit
26 A business incurs the following costs.
A bonus is paid of 25%4of the labour
March costs
sold 1850forunits
timeat
saved, in addition
$68 per unit to the hourly rate of $8.75.
1 direct material and direct labour costs
What
What did
wasFred earn for
the value of his output
closing of 175 units?
inventory?
2 indirect factory production overheads
A
A $68.91
$22 750 BB $76.56
$22expenses
941 CC $91.88
$23 100 DD $99.53
$23 800
3 administrative
4 2016 NOV 4 P12 Q23 costs
distribution
24
23 A
A potential investor
manufacturing looks atemploys
company the financial statements
20 workers whoofare
fourpaid
companies. Theirofincome
a basic rate statements
$30 per hour for a
all show
40-hour the
week. sameTo level
meet ofarevenue
special and profit
order, thefrom operations.
workers each
Which costs are included in the cost per unit using absorption costing? The cost
worked of
50 purchasing
hours and inventory
were paidisa
increasing.
premium of 40% over basic rate for the overtime.
A 1, 2, 3 and 4 B 1 and 2 only C 1 only D 2, 3 and 4 only
What was company
the value 1 uses AVCO
of wages to value
paid inventory
to meet the special order?
company 2 uses FIFO to value inventory
A $30 000 B $32 400 C $33 600 D $42 000
company 3 uses absorption costing
companybusiness
24 A manufacturing 4 uses marginal costing
is currently operating at full capacity.

The investor
As part of anwishes to invest
expansion in companies
programme with the best
to increase underlying
production profitability.
capacity, the business intends to
employ an additional factory supervisor.
Which companies should he select?
How are total supervisory salaries classified?
A 1 and 3 B 1 and 4 C 2 and 3 D 2 and 4
A fixed cost

25 A
B company is classifying
semi-variable cost its costs. It discovers that for any level of output between 10 000 and
15 000 units the freight cost per unit is always the same figure of $2 per unit.
C stepped cost
Of
D which typecost
variable of cost is this an example?
 split of maintenance department costs 60% 40%
direct labour hours 20 000 8 000

What is the overhead absorption rate per labour 8 hour for production department 1?
9
A $3.70
21 The B $4.00
following information is available for C $4.20
the inventory D $4.30
of a business.
22 Jamal uses the AVCO system to value his inventory. He provides the following information:
5 2017 JUN P11 Q25
July 1 opening inventory 60 units at $4.50 per unit
25 Vikram is paid $10 an hour
March 1 for ano40-hour
opening week and at time and a half for overtime.
inventory
15 issued 40 units
He is expected to produce 6 four60 units
units anwere
hour.purchased at $120
If he produces per unit
more than this, a bonus of $2 per
extra unit is paid. 23 purchased 120 units at $5.20 per unit
17 100 units were purchased at $116 per unit
29 issued 65 units
Last week Vikram worked 2341 hours
110 and
unitsproduced
were sold161for units.
$150 per unit
What is the value of the inventory on 31 July based
8 on AVCO?
How
Whatmuch wascost
was the Vikram paid?
of sales for March?
21 A
A
$337.50values inventory
A business
$410
$5875
B $363.75
B $12using
B $412
C $382.50 The following
925 the AVCO
C method.
C $415000
$13
D $390.00
D $18
D information
$417 800 is available.

6 2017
22 JUNmanufactures
A business P12 Q23August 1 inventory
a single product. of 6 units at $14.40 each
23 A business makes wedding dresses. Each machinist is paid $30 a day and each supervisor $40 a
4 purchased 9 units at $18.40 each
day. Each
Which cost supervisor can work
can be allocated to itswith up to 10
production machinists and each machinist can produce one
departments?
wedding dress a day. 6 sold 5 units at $20.20 each
A administrative expenses
© UCLES
If 2017
95 wedding 9706/11/M/J/17 [Turn over
What was the dresses a day
cost of the aresold?
goods produced, what is the daily labour cost?
B direct materials
A $2850
A factory
$72 B $3210 C $92 $3230 DD $101
$3250
C light andBheat$84 C

7 2017 JUNrent
D factory P13 Q22
24
22 Which statement
The labour costs ofbest describesare
a company variable
basedcosts?
on hours worked plus a bonus scheme. The production
workers all earn the same rate and bonus.
A costs that are the same in total up to a certain level then increase with output
23 The budget data of N Limited is as follows.
The costs
B daily rate
that is $6the
are persame
hour in
fortotal
an 8-hour
over anyday,output
5 days per week.
level
production level total costs
The costs
C bonusthat
is based on the number
are constant per unit asof units
outputproduced
increasesabove 2000 units in a week at a rate of $2
per 100 units. 15 000 units $406 000
D costs that increase per unit as output increases
In one week each worker produces 25 0002600 units. All workers
units work the full number of hours.
$546 000

25 What
A company
What will manufactures
bebudgeted
is the the week’s and
gross
fixed sells chairs.
wage
cost? for oneThe following per unit information is available.
worker?

A
A $240 000
$196 B
B $252
$238 000 C
C $292
$336 000 DD $ $304
$357 000

8 2017 NOV P11 Q24 selling price 25

23 A
24 Actual production
business is employees
pays its less than forecast production.
on a time rate basis at $8 per hour. It also pays a weekly bonus of
direct material and labour 12
$1.20 for every unit of production over 100 units, plus an additional $0.80 for all production over
Which cost is higher than forecast?
120 units. other variable production costs 3
A fixed cost per unit
Employees are guaranteedvariable selling
a minimum costswage of $335. 2
weekly
B total fixed cost
fixed costs 4
An employee worked 37.5 hours last week and produced 129 units.
C total variable cost
The company
What has the option
was thecost
employee’s of buying in the chairs for resale instead of making them.
D variable per unit wage for that week?
At which
A purchase price
$335.00 B would the company’s
$342.00 profit be unchanged?
C $358.00 D $365.20
A $15 B $17 C $19 D $21

© UCLES 2017 9706/11/O/N/17

© UCLES 2017 9706/12/M/J/17 [Turn over
18 Which business would use a job costing system of accounting?

A a beauty parlour
B a chocolate factory
C a dairy milk farmer 9
9 2017 NOV P13 Q22
D an oil refinery
22 The production wages paid for the year totalled $257 000.

Indirect
19 What is awages
direct are 30% of the total. Direct workers were expected to work 15 000 hours but only
cost?
worked 13 000 hours.
A one that can be traced to a cost item
No overtime or bonus payments were made.
B one that is always fixed
What is the hourly rate of pay paid to direct labour?
C one that is always semi-variable
A
D $5.14
one B variable
that is always $5.93 C $11.99 D S13.84
8
10 2018 FEB P12 Q20
21 A
23
20 A company
business
Which provided
will result
pays in the
highfollowing
itsaemployees
valuationinformation.
$6.80 ofper
closing
hourinventory?
for a basic 40-hour week. An overtime premium of
50% is payable together with a production bonus of $0.25 per unit for all units produced over 350.
A AVCO in
Employees areperiods of rising
guaranteed cost prices
a weekly wage of $330.
budgeted overheads $127 000
B AVCO in periods of rising selling prices
One employee worked 45 hours budgeted
last machine
week andhours
produced 410 10units.
450
C FIFO in periods of rising cost prices
actual overheads $149 000
What was the employee’s gross pay that week?
D FIFO in periods of rising selling
actual priceshours
machine 9 300
A $330 B $338 C $372 D $474
What was the absorption rate per machine hour? 9
24 2018
11 JUN P11 Q22
A manufacturing business has the following data.
22 A
A business
$12.15 employsB20 production
$13.66 staff.CEach worker is employed
$14.26 for 40 hours per week at a rate
D $16.02
of $7.80 per hour. budgeted factory overheads $144 000

22 Which costsisare
Piece budgeted
20% of machine hours 40 000
2018rate calculated
© UCLES
stepped at
costs? basic9706/12/F/M/18
rate pay per hour for each product manufactured above
[Turn over
120 units per employee. actual factory overheads $147 600
1 Increase in indirect materials cost.
In a week, each employee actual machine
produced 145hours
units. 36 000
2 Increase in variable overheads.
What were3 the
is the total wages
overhead
Renting for
absorption
further therate
factoryweek?
per machine hour?
space.

A
A $7020
$3.60
1 and 2 B
B $9984
1$3.69
only CC and764
C 2$4.00
$10 3 DDD 3$4.10
$10 920
only

12 2019 FEB P12 Q23

23
23 A
25 Anbusiness
Which
employeehad
values thebefollowing
can
worked normaltransactions
calculated
a relating
when absorption
35-hour week to inventory.
costing
and was paidis$15
used?
per hour. He also worked 5 hours
of overtime which was paid at $20 per hour and received a bonus of $50.
1 an inventory value which includes all production costs
March 1 opening inventory 20 items at $7.50 each
What was his total pay for the week?
2 the margin of safety at the current level of production
3 sales of inventory 12 items at $9 each
A $525 B $600 C $625 D $675
3 the selling price of the product
6 purchases of inventory 18 items at $8.20 each
A
24 What1 and 2uses machine
A company B 1 and 3to absorbCits overheads.
1 only D 2 and 3
was the cost per unithours
of closing inventory on 7 March using the AVCO (perpetual) method?
The $7.29
A following information is provided for aCmonth.
B $7.85 $7.98 D $8.23
26 Whose wages would be treated as an indirect cost?

A assemblers at a car manufacturer actual budgeted

24 Which statements about marginal costing are correct?
overheads company$237 010
B lorry drivers at an engineering $253 450
1 The marginal cost of a product includes an allowance for fixed overheads.
machinebusiness
C sewers at a dress-making hours 12 460 13 700
2 The marginal cost of a product represents the additional cost of making one extra
D welders
Which at
statementa regarding
unit.building construction company
overheads is correct?

A $65003 over-absorbed
If inventory decreases during a period, the profits under absorption costing will be
lower than under marginal costing.
B $6500 under-absorbed
© UCLES 2017 9706/13/O/N/17 [Turn over
A
C 1, $162 440
and over-absorbed
3 B 1 only C 2 and 3 only D 2 only

D $16 440 under-absorbed

 A 86 days
C 6.4 times
B 90 days
D 9.6 times
C 95 days
20 D 100 days
A business provided the following information.

13 2019 JUN P11 Q21

gross margin 20%
21 Eight employees work in a team. Each employee is paid $16 an hour and the team share a group
bonus between them, which is based on their output of $product. For any production in excess of
500 units the team, as a group, is paid a bonus of $8 per unit. The bonus is shared equally and
paid on a weekly basis. sales 77 275 325
19 A
A company
20 Last
company provides the
provides opening
the following inventory
information for the25 450ended 31 May 2019.
year
week each memberfollowing information.
of the team worked 40 hours, and the team as a whole produced
560 units. closing inventory 55 975
$ $
What is the pay of each member
What were the total purchases? of the team?
ordinary total purchases
share capital 175 000 50 000
A
A $700
$189 735 B $220
B $760 260 CC $250
$1120 785 D $1200
retained cash purchases
earnings at the end of the year 35D000$259 963
11 000
14 2019 JUN P13 Q21 inventory(2023–2025)
8% debentures 1 June 2018 12 000 15 000
22
21 A
Ancompany
employee uses the weighted
is paid $20 an houraverage
basiccost
pay(AVCO) method
for working to value
8 hours its inventory.
a day. Overtime is paid at the
rate of a time and a half. inventory
bankAoverdraft
bonus 31 paid
is also May of2019 15 000
$40 for each 8 000 in excess of 10 units
unit produced
The following information is available for an item of inventory.
a day.
profit from operations 17 700
What is the rate of inventory turnover (rounded to the nearest whole number)?
February
Yesterday the employee 1 worked Balance 20 units at $4 each
profit for the10 hours and produced 11 units. 16 500
year
A 11 times
14 Purchased 40 units at $5 each
What was the employee’s pay for the day?
What12istimes
B the return on capital employed?
April 1 Purchased 40 units at $8 each
A $220 B $260 C $620 D $660
A 13
C 21.07%
times B 21.71% C 23.29% D 27.05%
May 22 Issued 55 units
15 2019
D 16NOV timesP11 Q21
21 What was the production
A company’s total cost ofteam
the units
has fourissued?
employees. Each employee is paid a basic rate of $20 an
hour.
A $255 B $270 C $330 D $345
20 In 2017 a company was entirely financed by its equity and reserves which total $1 000 000. Its
return
The teamon capital employed
also shares (ROCE)
a bonus was 28%.
between them, based on their output. For any production in
excess of 200 units, the team is paid a bonus of $8 per unit. This bonus is shared equally.
On 1 January 2018 the company issued a 10% debenture of $300 000.
Last week each member of the team worked 35 hours, and the team as a whole produced
250 units.
During 2018 the profit from operations increased by 20%. No dividends were paid.
© UCLES 2019was member of the9706/11/M/J/19
What was the pay
What ROCEof each
for 2018? team last week?

A $800
19.1% B
B $945
20.9% CC $1050
23.4% DD $1200
25.8%
© UCLES 2019 9706/13/M/J/19
16 2019 NOV P13 Q21
22 A
21 A business
company’sbought the following
production units
workers areof paid
inventory
$16 in
anMay.
hour basic pay for working 7 hours a day.
Overtime is paid at the rate of a time and a quarter (basic pay plus 25%). An additional bonus is
also paid at the rate of $4 perdate
unit for output in excess of
quantity 20cost
unit units per day.

4 May 10 hours
On Monday one employee worked 1000 units $12.00
and produced 25 units.
20 May 1000 units $14.00
What is the employee’s pay for Monday?
28 May 800 units $14.75
A $192 B $220 C $272 D $300
1200 units were sold on 22 May for $20 each. The inventory’s net realisable value at 31 May was
$24 per unit. There was no opening inventory.

What was the value of closing inventory using the AVCO method of valuing inventory?

A $21 600 B $21 773 C $22 200 D $38 400

17 2020 NOV P11 Q22

18 2020 NOV P12 Q22

19 2020 NOV P13 Q21

20 2021 JUN P12 Q21

 A advertising
B driver insurance
C fuel
D vehicle licence

21 2018 JUN P12 Q23

23 Adam is paid $4 per hour and his expected output is 500 units per week. He is also paid a bonus
$1 for every 20 perfect units made above the total of 500.

In one week he worked for 40 hours and made 880 units, but 40 were faulty and were scrapped.

How much was Adam paid for the week?

A $177 B $179 C $202 D $204

22 2021 NOV P12 Q22

24 A business values their inventory using the AVCO method. The inventory on 1 June 2017 was
100 units valued at $2.40 each.

The following took place.

June 5 purchased 40 units at $2.50 per unit

7 sold 60 units at $3.50 per unit

What was the value of the inventory on 8 June 2017 to the nearest dollar?

A $194 B $196 C $200 D $224

23 2021 NOV P13 Q21

25 The following budgeted information is available for a hotel for the next financial year.

fixed overheads $192 000

direct costs $240 000
number of guests 2400
average guest stay 4 nights

Worksheet 1
What is the overhead absorption rate per guest night?

A $20 B $45 C $80 D $180

© UCLES 2018 9706/12/M/J/18 [Turn over

 Absorption Costing
12
1 2016 JUN P22 Q04
4 Bruna Limited is a manufacturing company. It operates three production departments and two
service departments. The costs are allocated to each department as follows:

Production departments Service departments

Machining Assembly Finishing Stores Canteen
$ $ $ $ $
Indirect labour 253 000 290 000 340 100 52 000 78 000
Other indirect overhead costs 205 000 90 000 225 000 88 000 92 000

The service departments costs are allocated to the production departments as follows:

Stores in proportion to the number of stores requisitions

Canteen in proportion to number of employees.

The following information is available:

Machining Assembly Finishing

Direct labour hours 15 000 60 000 40 000
Machine hours 45 000 30 000 25 000
Number of employees 5 6 9
Number of stores requisitions 6 300 4 500 7 200
 13
2 2016 JUN P22 Q04 A
REQUIRED

(a) Calculate, to two decimal places, a suitable overhead absorption rate for each of the three
production departments.

[13]

© UCLES 2016 9706/22/M/J/16 [Turn over

 14
3 2016 JUN P22 Q04 B
Additional information

Bruna Limited has been approached by a customer to quote for one of their products. This will
require the following:

Direct materials 20 kilos at $5 per kilo

Direct labour 10 hours at $9 per hour

Direct labour hours and machine hours required in each department will be:

Machining Assembly Finishing

Direct labour hours 5 3 2
Machine time 2 hours 30 minutes 20 minutes

It is the company’s practice to achieve a gross margin of 40% on all its products.

REQUIRED

(b) Calculate the total price to quote to the customer.

[7]

© UCLES 2016 9706/22/M/J/16

 15
4 2016 JUN P22 Q04 C
Additional information

The directors are considering changing from departmental overhead absorption rates to one
factory-wide rate.
REQUIRED

(c) Advise the directors whether or not they should make this change. Justify your answer.

[4]

(d) Explain how over absorption and under absorption of overheads can affect the profit of a
manufacturing business.

[6]

[Total: 30]

© UCLES 2016 9706/22/M/J/16

 [4]

5 2016 JUN P22 Q04 D

(d) Explain how over absorption and under absorption of overheads can affect the profit of a
manufacturing business.

[6]

[Total: 30]

© UCLES 2016 9706/22/M/J/16

 16
6 2016 NOV P23 Q04 A 16
4 Rajesh is a manufacturer with a trading year end of 31 December. He currently uses absorption
4 Rajesh
costing.isThe
a manufacturer with a two
business operates trading year end
production of 31
cost December.
centres and twoHeservice
currently
costuses absorption
centres. Details
costing. The business operates two production cost centres and two service cost centres.
of these cost centres and the budgeted overhead costs for the whole business for the year Details
ended
of
31these cost centres
December and
2015 are asthe budgeted overhead costs for the whole business for the year ended
follows:
31 December 2015 are as follows:
Overhead $ Basis of apportionment
Overhead $ Basis of apportionment
Depreciation 8 750 Non-current assets at cost
Depreciation 8 750 Non-current assets at cost
Machinery maintenance 27 000 Machine hours
Machinery maintenance 27 000 Machine hours
Power 15 370 Kilowatt hours
Power 15 370 Kilowatt hours
Rent of premises 63 510 Floor area
Rent of premises 63 510 Floor area
The following information is also available:
The following information is also available:
Production cost centres Service cost centres
Production cost centres Service cost centres
Machining
Machining Assembly
Assembly Stores
Stores Canteen
Canteen
Floor area
Floor area (square
(square metres)
metres) 750
750 500
500 150
150 50
50
Kilowatt hours
Kilowatt hours 3 750
3 750 2 500
2 500 750
750 250
250
Non-current asset
Non-current asset atat cost
cost ($)
($) 90 000
90 000 30 000
30 000 12000
12 000 88000
000
Stores requisitions
Stores requisitions 150
150 75
75 -- --
Staff
Staff 20
20 30
30 3 3 --
Direct labour
Direct labour hours
hours 2 300
2 300 13 900
13 900 - - --
Machine hours
Machine hours 14100
14 100 22650
650 - - --
REQUIRED
REQUIRED
(a) Apportion
(a) Apportion the
the overhead
overhead costs
costs to
to the
the four
four cost
cost centres
centres and
and re-apportion
re-apportionthe
theservice
servicecost
cost
centres costs to production cost centres using a suitable basis.
centres costs to production cost centres using a suitable basis.
Productioncost
Production costcentres
centres Servicecost
Service costcentres
centres
Total
Total Machining Assembly
Machining Assembly Stores
Stores Canteen
Canteen
$$ $$ $$ $$ $$

Depreciation

maintenance
Machinery maintenance

Power

premises
Rent of premises

Re-apportionment
Re-apportionment of
of canteen
canteen

Re-apportionment
Re-apportionment of
of stores
stores

Total
Total overhead
overhead cost
cost

[8][8]

© UCLES
© UCLES 2016
2016 9706/23/O/N/16
9706/23/O/N/16
 17
7 2016 NOV P23 Q04 B
(b) Calculate suitable overhead absorption rates for each production cost centre correct to two
decimal places.

[4]

Additional information

The following budgeted information is also available:

Product A Product B
Number of units 9400 6950
Direct costs per unit $5.75 $8.25
Machine hours per unit 1.5 0.3
Assembly hours per unit 0.5 2.0

REQUIRED

(c) Calculate the total cost per unit of Product A and Product B.

[4]

© UCLES 2016 9706/23/O/N/16 [Turn over

 [4]
8 2016 NOV P23 Q04 C 2016 NOV P23 Q04 C
Additional information

The following budgeted information is also available:

Product A Product B
Number of units 9400 6950
Direct costs per unit $5.75 $8.25
Machine hours per unit 1.5 0.3
Assembly hours per unit 0.5 2.0

REQUIRED

(c) Calculate the total cost per unit of Product A and Product B.

[4]

© UCLES 2016 9706/23/O/N/16 [Turn over

 18
18
9 2016 NOV P23 Q04 D
Additional
Additional information
information
The
The actual
actual results
results for
for the
the year
year were
were as
as follows:
follows:
Machining
Machining Assembly
Assembly
Factory
Factory overheads
overheads $76
$76 750
750 $45
$45 675
675
Direct
Direct labour
labour hours
hours 2
2 560
560 12
12 650
650
Machine
Machine hours
hours 16
16 210
210 2
2 490
490

REQUIRED
REQUIRED
(d)
(d) Calculate the
the over absorption
absorption or under
under absorption of
of overheads for
for each production
production cost
cost
centre.
centre.

[4]
[4]

10 2016 NOV P23 Q04 E

(e)
(e) State what
what is
is meant
meant by
by allocation.
allocation.

[1]
[1]

11 2016 NOV P23 Q04 F

(f)
(f) State what
what is
is meant
meant by
by overhead
overhead costs.
costs.

[2]
[2]

©
© UCLES
UCLES 2016
2016 9706/23/O/N/16
9706/23/O/N/16
 19
12 2016 NOV P23 Q04 G
(g) Explain why overhead costs are re-apportioned from service cost centres.

[2]

Additional information

Rajesh has been advised to change to a marginal costing system.

REQUIRED

(h) Advise Rajesh whether or not he should change. Justify your answer.

[5]

[Total: 30]

© UCLES 2016 9706/23/O/N/16

 [2]
13 2016 NOV P23 Q04 H
Additional information

Rajesh has been advised to change to a marginal costing system.

REQUIRED

(h) Advise Rajesh whether or not he should change. Justify your answer.

[5]

[Total: 30]

© UCLES 2016 9706/23/O/N/16

 13
14 2017 FEB P22 Q04 A
4 Miu owns a manufacturing business making a13
single product.

4 REQUIRED
Miu owns a manufacturing business making a single product.
(a) State the difference between a cost unit and a cost centre.
REQUIRED

(a) State the difference between a cost unit and a cost centre.

[2]

[2]
(b) State the difference between a production cost centre and a service cost centre.
15 2017 FEB P22 Q04 B
(b) State the difference between a production cost centre and a service cost centre.

[2]

[2]
(c) State what is meant by contribution.
16
16 2017 FEB P22 Q04 E
(c) State what
Additional is meant by contribution.
information

Miu is considering using absorption costing to value her inventory.

REQUIRED

(e) Calculate the production overhead absorption rate per unit.

[2]

[2]

[1]

(f) Prepare a budgeted profit statement for each of the two months, January and February,
using absorption costing. Clearly show the opening and closing inventories each month.
© UCLES 2017 9706/22/F/M/17
Budgeted Profit Statement [Turn over
 14
14
17 2017 JUN P23 Q04 G
Additional
Additional information
information

The
The following
following information
information is
is available
available for
for another
another division
division of
of Y
Y Limited.
Limited. The
The division
division operates
operates a
a
system of absorption costing with two production departments.
system of absorption costing with two production departments.

Department 1
Department 1 Department 2
Department 2

Budgeted
Budgeted overheads
overheads $560
$560 000
000 $304
$304 000
000
Actual
Actual overheads
overheads $533
$533 000
000 $294
$294 000
000
Budgeted
Budgeted labour
labour hours
hours 140
140 000
000 hrs
hrs 46
46 000
000 hrs
hrs
Actual
Actual labour hours
labour hours 124
124 000
000 hrs
hrs 54
54 000
000 hrs
hrs
Budgeted
Budgeted machine
machine hours
hours 27
27 000
000 hrs
hrs 160
160 000
000 hrs
hrs
Actual
Actual machine hours
machine hours 33
33 000
000 hrs
hrs 151
151 000
000 hrs
hrs

REQUIRED
REQUIRED

(g) Calculate
(g) to two
Calculate to two decimal
decimal places
places an
an appropriate
appropriate overhead
overhead absorption
absorption rate
rate for
for each
each
department.
department.

[2]
[2]

18 2017 JUN P23 Q04 H

(h)
(h) Calculate
Calculate the
the over
over absorption
absorption or
or under
under absorption
absorption of
of overheads
overheads for
for each
each department.
department.

[4]
[4]

[Total:
[Total: 30]
30]

©
© UCLES
UCLES 2017
2017 9706/23/M/J/17
9706/23/M/J/17
 14
19 2017 NOV P21 Q04 A
4 Anna has a manufacturing business with two production departments and two service
departments. She makes circuit boards for electronic games using batch costing.

REQUIRED

(a) Explain what is meant by ‘batch costing’.

[2]

Additional information

The following budgeted annual data for Anna is available:

Production departments Service departments

Assembly Machining Stores Canteen
Overheads $36 000 $50 000 $6 250 $2 500
Direct labour hours 6 000 3 500 – –
Machine hours 2 500 5 500 – –

The following information is also available:

Assembly Machining Stores

Number of orders 800 1200 –
Use of canteen 65% 25% 10%

© UCLES 2017 9706/21/O/N/17

 [2]
20 2017 NOV P21 Q04 B
Additional information

The following budgeted annual data for Anna is available:

Production departments Service departments

Assembly Machining Stores Canteen
Overheads $36 000 $50 000 $6 250 $2 500
Direct labour hours 6 000 3 500 – –
Machine hours 2 500 5 500 – –

The following information is also available:

Assembly Machining Stores

Number of orders 800 1200 –
Use of canteen 65% 1525%
15 10%

REQUIRED
REQUIRED

(b)
(b) Re-apportion
Re-apportion the
the service
service departments’
departments’ costs
costs to
to the
the production
production departments
departments using
using a
a suitable
suitable
basis
basisfor
for each.
each.

Assembly
Assembly Machining
Machining Stores
Stores Canteen
Canteen
$$!! $$!! $! $!

Allocated
Allocated overheads
overheads 36
36000
000 50
50000
000 6250 2500

Re-apportionment
Re-apportionment of
of
canteen
canteen

Subtotal
Subtotal

Re-apportionment
Re-apportionment of
of
stores
stores

Total
Total

[3]

(c)
(c) Calculate
Calculate aa suitable
suitable overhead
overhead absorption
absorption rate
rate for
for each
each production department to two
decimal
decimal places.
places. !!
© UCLES 2017
Worksheet 1
9706/21/O/N/17

[4]
 Subtotal

Re-apportionment of
stores

Total
Absorption Costing
[3]
1 2017 NOV P21 Q04 C
(c) Calculate a suitable overhead absorption rate for each production department to two
decimal places. !

[4]

© UCLES 2017 9706/21/O/N/17 [Turn over

 16
2 2017 NOV P21 Q04 D
Additional information

A typical order for a batch of 1000 circuit boards requires the following:

Direct materials $48 000

Direct labour
Assembly department 500 hours at $12 per hour
Machining department 300 hours at $8 per hour

Machine hours
Assembly department 210 hours
Machining department 500 hours

Selling and administration costs $7000

REQUIRED

(d) Calculate, to two decimal places, the total cost per circuit board based on a batch of 1000
units.

[6]

© UCLES 2017 9706/21/O/N/17

 17
3 2017 NOV P21 Q04 E 17
! Additional information
! Additional information
Sally, a customer, asked for a quote for an order for 75 circuit boards. Anna calculates the selling
price
Sally,to
a give a profitasked
customer, margin
forofa 60%.
quote for an order for 75 circuit boards. Anna calculates the selling
price to give a profit margin of 60%.
REQUIRED
REQUIRED
(e) Prepare a quote showing the total selling price.!
(e) Prepare a quote showing the total selling price.!

[3]
[3]
Additional
4 2017 NOVinformation
P21 Q04 F
Additional information
Sally considered the quoted price and has asked for a discount of 5%.
Sally considered the quoted price and has asked for a discount of 5%.
REQUIRED
REQUIRED
(f) Advise Anna whether or not she should allow Sally the discount. Justify your answer.
(f) Advise Anna whether or not she should allow Sally the discount. Justify your answer.

[5]
[5]

© UCLES 2017 9706/21/O/N/17 [Turn over

© UCLES 2017 9706/21/O/N/17 [Turn over
 16
5 2018 FEB P22 Q04 A
4 K Limited has two production departments. Department A produces bicycles and Department B
produces scooters.

The company splits the costs of its maintenance department across the two production
departments on the basis of stores requisitions.

REQUIRED

(a) (i) Name the accounting term which describes the splitting of a service department’s costs
based on stores requisitions.

[1]

(ii) Explain how the cost of direct materials is charged to each production department.

[2]

Additional information

K Limited provided the following budgeted information for January 2018.

Department Department
A B
Production (units) 1 000 1 200
!
Total production costs $ $
Direct materials 16 000 26 000
Direct labour 18 000 21 000
Indirect materials 4 000 3 000
Maintenance department costs 4 500 7 000
Factory rent 10 000 8 000
Depreciation of factory machinery 10 500 19 000
63 000 84 000

The selling and distribution costs for January were budgeted to be $33 000 and the administrative
expenses for January were budgeted to be $66 000. These were to be split between the two
departments on the basis of units produced.

The budgeted selling prices were calculated using a mark-up of 25% on total cost.

© UCLES 2018 9706/22/F/M/18

 (ii) Explain how the cost of direct materials is charged to each production department.

[2]

6 2018 FEB P22 Q04 B

Additional information

K Limited provided the following budgeted information for January 2018.

Department Department
A B
Production (units) 1 000 1 200
!
Total production costs $ $
Direct materials 16 000 26 000
Direct labour 18 000 21 000
Indirect materials 4 000 3 000
Maintenance department costs 4 500 7 000
Factory rent 10 000 8 000
Depreciation of factory machinery 10 500 19 000
63 000 84 000

The selling and distribution costs for January were budgeted to be $33 000 and the administrative
expenses for January were budgeted to be $66 000. These were to be split between the two
departments on the basis of units produced. 17

The budgeted selling prices were calculated using a mark-up of 25% on total cost.
REQUIRED

(b) State the bases which the company may have used to split each of the following costs
between the two departments.

(i) factory rent

[1]

(ii) depreciation of factory machinery

[1]

(c) 2018
© UCLES Calculate the inventory value of one 9706/22/F/M/18
bicycle produced by Department A
!
(i) using marginal costing

[1]

(ii) using absorption costing.

[1]

(d) (i) Calculate the budgeted profit for one bicycle.

 [1]

7 2018 FEB P22 Q04 D

(d) (i) Calculate the budgeted profit for one bicycle.

[4]

(ii) Calculate the budgeted profit for one scooter.

[4]

© UCLES 2018 9706/22/F/M/18 [Turn over

 18
8 2018 FEB P22 Q04 E
Additional information

The sales director has suggested that the company should reduce production of bicycles by 500
a month and increase production of scooters by 500 a month.

REQUIRED

(e) Advise the directors whether or not they should proceed with this suggestion. Justify your
answer using both financial and non-financial factors.

[7]

© UCLES 2018 9706/22/F/M/18

 19
19
9 2018 FEB P22 Q04 F
Additional
Additional information
information

K
K Limited
Limited pays
pays its
its production
production workers
workers $9
$9 an
an hour.
hour.

In
In January
January 2018
2018 actual
actual results
results for
for Department
Department A
A showed
showed the following.!!
the following.

hours
hours worked
worked 2
2 100
100
total
total overheads
overheads $76
$76 200
200

REQUIRED
REQUIRED

(f)
(f) Calculate
Calculate the
the overhead
overhead absorption
absorption rate
rate per
per direct
direct labour
labour hour
hour for
for Department
Department A.
A.

[3]
[3]

10 2018 FEB P22 Q04 G

(g) Calculate the
(g) Calculate the under-absorption
under-absorption or
or over-absorption
over-absorption of
of overheads
overheads for
for Department
Department A
A in
in
January
January 2018.
2018.

[5]
[5]

[Total:
[Total: 30]
30]

©
© UCLES
UCLES 2018
2018 9706/22/F/M/18
9706/22/F/M/18
 16
11 2018 JUN P21 Q04 D
Additional information

Zinan is considering using absorption costing.

REQUIRED

(d) State two limitations of absorption costing.

[2]

(e) Calculate the total budgeted profit for each of the two years using absorption costing.!

[7]

© UCLES 2018 9706/21/M/J/18

 2

[2]

12 2018 JUN P21 Q04 E

(e) Calculate the total budgeted profit for each of the two years using absorption costing.!

[7]

© UCLES 2018 9706/21/M/J/18

 13
13 2018 JUN P22 Q04 A
4 SP Limited owns a hotel and a leisure centre.
The business is split into three working divisions: Accommodation, Leisure and Conferences.
The business also has one service centre: Support.
Labour, food and materials are allocated direct to the relevant division. The remaining overheads
cannot be directly allocated.
The following budgeted information for the year ended 31 March 2018 is available:
$
Rent and rates 86 000
Light and heat 48 000
Advertising 40 000
Equipment depreciation 60 000
Office costs 150 000
The following cost centre information is available.
Accommodation Leisure Conferences Support
Floor space (m2) 25 000 4 000 10 000 1 000
Equipment value ($) 10 000 45 000 5 000 –
Number of employees 23 5 5 2
Kilowatt hours 7 000 4 000 3 000 1 000
Budgeted guest days 12 000 3 000 5 000 –

Advertising and office costs are apportioned on the basis of budgeted guest days.

REQUIRED

(a) Apportion the budgeted overheads to the four divisions using a suitable basis for each.
Re-apportion the support costs to the three working divisions on the basis of guest days.

Total Accommodation Leisure Conferences Support

$ $ $ $ $
Labour cost 345 000 194 000 86 000 60 000 5 000
Food and
81 000 42 000 11 000 26 000 2 000
materials
Rent and rates 86 000

Light and heat 48 000

Advertising 40 000
Equipment
60 000
depreciation
Office costs 150 000
Total apportioned
overheads
Reapportionment
of Support
Total

[8]

© UCLES 2018 9706/22/M/J/18 [Turn over

 14
14 2018 JUN P22 Q04 B
(b) Calculate an overhead absorption rate to two decimal places, for each of the three working
divisions based on budgeted guest days.

Accommodation Leisure Conferences

$ $ $

[3]

15 2018 JUN P22 Q04 C

Additional information
The actual results for the year ended 31 March 2018 were as follows:

Total cost ($) Guest days

Accommodation 522 000 13 200
Leisure 215 000 3 600
Conferences 196 000 5 800

REQUIRED

(c) Calculate the under-absorption or over-absorption of overheads for each division.

Accommodation Leisure Conferences

$ $ $

[6]

© UCLES 2018 9706/22/M/J/18

 15
16 2018 JUN P22 Q04 D
Additional information

The company’s policy is to charge customers a price to achieve a profit margin of 60%.

A business customer wishes to register five employees for a three day conference to include four
days’ accommodation, one day’s leisure and three days' conference facilities for each employee.

REQUIRED

(d) Prepare a statement to calculate the price to be quoted to the customer.

[4]

Additional information

The directors have been informed that a competitor has quoted a price $600 more for the same
conference. They are considering revising their own pricing policy to increase accommodation
prices by 20%.

REQUIRED

(e) Advise the directors whether or not they should increase their accommodation prices. Give
reasons for your answer.

[5]

© UCLES 2018 9706/22/M/J/18 [Turn over

 [4]

17 2018 JUN P22 Q04 E

Additional information

The directors have been informed that a competitor has quoted a price $600 more for the same
conference. They are considering revising their own pricing policy to increase accommodation
prices by 20%.

REQUIRED

(e) Advise the directors whether or not they should increase their accommodation prices. Give
reasons for your answer.

[5]
16
18 2018
© UCLES 2018JUN P22 Q04 F 9706/22/M/J/18 [Turn over
Additional information

A company has recently employed a new assistant accountant with only limited knowledge of
budgetary control procedures.

REQUIRED

(f) State two benefits to a company of operating a system of budgetary control.

! [2]

(g) State two limitations to a company of operating a system of budgetary control.

1
 2

! [2]

19 2018 JUN P22 Q04 G

(g) State two limitations to a company of operating a system of budgetary control.

! [2]
17
20 2018 JUN P23 Q04 H [Total: 30]
Additional information

The directors provide the following information for the manufacturing part of the business:

Budgeted labour hours 26 400 hours

Budgeted machine hours 10 500 hours
Actual labour hours 22 300 hours
Actual machine hours 11 400 hours
Budgeted overheads $445 000
Actual overheads $420 000

REQUIRED
Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
(h)will (i)
publisher Calculate
be pleased an appropriate
to make amends overhead
at the earliest possible absorption rate for the business.
opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
International Examinations Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download at
www.cie.org.uk after the live examination series.

Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of Cambridge Local
Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
[2]
© UCLES 2018 9706/22/M/J/18

(ii) Explain one limitation of absorption costing.

[2]

[Total: 30]

Worksheet 2
 Absorption Costing
18
1 2018 NOV P21 Q04 H
Additional information

The directors of DH Limited also use absorption costing.

REQUIRED

(h) State the meaning of each of the following terms.

(i) Allocation

[2]

(ii) Apportionment

[2]

(iii) Absorption

[2]

[Total: 30]
 2

[2]
2 2019 JUN P22 Q4 C
Additional information

The business has two production cost centres: machining and assembly, and one service cost
centre: stores.

The following budgeted information is available for the year ending 31 December 2019.
Budgeted overheads $ Basis of apportionment
Depreciation 9 760 Non-current asset at cost
Heat and light 13 850 Kilowatt hours
Machinery maintenance 6 500 Machine hours

The following budgeted information is also available.

Service
Production cost centres
cost centre
Machining Assembly Stores
Kilowatt hours 4 200 2 100 700
Non-current assets at cost ($) 91 000 28 000 21 000
Stores requisitions 375 125
Direct labour hours 2 700 6 300
Machine hours 13 400 3 350

REQUIRED

(c) Complete the following table to show the apportionment of budgeted overhead costs for the
year ending 31 December 2019.
Service cost
Production cost centres
Total centre
$ Machining Assembly Stores
$ $ $
Depreciation

Heat and light

Machinery maintenance

Total overheads apportioned

Re-apportionment of stores

Total overheads cost

[6]

© UCLES 2019 9706/22/M/J/19

 15
3 2019 JUN P22 Q4 D
(d) Calculate, to two decimal places, an overhead absorption rate for each production cost
centre, using a suitable basis.

[4]

Question 4 (e) is on the next page.

© UCLES 2019 9706/22/M/J/19 [Turn over

 16
4 2019 JUN P22 Q4 E
Additional information

On 1 April 2019 a customer asked Jessie to quote for an order of 200 units of her product. Each
unit requires the following:

Direct labour 2.5 hours at $4 per hour

Direct material 3 kilos
Overheads Machining department
1.5 machine hours
0.8 direct labour hours
Assembly department
1.0 machine hour
2.0 direct labour hours

Jessie marks up all orders by 25%.

REQUIRED

(e) Prepare a statement to show the total selling price that Jessie will quote to the customer.

[7]

© UCLES 2019 9706/22/M/J/19

 17
5 2019 JUN P22 Q4 F
Additional information

The same customer offers to pay Jessie the quoted price less a 10% discount. Jessie’s factory
has spare capacity.

REQUIRED

(f) Advise Jessie whether or not she should accept the offer. Justify your answer.

[5]

[Total: 30]

© UCLES 2019 9706/22/M/J/19

 16
6 2019 NOV P21 Q4 A
4 D Limited is a large company and operates from several sites. It uses different systems of costing
for its different sites.

REQUIRED

(a) State three advantages to a business of using a system of absorption costing.

[3]

Additional information

At one of its sites the company specialises in printing brochures and leaflets for local
organisations. At this site it uses a system of absorption costing.

There are two production departments: Assembly and Printing and two service departments:
Technical support and Personnel.

The following information is available.

Production departments Service departments

Technical
Assembly Printing Personnel
support
Floor area (square metres) 90 70 15 5
Power (kilowatt-hours) 120 320 40 20
Replacement cost of machinery
and equipment ($) 105 000 30 000 12 000 3 000
Number of employees 20 15 5
Technical support hours 400 60

The following budgeted overhead costs for August 2019 are still to be apportioned.

$
Electricity 20 500
Insurance of machinery 7 500
Insurance of buildings 11 880

© UCLES 2019 9706/21/O/N/19

 3

[3]
7 2019 NOV P21 Q4 B 1
Additional information

At one of its sites the company specialises in printing brochures and leaflets for local
organisations. At this site it uses a system of absorption costing.

There are two production departments: Assembly and Printing and two service departments:
Technical support and Personnel.

The following information is available.

Production departments Service departments

Technical
Assembly Printing Personnel
support
Floor area (square metres) 90 70 15 5
Power (kilowatt-hours) 120 320 40 20
Replacement cost of machinery
and equipment ($) 105 000 30 000 12 000 3 000
Number of employees 20 15 5
Technical support hours 400 60

The following budgeted overhead costs for August 2019 are still to be apportioned.

$
Electricity 20 500
Insurance of machinery 7 500 17
Insurance of buildings 11 880
REQUIRED

(b) 2019
© UCLES Complete the following table to show the apportionment of budgeted overhead costs for
9706/21/O/N/19
August 2019.

Apportionment of overheads

Production departments Service departments

Technical
Total Assembly Printing support Personnel
$ $ $ $ $

Overheads already apportioned 40 210 17 530 11 360 5020 6300

Electricity

Insurance of machinery

Insurance of buildings

Total overheads apportioned

Reapportionment of personnel
overheads

Reapportionment of technical
 17

REQUIRED

(b) Complete the following table to show the apportionment of budgeted overhead costs for
August 2019.
8 2019 NOV P21 Q4 B 2
Apportionment of overheads

Production departments Service departments

Technical
Total Assembly Printing support Personnel
$ $ $ $ $

Overheads already apportioned 40 210 17 530 11 360 5020 6300

Electricity

Insurance of machinery

Insurance of buildings

Total overheads apportioned

Reapportionment of personnel
overheads

Reapportionment of technical
support overheads

[7]

© UCLES 2019 9706/21/O/N/19 [Turn over

 18
9 2019 NOV P21 Q4 B C
Additional information

The following budgeted information is also available for August 2019.

Assembly Printing
Direct labour hours 3200 2000
Direct machine hours 1400 5500

REQUIRED

(c) Calculate an overhead absorption rate for each production department using an
appropriate basis.

[4]

Additional information

The company received an order for a set of brochures to be produced in August 2019. It was
budgeted that this order would require the following:

Direct material and labour cost $1330

Direct labour hours
Assembly department 12.5 hours
Printing department 7.2 hours
Machine hours
Assembly department 5.5 hours
Printing department 6.0 hours

The company requires a profit margin of 25% on all orders.

© UCLES 2019 9706/21/O/N/19

 [4]

10 2019 NOV P21 Q4 D

Additional information

The company received an order for a set of brochures to be produced in August 2019. It was
budgeted that this order would require the following:

Direct material and labour cost $1330

Direct labour hours
Assembly department 12.5 hours
Printing department 7.2 hours
Machine hours
Assembly department 5.5 hours
Printing department 6.0 hours
19
The company requires a profit margin of 25% on all orders.
REQUIRED

(d) Calculate the budgeted profit on this order.

© UCLES 2019 9706/21/O/N/19

[4]

Additional information

The actual time taken in each production department for this order was as follows:

Assembly department Printing department

Direct labour hours 11 6.5
Machine hours 6 8

REQUIRED

(e) Calculate the total over or under-absorption of overheads for this order. Clearly show in
your workings over-absorption or under-absorption of overheads in each department.
 [4]

11 2019 NOV P21 Q4 E

Additional information

The actual time taken in each production department for this order was as follows:

Assembly department Printing department

Direct labour hours 11 6.5
Machine hours 6 8

REQUIRED

(e) Calculate the total over or under-absorption of overheads for this order. Clearly show in
your workings over-absorption or under-absorption of overheads in each department.

[5]

© UCLES 2019 9706/21/O/N/19 [Turn over

 14
12 2019 NOV P22 Q4 A
4 Aramis operates a manufacturing business. He has been advised that he should use absorption
costing in his factory.

REQUIRED

(a) Explain two drawbacks for a business of using a budgeted overhead absorption rate.

[4]

Additional information

Aramis’s factory comprises three departments drilling, finishing and maintenance. The
maintenance department costs consist of maintenance engineers’ wages. The manufacturing
process is machine intensive. The overheads of the drilling and finishing departments are made
up of allocated costs and an apportioned share of the maintenance department.

The following budgeted information for the six months ended 31 March is available.

Drilling Finishing Maintenance

Allocated costs $435 720 $748 900 $208 000

Use of maintenance 38% 62%
Machine hours 27 530 32 270

REQUIRED

(b) (i) Allocate the maintenance department overhead costs to the drilling and finishing
departments.

[2]

© UCLES 2019 9706/22/O/N/19

 [4]

13 2019 NOV P22 Q4 B

Additional information

Aramis’s factory comprises three departments drilling, finishing and maintenance. The
maintenance department costs consist of maintenance engineers’ wages. The manufacturing
process is machine intensive. The overheads of the drilling and finishing departments are made
up of allocated costs and an apportioned share of the maintenance department.

The following budgeted information for the six months ended 31 March is available.

Drilling Finishing Maintenance

Allocated costs $435 720 $748 900 $208 000

Use of maintenance 38% 62%
Machine hours 27 530 32 270

REQUIRED

(b) (i) Allocate the maintenance department overhead costs to the drilling and finishing
departments.

15 [2]

(ii) Calculate, to two decimal places, a budgeted overhead absorption rate for the drilling
and finishing departments.
© UCLES 2019 9706/22/O/N/19

[2]

Additional information

The following information relates to maintenance engineers’ wages during the six-month period.

Total hours worked 7500

Total basic hours worked 6800

Workers are paid a basic rate of $30 per hour. Overtime is paid at 1.5 times the basic rate.

REQUIRED

(c) Calculate the total actual wages for the maintenance engineers for the six-month period.
 [2]

14 2019 NOV P22 Q4 C

Additional information

The following information relates to maintenance engineers’ wages during the six-month period.

Total hours worked 7500

Total basic hours worked 6800

Workers are paid a basic rate of $30 per hour. Overtime is paid at 1.5 times the basic rate.

REQUIRED

(c) Calculate the total actual wages for the maintenance engineers for the six-month period.

[3]

© UCLES 2019 9706/22/O/N/19 [Turn over

 16
15 2019 NOV P22 Q4 D
Additional information

In addition to the actual maintenance wages, the following actual information for the six months
ended 31 March has been made available.

Drilling Finishing

Total overhead costs $427 360 $713 630

Machine hours 25 110 31 976

REQUIRED

(d) Calculate the over or under-absorption of production overheads for each department for the
six-month period.

[8]

© UCLES 2019 9706/22/O/N/19

 17
16 2019 NOV P22 Q4 E
Additional information

Aramis’s accountant has suggested that he uses marginal costing. He has provided the following
analysis for one product:

$
Direct materials 710
Direct labour Drilling 225
Finishing 85
Overhead absorbed Drilling 115
Finishing 45
Selling and administration costs 280

Half of the selling and administration costs are variable.

Aramis requires that all products achieve a profit margin of at least 15%.

A new customer has approached Aramis and offered to pay him $1300 for his product. The
normal selling price for this product is $1750.

REQUIRED

(e) Advise Aramis whether or not he should accept the order. Justify your answer using both
financial and non-financial factors.

[7]

© UCLES 2019 9706/22/O/N/19 [Turn over

 18

17 2019 NOV P22 Q4 F

(f) State four factors that a business should consider before changing its supplier.

[4]
16
18 171 2019 NOV P23 Q4 A [Total: 30]
4 D Limited manufactures a single product. The company has two production departments:
machining and finishing. There are two service departments: stores and maintenance.

The accountant has allocated and apportioned total factory overheads to the four departments.

REQUIRED

(a) Explain the difference between allocation and apportionment of overheads.

[4]

Additional information

The directors of D Limited have provided the following information:

Machining Finishing Stores Maintenance

Issues from stores 60% 30% - 10%
Maintenance 75% 25% - –
Budgeted direct labour hours 22 000 52 000 - –
Budgeted machine hours 84 000 12 000 - –

© UCLES 2019
REQUIRED 9706/22/O/N/19

(b) Re-apportion the service departments’ costs to the production departments.

 [4]
[4]
[4]
19 2019 NOV information
Additional P23 Q4 B
Additional information
Additional information
The directors of D Limited have provided the following information:
The directors of D Limited have provided the following information:
The directors of D Limited have provided the following information:
Machining Finishing Stores Maintenance
Issues from stores Machining Finishing
60% Finishing
Machining 30% StoresStores Maintenance
- Maintenance10%
Issues from
Issues fromstores
Maintenance stores 60%
60%75% 30%30%
25% - -- 10% 10% –
Maintenance
Maintenance
Budgeted direct labour hours 2275%
75% 000 5225%
25% 000 - -- – ––
Budgeted
Budgeteddirect
Budgeted directlabour
machine labour hours
hours
hours 2222 000
000
84 000 52 000 52
12000
000 - -- – ––
Budgetedmachine
Budgeted machine hours
hours 8484000
000 12 000
12 000 - - – –
REQUIRED
REQUIRED
REQUIRED
(b)(b)Re-apportion
Re-apportionthe
the service departments’
service departments’ costs
costs to production
to the the production departments.
departments.
(b) Re-apportion the service departments’ costs to the production departments.
Machining
Machining Finishing
Finishing StoresStores Maintenance
Maintenance
Machining
$$ Finishing
$ $ $ Stores
$ $ Maintenance
$
Total apportioned
$ $ $ $
Total apportioned 177 255 101 150 26 585 33 010
overheads
Total apportioned 177 255 101 150 26 585 33 010
overheads 177 255 101 150 26 585 33 010
overheads
Re-apportionment
Re-apportionment
of stores
Re-apportionment
of stores
of stores
Subtotal
Subtotal
Subtotal
Re-apportionment
of maintenance
Re-apportionment
Re-apportionment
of maintenance
Total
of maintenance
Total [4]
Total
17
20 2019 NOV P23 Q4 C
© UCLES 2019 9706/23/O/N/19
[4]
(c) Calculate a suitable overhead absorption rate to two decimal places for each production [4]
department.
© UCLES 2019 9706/23/O/N/19
© UCLES 2019 9706/23/O/N/19

[4]

(d) Explain why a business calculates separate overhead absorption rates for each production
Worksheet 3
department rather than a single rate for the whole factory.
 Absorption Costing [4]

1 2019 NOV P23 Q4 D

(d) Explain why a business calculates separate overhead absorption rates for each production
department rather than a single rate for the whole factory.

[4]

© UCLES 2019 9706/23/O/N/19 [Turn over

 18
2 2019 NOV P23 Q4 E
Additional information

The company accountant has been asked to provide a quotation for a customer who requires
200 units of the company’s product. The directors wish to quote a selling price which will achieve
a 25% gross margin.

Budgeted cost per unit of product

Direct material $16.00

Direct labour hours
Machining 10 minutes at $9.60 per hour
Finishing 45 minutes at $10.80 per hour
Machine hours
Machining 90 minutes
Finishing 20 minutes

REQUIRED

(e) Prepare a statement to show the quoted selling price of one unit of the product.

[6]

(f) Calculate the total amount the company would receive if the customer accepted the quoted
price and then took a cash discount of 7 ½ %.

[1]

© UCLES 2019 9706/23/O/N/19

 [6]

3 2019 NOV P23 Q4 F

(f) Calculate the total amount the company would receive if the customer accepted the quoted
price and then took a cash discount of 7 ½ %.

[1]

© UCLES 2019 9706/23/O/N/19

 19
4 2019 NOV P23 Q4 G
Additional information

Although the business is successful and expanding, the directors feel that the four departments
do not always appear to be working well together. The directors are planning to introduce a
system of budgetary control which would initially reduce annual profits by 5%.

REQUIRED

(g) Advise the directors whether or not they should proceed with their plans. Justify your answer.

[7]

[Total: 30]

© UCLES 2019 9706/23/O/N/19

 12
5 2020 FEB P22 Q4 A 12
4 Cuthbert runs a manufacturing business which has two production departments and one service
4 department.
Cuthbert runsThe business allocates
a manufacturing business andwhichapportions
has two overhead
production expenditure
departments between
and one production
service
and service departments.
department. The business allocates and apportions overhead expenditure between production
and service departments.
REQUIRED
REQUIRED
(a) Explain one difference between overhead allocation and overhead apportionment.
(a) Explain one difference between overhead allocation and overhead apportionment.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
[2]
...................................................................................................................................................
[2]
(b) State
6 2020 FEBwhat P22 is Q4
meant B by:
(b) State what is meant by:
(i) a production department
(i) a production department
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
[1]
[1]
(ii) a service department
(ii) a service department
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
...........................................................................................................................................
[1]
[1]

© UCLES 2020 9706/22/F/M/20

© UCLES 2020 9706/22/F/M/20
 13
7 2020 FEB P22 Q4 C
Additional information

The following budgeted information has been provided.

$
Rent 18 000
Heating and lighting 12 500
Depreciation 11 200
Employee overheads 8 300
50 000

Production Production Service

department 1 department 2 department

Area (Square metres) 4 500 3 000 1 500

Electricity used (Kilowatt hours) 60 000 30 000 10 000

Non-current assets at net book value ($) 75 000 45 000

Number of employees 45 25 13

Direct labour hours 4 000 1 200

Machine hours 1 500 2 000

Service department costs are re-apportioned on the basis of electricity used.

REQUIRED

(c) Complete the table to apportion the budgeted overheads to each department. Re-apportion
the service department costs to the two production departments.

Production Production Service

Overhead department 1 department 2 department Total
$ $ $ $

Rent

Heating and lighting

Depreciation

Employee
overheads

Service department
re-apportionment

[8]
© UCLES 2020 9706/22/F/M/20 [Turn over
 14
8 2020 FEB P22 Q4 D 14
(d) Calculate the overhead absorption rate for both production departments using an appropriate
basis. Give
(d) Calculate theyour answers
overhead to two decimal
absorption rate forplaces.
both production departments using an appropriate
basis. Give your answers to two decimal places.
Production department 1
Production department 1
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Production department 2
Production department 2
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
[4]
...................................................................................................................................................
[4]
(e) Explain
9 2020 FEB P22 the reason
Q4 Efor the re-apportionment of the service department costs.
(e) Explain the reason for the re-apportionment of the service department costs.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
[2]
...................................................................................................................................................
[2]
(f) State three limitations of using absorption costing.
(f) State three limitations of using absorption costing.
1 ................................................................................................................................................
1 ................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
2 ................................................................................................................................................
2 ................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
3 ................................................................................................................................................
3 ................................................................................................................................................
...................................................................................................................................................
[3]
...................................................................................................................................................
[3]

© UCLES 2020 9706/22/F/M/20

© UCLES 2020 9706/22/F/M/20
 ...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[2]
10 2020 FEB P22 Q4 F
(f) State three limitations of using absorption costing.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................

3 ................................................................................................................................................

...................................................................................................................................................
[3]
15
11 2020 FEB P22 Q4 G
Additional information
© UCLES 2020 9706/22/F/M/20
A customer made a request for a special order.

The manufacture of this order would require direct materials of $2 800 and direct labour of $3 200.

Production department 1 Production department 2

Direct labour hours 80 20

Machine hours 30 100

Cuthbert wishes to achieve a profit margin of 35% on this order.

REQUIRED

(g) Calculate the price to quote for this special order.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[4]
 16
12 2020 FEB P22 Q4 H
Additional information

The customer offered $9 000 for this order.

REQUIRED

(h) Advise Cuthbert whether or not he should accept the order. Justify your answer.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[5]

[Total: 30]

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

To avoid the issue of disclosure of answer-related information to candidates, all copyright acknowledgements are reproduced online in the Cambridge
Assessment International Education Copyright Acknowledgements Booklet. This is produced for each series of examinations and is freely available to download
at www.cambridgeinternational.org after the live examination series.

Cambridge Assessment International Education is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of the University of
Cambridge Local Examinations Syndicate (UCLES), which itself is a department of the University of Cambridge.

© UCLES 2020 9706/22/F/M/20

 15
13 2020 JUN P21 Q4 A
4 G Limited manufactures cakes for celebrations. The company uses absorption costing.

REQUIRED

(a) Explain three benefits to a business of using absorption costing.

1 ................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

3 ................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[6]

© UCLES 2020 9706/21/M/J/20 [Turn over

 16
14 2020 JUN P21 Q4 B
Additional information

There are two production departments: baking and decoration.

There are two service departments: stores and maintenance.

Some overheads have already been allocated. The following forecast information is available for the
year ending 31 December 2020.

Budgeted overheads to be apportioned

$
Machinery depreciation 33 600
Power 45 500
Lighting and heating 18 000

Baking Decoration Stores Maintenance

department department department department
Floor space (m2) 4 100 2 300 600 200

Kilowatt hours 22 000 9 000 1 000 3 000

Machinery (net book value) ($) 33 000 10 000 4 000 9 000

Number of employees 14 29 4 5

Issues from stores 64% 24% 12%

Budgeted maintenance hours 2 500 1 800

Budgeted machine hours 86 400 37 600

Budgeted labour hours 26 300 17 51 000

REQUIRED

(b) Complete the table to show the apportionment of overheads and the reapportionment of the
service department overheads using suitable bases.

Total Baking Decoration Stores Maintenance

department department department department
$ $ $ $ $
Budgeted overheads
57 620 38 530 14 150 2 800 2 140
already allocated
Machinery depreciation 33 600

Power 45 500

Lighting and heating 18 000

Total overheads 154 720

Reapportionment of
first service department
overheads
Subtotal
© UCLES 2020 9706/21/M/J/20
Reapportionment
of second service
department overheads
 18
15 2020 JUN P21 Q4 C 18
(c) Calculate the overhead absorption rate, to two decimal places, for each production
(c) department
Calculate the using an appropriate
overhead absorption basis.rate, to two decimal places, for each production
department using an appropriate basis.
Baking department
Baking department
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
Decoration department
Decoration department
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
[4]
...................................................................................................................................................
[4]
(d) State
16 2020 JUN two P21possible
Q4 Dreasons why overheads may be under absorbed.
(d) State two possible reasons why overheads may be under absorbed.
1 ................................................................................................................................................
1 ................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
2 ................................................................................................................................................
2 ................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
[2]
...................................................................................................................................................
[2]
Additional information
Additional information
D Limited, a competitor of G Limited, makes a single product. The factory has the capacity to
make 850 units
D Limited, per month.
a competitor of Overtime
G Limited, working
makesisanot available
single product.at this
Thefactory.
factory has the capacity to
make 850 units per month. Overtime working is not available at this factory.
The following information is available for each unit of production and is based on operating at full
capacity.
The following information is available for each unit of production and is based on operating at full
capacity. $
Selling price 49
$
Direct
Sellinglabour
price 16
49
Direct materials
labour 169
Fixed costs
Direct materials 129
Fixed costs 12
In April 2020 the factory was planned to operate at 80% capacity.
In April 2020 the factory was planned to operate at 80% capacity.
The directors of D Limited have received an offer from Wendy to supply 280 units at $45 per unit.
Wendy stated of
The directors that the offerhave
D Limited would dependan
received onoffer
the entire order ofto280
from Wendy units280
supply being
units supplied.
at $45 per unit.
Wendy
© UCLES 2020 stated that the offer would depend on the
9706/21/M/J/20entire order of 280 units being supplied.
© UCLES 2020 9706/21/M/J/20
 10
17 2020 NOV P21 Q4 A
4 Y Limited is a furniture manufacturer. One of the company’s factories operates a system of
absorption costing.

REQUIRED

(a) State two limitations of absorption costing.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................
[2]

Additional information

The factory makes kitchen tables.

There are two production departments: cutting and assembly.

The following forecast information is available for the year:

Cutting department Assembly department

Overheads $68 400 $49 200
Total labour hours 13 720 15 820
Total machine hours 24 810 7 290

REQUIRED

(b) Calculate, to two decimal places, appropriate overhead absorption rates for each department.

Cutting department

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

Assembly department

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[2]

© UCLES 2020 9706/21/O/N/20

 ...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................
[2]
18 2020 NOV P21 Q4 B
Additional information

The factory makes kitchen tables.

There are two production departments: cutting and assembly.

The following forecast information is available for the year:

Cutting department Assembly department

Overheads $68 400 $49 200
Total labour hours 13 720 15 820
Total machine hours 24 810 7 290

REQUIRED

(b) Calculate, to two decimal places, appropriate overhead absorption rates for each department.

Cutting department

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

Assembly department

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[2]

© UCLES 2020 9706/21/O/N/20

 11
19 2020 NOV P21 Q4 C
Additional information

Each kitchen table requires the following.

Materials 4.2 kg at $4.90 per kg

Labour hours:
cutting department 3.8 hours
assembly department 2.2 hours
Machine hours:
cutting department 2.1 hours
assembly department 1.3 hours

All direct labour is paid at the rate of $10.50 per hour.

The selling price of a table is calculated to achieve a gross margin of 40%.

REQUIRED

(c) Calculate the selling price of a kitchen table.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [6]

© UCLES 2020 9706/21/O/N/20 [Turn over

 12
20 2020 NOV P21 Q4 D
Additional information

At the end of the year on 31 December 2019 it was discovered that overheads had been
over absorbed.

REQUIRED

(d) State two reasons why overheads may be over absorbed in a business.

1 ................................................................................................................................................

...................................................................................................................................................

2 ................................................................................................................................................

...................................................................................................................................................
[2]

Additional information

Worksheet 4
At another factory the company manufactures bookcases. The following information is available.

Selling price per unit $55

Materials per unit $10
Direct labour per unit $21
Fixed costs per month $54 000
Factory capacity per month 3800 units

Recently demand for the product has fallen due to increased competition and the target profit of
$12 500 per month has not been met.

The directors are considering the following options.

Option A

1 Reduce the selling price of each bookcase by $3 per unit.

2 Introduce a sales commission of 5% of selling price.

3 It is expected that demand will be 3800 units.

Option B

1 Change the design to improve quality resulting in an increase of 20% in the material cost per
unit.

2 Labour hours per unit will increase by 10%.

3 The revised selling price of each bookcase will be $59.

4 Start an advertising campaign at a cost of $24 000 per annum.

5 It is expected that demand will be 3040 units.

© UCLES 2020 9706/21/O/N/20

 Absorption Costing
14
14
1 2021 JUN P22 Q4 A
44 TTLimited
Limitedmanufactures
manufactures goods
goods at
at two
two factories:
factories: Factory
Factory A
A and
and Factory
Factory B.
B.
Factory
FactoryAA
Factory
FactoryAAhas
hastwo
twoproduction
production departments,
departments,Assembly
Assembly and
and Finishing;
Finishing; and
and two
two service
service departments,
departments,
Administration and Canteen.
Administration and Canteen.
Absorption
Absorptioncosting
costing isis used
used at
at this
this factory.
factory.
Budgeted
Budgetedoverheads
overheads for
for February
February 2021
2021 have
have already
already been
been apportioned.
apportioned.
The
Thebasis
basisfor
forreapportioning
reapportioning the
the service
service department
department overheads
overheads is
is as
as follows:
follows:

Production
Production departments
departments Service
Service departments
departments
Assembly
Assembly Finishing
Finishing Administration
Administration Canteen
Canteen
Canteen
Canteen 50%
50% 40%
40% 10%
10% --
Administration
Administration 75%
75% 25%
25% -- --

REQUIRED
REQUIRED

(a)
(a) Prepare
Prepare aa statement
statement showing
showing the
the reapportionment
reapportionment of
of service
service department
department overheads
overheads for
for
February 2021.
February 2021.

Production
Production departments
departments Service
Service departments
departments
Assembly
Assembly Finishing
Finishing Administration
Administration Canteen
Canteen
$$ $$ $$ $
$

Overheads
Overheads 83
83500
500 70
70100
100 28
28300
300 15
15 400
400

Reapportionment
Reapportionment of
of
canteen
canteen
Subtotal
Subtotal

Reapportionment
Reapportionment of
of
administration
administration
Total
Totaloverheads
overheads

[4]
 15
2 2021 JUN P22 Q4 B
Additional information

Assembly Finishing
Direct labour hours per month 1700 1400
Machine hours per month 2800 900
Direct labour rate per hour $8.40 $8.20

REQUIRED

(b) Calculate the overhead absorption rate for each production department to two decimal
places.

Assembly department

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

Finishing department

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................
[4]

© UCLES 2021 9706/22/M/J/21 [Turn over

 16
3 2021 JUN P22 Q4 C
Additional information

The company received an order from a customer. The following details are available:

Direct materials $1880

Direct labour:
Assembly department 11.5 hours
Finishing department 6.1 hours
Machine hours:
Assembly department 5.7 hours
Finishing department 2.4 hours

The company’s policy is to achieve a profit of 40% on selling price.

REQUIRED

(c) Prepare a statement to show the total selling price that T Limited will quote to the customer.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [7]

© UCLES 2021 9706/22/M/J/21

 17
4 2021 JUN P22 Q4 D 17
(d) State two possible causes of under absorption of overheads.
(d) State two possible causes of under absorption of overheads.
1 ................................................................................................................................................
1 ................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
2 ................................................................................................................................................
2 ................................................................................................................................................
...................................................................................................................................................
[2]
...................................................................................................................................................
[2]
(e) State
5 2021 what
JUN P22 Q4 E is meant by
(e) State what is meant by
(i) allocation of overheads
(i) allocation of overheads
...........................................................................................................................................
...........................................................................................................................................
..................................................................................................................................... [1]
..................................................................................................................................... [1]
(ii) apportionment of overheads
(ii) apportionment of overheads
...........................................................................................................................................
...........................................................................................................................................
..................................................................................................................................... [1]
..................................................................................................................................... [1]
12
6 2021 NOV P22 Q4 A
4 Hayden manufactures two products, Aye and Bee. The business operates two production
departments, Machining and Finishing, and two service departments, Stores and Maintenance.

REQUIRED

(a) Identify one possible basis of apportionment that a business could use in respect of:

(i) rent and rates

...........................................................................................................................................

(ii) machinery depreciation

...........................................................................................................................................

(iii) electricity for machinery.

...........................................................................................................................................
[3]

Additional information

The following information is available.

Machining Finishing
Number of orders from Stores 3 200 1 800
Maintenance call-outs 160 32
Budgeted
© UCLES 2021 direct labour hours 69706/22/M/J/21
200 19 800 [Turn over
© UCLES 2021 9706/22/M/J/21 [Turn over
Budgeted machine hours 38 600 9 400
 ...........................................................................................................................................

(iii) electricity for machinery.

...........................................................................................................................................
[3]
7 2021 NOV P22 Q4 B
Additional information

The following information is available.

Machining Finishing
Number of orders from Stores 3 200 1 800
Maintenance call-outs 160 32
Budgeted direct labour hours 6 200 19 800
Budgeted machine hours 38 600 9 400

REQUIRED

(b) Complete the following table to show the apportionment of budgeted overhead costs for the
year ended 30 September 2021.

Production Service departments

departments
Total Machining Finishing Stores Maintenance
$ $ $ $ $

Total apportioned overheads 449 800 188 850 172 850 53 325 34 775

Re-apportion Stores

Subtotal

Re-apportion Maintenance

Total overheads cost

[4]

© UCLES 2021 9706/22/O/N/21

 13
8 2021 NOV P22 Q4 C 13
(c) Calculate, to two decimal places, an overhead absorption rate for each production
department,tousing
(c) Calculate, twoa decimal
suitable basis.
places, an overhead absorption rate for each production
department, using a suitable basis.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [4]
............................................................................................................................................. [4]
Additional
9 2021 NOVinformation
P22 Q4 D
Additional information
The actual results for the year ended 30 September 2021 were as follows:
The actual results for the year ended 30 September 2021 were as follows:
Machining Finishing
Machining Finishing
Factory overheads $265 800 $187 420
Factory overheads $265 800 $187 420
Direct labour hours 6 350 19 260
Direct labour hours 6 350 19 260
Machine hours 36 940 9 810
Machine hours 36 940 9 810
REQUIRED
REQUIRED
(d) Calculate the over-absorption or under-absorption of overheads for each department for the
year ended
(d) Calculate the30over-absorption
September 2021. or under-absorption of overheads for each department for the
year ended 30 September 2021.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [4]
............................................................................................................................................. [4]

© UCLES 2021 9706/22/O/N/21 [Turn over

© UCLES 2021 9706/22/O/N/21 [Turn over
 14
10 2021 NOV P22 Q4 E
Additional information

The following information is available for one unit of product Aye.

Direct material $36.20

Direct labour hours
Machining ($8 per hour) 45 minutes
Finishing ($10 per hour) 60 minutes
Machine hours
Machining 20 minutes
Finishing 30 minutes

During September 2021, a customer requested a quotation for supplying 200 units of Aye. Hayden
required a 30% gross profit margin on the order.

REQUIRED

(e) Prepare a statement to show the total selling price that Hayden quoted to the customer.

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

...................................................................................................................................................

............................................................................................................................................. [6]

© UCLES 2021 9706/22/O/N/21

 15
11 2021 NOV P22 Q4 F 15
Additional information
Additional information
Hayden is considering using one factory-wide overhead absorption rate rather than separate
departmental overhead absorption
Hayden is considering using one rates. factory-wide overhead absorption rate rather than separate
departmental overhead absorption rates.
REQUIRED
REQUIRED
(f) Advise Hayden whether or not he should use one factory-wide absorption rate. Justify your
(f) answer.
Advise Hayden whether or not he should use one factory-wide absorption rate. Justify your
answer.
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
............................................................................................................................................. [5]
............................................................................................................................................. [5]
(g) Explain
12 2021 NOV two P22effects
Q4 Gthat the over-absorption of overheads may have on a business.
(g) Explain two effects that the over-absorption of overheads may have on a business.
1 ................................................................................................................................................
1 ................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
2 ................................................................................................................................................
2 ................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
...................................................................................................................................................
[4]
...................................................................................................................................................
[4]
[Total: 30]
[Total: 30]

© UCLES 2021 9706/22/O/N/21

© UCLES 2021 9706/22/O/N/21
Worksheet 5