AQA A-Level Accounting: Standard costing and variance analysis (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 3.11, Standard costing and variance analysis, 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. A calculator is needed. 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 most likely to cause a favourable labour rate variance and an adverse labour efficiency variance? [1]

A. Using trainees paid less than the standard rate B. A pay award above the standard rate, together with new faster machinery C. Buying a higher grade of material that is easier to work D. Paying overtime premiums to finish a rush order

2. Define the following terms. [2]

(a) Standard cost (b) Variance analysis

3. Pellow Candles Ltd uses 0.4 kg of wax per candle at a standard price of £6.50 per kg. In May it made 3 000 candles and used 1 230 kg of wax, costing £7 749. Calculate the materials price variance and the materials usage variance, stating whether each is favourable or adverse. [4]

4. Trenmoor Print Ltd sets a standard of 0.25 hours per pack of leaflets at £16 per hour. In June it produced 7 200 packs. Staff worked and were paid for 1 880 hours, costing £29 140.

(a) Calculate the labour rate variance and the labour efficiency variance. [4] (b) Suggest one reason that could explain both variances. [1]

5. Corve Cycles Ltd budgeted to sell 400 bikes at £620 each. The standard variable cost is £380 per bike. It actually sold 430 bikes at £600 each.

(a) Calculate the sales price variance. [2] (b) Calculate the sales volume variance. [2] (c) Assess whether the price reduction was worthwhile. [2]

6. A product has a standard of 3.5 labour hours at £15 per hour. In July the labour efficiency variance was £1 050 adverse and actual hours worked were 2 870. Calculate the number of units produced. [3]

7. Holm Textiles Ltd reports these variances for March: materials price £2 300 F, materials usage £3 100 A, labour efficiency £1 800 A. The buyer claims a bonus for the favourable price variance.

Explain how a single purchasing decision could cause all three variances, and state whether the buyer should receive the bonus. [4]

8. Ashby Tiles Ltd has the following standard cost per box of tiles.

	£
Clay: 5 kg at £1.20 per kg	6.00
Labour: 0.2 hours at £15 per hour	3.00
Standard variable cost	9.00

Budgeted fixed overheads are £18 000 a month. In August it produced 4 500 boxes. It used 23 200 kg of clay costing £26 680, and paid for 870 labour hours costing £13 485. Fixed overheads were £17 400.

(a) Calculate the materials price, materials usage, labour rate and labour efficiency variances. [4] (b) Prepare a statement reconciling the standard cost of actual output with the actual cost. [3]

9. Fenwick Planters Ltd makes one product. Standard data per planter:

	£
Selling price	85.00
Materials: 6 kg at £4.00 per kg	24.00
Labour: 1.5 hours at £14.00 per hour	21.00

Budget for October: 1 200 planters made and sold; fixed overheads £30 000.

Actual for October: 1 150 planters made and sold at £88 each. Materials used 7 100 kg, costing £27 690. Labour 1 690 hours, costing £24 505. Fixed overheads £29 300.

(a) Calculate the budgeted profit and the actual profit. [2] (b) Calculate the sales price, sales volume, materials price, materials usage, labour rate and labour efficiency variances, and the fixed overhead expenditure variance. [7] (c) Prepare a statement reconciling budgeted profit with actual profit. [2]

10. Kestle Kitchens Ltd makes two things: a range of 12 standard cabinet designs, produced in large batches, and bespoke fitted kitchens designed for each customer. The finance director proposes introducing standard costing across the whole business.

Evaluate the proposal. [8]

11. Explain why a business using management by exception might decide not to investigate a variance. [2]

Answers

1. A – trainees are paid less (rate F) but work more slowly (efficiency A) [1] [1] Examiner insight: B and D give an adverse rate and C gives a favourable efficiency variance; one mark for the single correct letter only.

2. (a) A predetermined cost of one unit of output, set in advance from expected quantities and prices [1]. (b) Comparing actual results with standards, calculating the differences and splitting them into causes so that managers can act [1]. [2] Examiner insight: “Expected cost” alone is too vague; the definition must show the cost is set in advance per unit.

3. Actual price = 7 749 ÷ 1 230 = £6.30 per kg [1]. Price variance = (6.50 − 6.30) × 1 230 = £246 F [1]. Standard quantity = 3 000 × 0.4 = 1 200 kg [1]. Usage variance = (1 200 − 1 230) × 6.50 = £195 A [1]. [4] Examiner insight: A correct figure with no F or A label usually loses the accuracy mark; check that the two variances sum to the total of £51 F.

4. (a) Actual rate = 29 140 ÷ 1 880 = £15.50 [1]; rate variance = (16 − 15.50) × 1 880 = £940 F [1]. Standard hours = 7 200 × 0.25 = 1 800 [1]; efficiency variance = (1 800 − 1 880) × 16 = £1 280 A [1]. (b) Less experienced staff on a lower rate took longer to produce the packs [1]. [5] Examiner insight: The reason must explain both directions at once; “staff were lazy” does not explain the favourable rate.

5. (a) (600 − 620) × 430 [1] = £8 600 A [1]. (b) Standard contribution = 620 − 380 = £240 [1]; (430 − 400) × 240 = £7 200 F [1]. (c) The extra volume added £7 200 but the lower price cost £8 600, a net £1 400 A, so on these figures the cut was not worthwhile [1]. It may still be justified if it won customers who will buy again or protected market share from a competitor [1]. [6] Examiner insight: Valuing volume at the £620 selling price gives £18 600 and loses both marks in (b); allow follow-through into (c) from your own figures.

6. Excess hours = 1 050 ÷ 15 = 70 hours [1]. Standard hours for actual output = 2 870 − 70 = 2 800 [1]. Units = 2 800 ÷ 3.5 = 800 units [1]. [3] Examiner insight: Adverse means actual hours exceeded standard, so subtract the 70 hours; adding them gives 840 units.

7. The buyer may have bought cheaper, lower-grade material, giving the favourable price variance [1]. Poorer material produces more waste and rejected output, so more was used than standard: usage A [1]. It is also harder and slower to work, so labour took longer: efficiency A [1]. The net effect is £2 300 − £3 100 − £1 800 = £2 600 A, so the decision reduced profit and the buyer should not receive the bonus [1]. [4] Examiner insight: The judgement mark needs the net figure or a clear comparison; simply saying “no” without linking to the adverse variances earns nothing.

8. (a) Actual price £1.15; price variance = (1.20 − 1.15) × 23 200 = £1 160 F [1]. Usage: standard quantity 22 500 kg; (22 500 − 23 200) × 1.20 = £840 A [1]. Actual rate £15.50; rate variance = (15 − 15.50) × 870 = £435 A [1]. Efficiency: standard hours 900; (900 − 870) × 15 = £450 F [1]. (b)

	£	£
Standard cost of actual output: 4 500 × £9 + £18 000		58 500
Materials price	(1 160) F
Materials usage	840 A
Labour rate	435 A
Labour efficiency	(450) F
Fixed overhead expenditure	(600) F
Net favourable variances		(935)
Actual cost (26 680 + 13 485 + 17 400)		57 565

Starting figure of £58 500 [1]; variances with correct treatment, including fixed overheads £600 F [1]; ends on actual cost £57 565 [1]. [7] Examiner insight: The statement must start from standard cost of actual output, not an original budget, or it will not balance.

9. (a) Standard contribution = 85 − 24 − 21 = £40; budgeted profit = 1 200 × 40 − 30 000 = £18 000 [1]. Actual profit: revenue 1 150 × 88 = £101 200; 101 200 − 27 690 − 24 505 − 29 300 = £19 705 [1]. (b) Sales price = (88 − 85) × 1 150 = £3 450 F [1]. Sales volume = (1 150 − 1 200) × 40 = £2 000 A [1]. Materials price: actual £3.90; (4.00 − 3.90) × 7 100 = £710 F [1]. Materials usage: standard 6 900 kg; (6 900 − 7 100) × 4 = £800 A [1]. Labour rate: actual £14.50; (14 − 14.50) × 1 690 = £845 A [1]. Labour efficiency: standard 1 725 hours; (1 725 − 1 690) × 14 = £490 F [1]. Fixed overhead expenditure = 30 000 − 29 300 = £700 F [1]. (c)

	£ F	£ A	£
Budgeted profit			18 000
Sales price	3 450
Sales volume		2 000
Materials price	710
Materials usage		800
Labour rate		845
Labour efficiency	490
Fixed overhead expenditure	700
Totals	5 350	3 645	1 705 F
Actual profit			19 705

Favourable added and adverse deducted from budgeted profit [1]; ends on £19 705 [1]. [11] Examiner insight: Own-figure follow-through is normally allowed in the statement if every variance is labelled F or A.

10. For the standard range, standard costing suits repetitive batch production of identical units, so reliable standards can be set [1]. Variances would show the buyer and supervisors where costs are out of line, allowing management by exception [1]. Standards would also give unit costs for pricing and for valuing inventory [1]. For bespoke kitchens, every job is different, so there is no meaningful standard quantity or time per unit [1]. Setting a standard for each job would be costly and would quickly date [1]. Variances on one-off work would be hard to interpret and could demotivate fitters if targets were unrealistic [1]. Costing each kitchen against its own quotation would be more useful there [1]. Judgement: introduce standard costing for the standard cabinet range only, reviewing standards regularly, and keep job-by-job costing for bespoke kitchens [1]. [8] Examiner insight: Evaluation needs points on both sides applied to this business and a final decision; a generic list caps the mark.

11. Investigation takes time and money, so a small or insignificant variance may cost more to investigate than it could save [1]. A variance caused by something outside managers’ control, such as a national price rise, needs the standard updating rather than an investigation [1]. [2] Examiner insight: Two distinct, developed reasons are needed; repeating “it is too small” in different words earns only one mark.

Where marks are usually lost

• Calculating standard quantity or hours from budgeted output instead of actual output.
• Using the actual price in the usage variance or the actual rate in the efficiency variance.
• Valuing the sales volume variance at selling price, ignoring variable cost.
• Omitting F or A labels on calculated variances.
• Reversing the treatment of variances in a cost reconciliation compared with a profit reconciliation.
• Giving causes that do not match the direction of the variance.
• No judgement in “evaluate” or “assess” answers.

Next steps

• Revision notes
• Study guide
• Marginal costing practice questions
• 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 3.11 Standard costing and variance analysis.