AQA A-Level Accounting: Marginal costing (7127) – Practice Questions

These are original questions written for Marlbridge, for revision and practice on this content. They are not reproduced past-paper questions, and they do not replicate the exam’s exact structure, question count or mark tariffs – examination boards hold copyright in their own papers. Use these alongside the official past papers from your board or school.

This set covers section 3.10, Marginal costing, of the AQA A-level Accounting (7127) specification, version 1.1 (October 2026), for A-level exams from June 2019 onwards. The course is untiered; this section is assessed on Paper 2. All businesses and figures are invented.

See the study guide and revision notes. Course hub: AQA A-level Accounting; checklist: printable checklist; quick check: diagnostics.

Questions

1. Which one of the following is a semi-variable cost? [1]

A. Rent of £1 500 a month B. Sales commission of 5% of sales C. A salesperson paid £1 200 a month plus 2% commission on sales D. Machine hire of £800 per machine, with one machine needed for every 500 units

2. A product sells for £25 and has a variable cost of £15 per unit. Fixed costs are £42 000. What is the break-even point? [1]

A. 1 680 units B. 2 800 units C. 4 200 units D. 105 000 units

3. Tarnside Ceramics makes mugs. Classify each cost as direct or indirect, and state its behaviour (variable, fixed, semi-variable or stepped).

(a) Clay used in the mugs [1] (b) Kiln electricity: a standing charge plus a rate per firing [1] (c) Business rates on the workshop [1] (d) Packers’ wages, with one packer employed for every 3 000 mugs a month [1]

4. Explain the difference between marginal cost and full cost, and why marginal cost is used for short-term decisions. [3]

5. Harbour Paddleboards sells boards at £340 each. Variable cost is £204 per board and fixed costs are £95 200 a year. Budgeted sales are 1 000 boards.

(a) Calculate the contribution per board. [1] (b) Calculate the break-even point in boards. [2] (c) Calculate the break-even revenue. [1] (d) Calculate the margin of safety in boards and as a percentage of budgeted sales. [2] (e) Calculate the number of boards needed to make a profit of £27 200. [2]

6. A break-even chart for a single product shows: a fixed cost line at £30 000; revenue and total cost lines crossing at 2 500 units and £75 000; a maximum output of 4 000 units.

(a) Calculate the selling price per unit. [1] (b) Calculate the variable cost per unit. [2] (c) Calculate the profit at maximum output. [2]

7. Explain three limitations of break-even analysis for a business that sells several different products. [6]

8. Tamar Valves makes a component it uses in its products, needing 20 000 a year. Cost per component: direct materials £6.40, direct labour £5.20, variable overheads £1.80, fixed overheads absorbed £3.60. A supplier offers the component at £15.50.

(a) The production manager says buying will save £1.50 per component. Calculate the true effect on annual profit of buying in. [3] (b) If the component is bought, the space freed could be rented out for £30 000 a year and £8 000 of supervision costs would be avoided. Calculate the revised effect on annual profit and state the decision on financial grounds. [3] (c) State two non-financial factors Tamar Valves should consider. [2]

9. Corvid Print can print 50 000 books a year and currently prints 40 000. Normal selling price is £12 per book; variable cost is £7.50 per book; fixed costs are £120 000. An overseas customer offers a one-off order for 8 000 books at £8.40 each. The order needs extra packaging at £0.25 per book and a one-off set-up cost of £2 000.

(a) Calculate the effect on profit of accepting the order. [4] (b) Advise Corvid Print whether to accept, considering financial and non-financial factors. [3]

10. Lune Valley Foods makes three pies. Oven time is limited to 5 300 hours next year. Fixed costs are £64 000.

Pie	Selling price £	Variable cost £	Oven hours per pie	Maximum demand
P	18.00	10.80	0.40	5 000
Q	24.00	13.50	0.75	4 000
R	15.00	9.00	0.30	6 000

(a) Calculate the contribution per oven hour for each pie and rank the pies. [4] (b) Calculate the production plan that maximises profit. [3] (c) Calculate the maximum profit. [2] (d) State one non-financial factor to consider before cutting output of pie Q. [1]

11. Wendle Sports has three product lines. Its statement for the year:

	Bikes £	Boards £	Skates £	Total £
Sales	240 000	150 000	90 000	480 000
Variable costs	144 000	84 000	63 000	291 000
Fixed costs (apportioned by floor area)	66 000	42 000	36 000	144 000
Profit/(loss)	30 000	24 000	(9 000)	45 000

If Skates closed, £11 000 of its fixed costs would be avoided; the rest would continue.

(a) Calculate the contribution of each product line. [3] (b) Calculate the total profit if Skates closed. [3] (c) The manager suggests using the Skates space to expand Boards, which would raise Boards’ contribution by 20%. Evaluate whether Wendle Sports should close Skates. [6]

12. Juniper Candles expects to sell 6 000 candles next year. Variable cost is £4.60 per candle and fixed costs are £21 000. The owner wants a profit of £15 000.

(a) Calculate the selling price needed. [3] (b) Explain why a lower price might be accepted for a one-off order but not for all sales. [2]

Answers

1. C – a fixed salary plus a variable commission [1] [1] Examiner insight: D is a stepped cost, the usual wrong answer here.

2. Contribution £10; 42 000 ÷ 10 = C, 4 200 units [1] [1] Examiner insight: D is break-even revenue in £, not units; read the unit in each option.

3. (a) Direct, variable [1] (b) Indirect, semi-variable [1] (c) Indirect, fixed [1] (d) Indirect (or direct if packing is treated as direct labour), stepped [1] [4] Examiner insight: Each mark needs both classifications; one correct label alone does not earn it.

4. Marginal cost is the variable cost of one extra unit [1]; full cost adds absorbed fixed overheads [1]. Short-term decisions do not change fixed costs, so marginal cost shows the true change in profit [1]. [3] Examiner insight: The third mark needs the reason (fixed costs unchanged), not just a definition.

5. (a) 340 − 204 = £136 [1] (b) 95 200 ÷ 136 [1] = 700 boards [1] (c) 700 × 340 = £238 000 [1] (d) 1 000 − 700 = 300 boards [1]; 300 ÷ 1 000 = 30% [1] (e) (95 200 + 27 200) ÷ 136 [1] = 900 boards [1] [8] Examiner insight: Parts (b) to (e) all build on (a), so show working; a slip there spreads.

6. (a) 75 000 ÷ 2 500 = £30 [1] (b) Variable costs at break-even = 75 000 − 30 000 = £45 000 [1]; 45 000 ÷ 2 500 = £18 [1] (c) Contribution = 30 − 18 = £12; (4 000 × 12) − 30 000 [1] = £18 000 [1] [5] Examiner insight: At break-even, revenue equals total cost, not variable cost; using £75 000 as the variable cost loses (b).

7. Any three, each with a point and a multi-product explanation:

• Break-even depends on the sales mix [1]; a shift to low-contribution products raises break-even revenue [1].
• Shared fixed costs must be apportioned [1], so one product’s break-even rests on an arbitrary split [1].
• It assumes constant prices and variable costs [1], but discounts to sell more of one line, or bulk buying, change contribution per unit [1]. (Also creditworthy: all output assumed sold; stepped costs.) [6] Examiner insight: A limitation stated without linking it to several products earns only the first mark of each pair.

8. (a) Marginal cost of making = 6.40 + 5.20 + 1.80 = £13.40 [1]. Buying costs 15.50 − 13.40 = £2.10 more per component [1]; 20 000 × 2.10 = profit falls by £42 000 [1]. (b) Benefits = 30 000 + 8 000 = £38 000 [1]; net effect 38 000 − 42 000 [1] = profit falls by £4 000, so continue to make [1]. (c) Any two [1] [1]: supplier quality; reliability of delivery; dependence on one supplier; loss of in-house skills. [8] Examiner insight: Comparing £15.50 with the £17.00 full cost is the method error this question tests; no credit for that comparison.

9. (a) Marginal cost = 7.50 + 0.25 = £7.75 [1]; contribution = 8.40 − 7.75 = £0.65 per book [1]; 8 000 × 0.65 = £5 200 [1]; less set-up 2 000 = profit rises by £3 200 [1]. (b) Accept: spare capacity (10 000 books) covers the order and profit rises by £3 200 [1]. Risk: regular customers may demand the lower price [1]. Benefit: possible repeat overseas orders [1]. [7] Examiner insight: “Advise” needs a clear decision as well as factors; points with no decision lose the last mark.

10. (a) Contribution per pie: P £7.20, Q £10.50, R £6.00 [1]. Per oven hour: P 7.20 ÷ 0.40 = £18, Q 10.50 ÷ 0.75 = £14 [1]; R 6.00 ÷ 0.30 = £20 [1]. Rank R, P, Q [1]. (b) Demand needs 2 000 + 3 000 + 1 800 = 6 800 hours, more than 5 300, so oven time is limiting [1]. Make R 6 000 (1 800 hours) and P 5 000 (2 000 hours) [1]; the remaining 1 500 hours give 1 500 ÷ 0.75 = 2 000 of Q [1]. (c) Contribution = 36 000 + 36 000 + 21 000 = £93 000 [1]; profit = 93 000 − 64 000 = £29 000 [1]. (d) Customers who cannot get pie Q may stop buying the other pies too [1]. [10] Examiner insight: Q has the highest contribution per pie; ranking on that instead of per oven hour loses the ranking and plan marks.

11. (a) Bikes 240 000 − 144 000 = £96 000 [1]; Boards £66 000 [1]; Skates £27 000 [1]. (b) Contribution lost £27 000 [1]; fixed costs saved £11 000 [1]; profit = 45 000 − 27 000 + 11 000 = £29 000, a fall of £16 000 [1]. (c) Extra Boards contribution = 66 000 × 20% = £13 200 [1]; profit = 29 000 + 13 200 = £42 200, still £2 800 below the current £45 000 [1]. Skates’ loss comes from apportioned costs; it earns positive contribution [1]. Against closure: redundancies and morale [1]; customers who buy skates may also buy bikes or boards [1]. Judgement: keep Skates unless Boards’ contribution could rise by over 24.2% (16 000 ÷ 66 000) [1]. [12] Examiner insight: The judgement mark needs a decision supported by the figures, not “it depends” alone.

12. (a) Contribution needed = 21 000 + 15 000 = £36 000 [1]; per candle 36 000 ÷ 6 000 = £6 [1]; price = 4.60 + 6 = £10.60 [1]. (b) With spare capacity, a one-off order adds profit at any price above the £4.60 marginal cost, as fixed costs are already covered [1]. All sales must cover fixed costs and the target profit [1]. [5] Examiner insight: Answers must name marginal cost as the floor; “it is still profitable” with no reason does not earn the mark.

Where marks are usually lost

• Using full cost instead of marginal cost in make-or-buy and special-order decisions.
• Ignoring avoidable fixed costs or income from freed space.
• Ranking by contribution per unit when a limiting factor applies.
• Treating all apportioned fixed costs as saved on closure.
• Reading break-even where revenue meets the fixed cost line.
• Giving factors with no final recommendation on “advise” or “evaluate”.
• Rounding target-profit units down.

Next steps

• Revision notes
• Study guide
• AQA A-level Accounting hub
• Printable checklist
• All free 10-minute diagnostics
• Book a free trial class

Official syllabus

AQA A-level Accounting (7127) specification, version 1.1, October 2026, for A-level exams June 2019 onwards (AQA). Section 3.10 Marginal costing.