A Level Accounting: Costs, cost behaviour and traditional costing (Cambridge 9706) – 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.

These questions follow sections 2.1 Costs and cost behaviour and 2.2 Traditional costing methods of the Cambridge International AS & A Level Accounting 9706 syllabus for 2026, 2027 and 2028 (AS Level content). All businesses and figures are invented and all amounts are in dollars. Start with the study guide or the revision notes. See the course hub, the checklist and the free diagnostics.

Questions

1. Oakhallow Foods bakes loaves.

(a) Classify each cost as direct or indirect, and as fixed, variable, semi-variable or stepped: (i) flour in the loaves; (ii) the production manager’s salary; (iii) one quality inspector per 2,000 loaves made weekly; (iv) oven gas. [4] (b) The gas bill was 1,900 for 20,000 loaves and 2,650 for 35,000. Calculate the variable cost per loaf and the fixed part. [2]

2. Lowood Stores holds 80 units at 5.00. It receives 120 at 5.50, issues 100, receives 100 at 6.00, then issues 120. Using perpetual records, calculate closing inventory under:

(a) FIFO [3] (b) AVCO [3]

3. Hexbeck Paints (periodic method) holds 200 units at 4.00, buys 300 at 4.50 and 500 at 5.00, and uses 700 units.

(a) Calculate closing inventory under FIFO and under AVCO. [4] (b) State which method gives the higher profit and by how much. [1]

4. Kingsmoor Electronics assembles tablets.

(a) State two features of a JIT inventory system. [2] (b) Its only supplier is overseas and often delivers late. Assess whether JIT suits Kingsmoor, giving two reasons. [3]

5. Ferndown Metalworks has production departments Press and Finishing and a service department, Maintenance. Rent is 24,000 (floor area) and machine depreciation is 18,000 (machine cost).

	Press	Finishing	Maintenance
Floor area (square metres)	400	300	100
Machine cost	150,000	30,000	20,000
Indirect wages (allocated)	9,500	6,500	5,200

Maintenance is reapportioned 60:40 to Press and Finishing. Budgeted activity is 4,100 machine hours (Press) and 3,700 direct labour hours (Finishing).

(a) Apportion rent and depreciation and calculate each department’s subtotal. [4] (b) Reapportion Maintenance. [2] (c) Calculate an overhead absorption rate for each production department. [2]

6. Haverbeck Plastics budgeted overhead of 96,000 on 12,000 machine hours. Actual hours were 12,900 and actual overhead 100,500.

(a) Calculate the absorption rate, the overhead absorbed and the under or over absorption. [3] (b) State the effect on profit. [1] (c) Give one cause. [1]

7. Ullswick Design Studio absorbs overhead at 9.00 per direct labour hour and prices work to earn a margin of 20% of selling price.

(a) Job 17 used 36 consultant hours at 40, 20 designer hours at 30 and printing costing 240. Prepare a costing statement and calculate the selling price. [5] (b) A run of 800 sketchbooks cost 960 materials, 480 labour and 160 overhead. Calculate the cost per sketchbook and name the costing method. [2]

8. Cottesley Garments sells at 30 with variable production cost 12. Fixed production overhead of 54,000 a quarter is absorbed on normal output of 9,000 units; fixed non-production overhead is 30,000. In quarter 1 it makes 9,000 units, sells 8,000 and has no opening inventory.

(a) Prepare the quarter 1 profit statement using absorption costing. [3] (b) Prepare it using marginal costing. [3] (c) Reconcile the two profits. [2] (d) In quarter 2 it makes 9,000 and sells 9,500. Without recalculating, state which method gives the higher profit and why. [2]

9. Penbury Gifts sells at 25 with variable cost 15. Fixed costs are 36,000 a year and budgeted sales are 4,500 units.

(a) Calculate the contribution per unit and the break-even point in units. [2] (b) Calculate the contribution to sales ratio and break-even revenue. [2] (c) Calculate the margin of safety in units and as a percentage of budget. [2] (d) Calculate the units needed for a profit of 18,000. [1] (e) On a break-even chart, state what the gap between the revenue and total cost lines shows to the right of break-even. [1]

10. Wadsley Kitchens makes 6,000 handles a year: materials 5.00, labour 3.50 and variable overhead 1.50 each. Fixed overhead of 24,000 is charged to handles, but only 9,000 of it would be avoided if production stopped.

(a) A supplier quotes 11.00 a handle. Advise whether to buy. [4] (b) A customer offers 1,500 cabinets at 21.00. The normal price is 28.00, variable cost 17.00, and capacity is spare. Calculate the extra profit. [2] (c) State two non-financial factors to consider before accepting the offer. [2]

11. Yeldham Engineering makes two products with 7,000 machine hours available and fixed costs of 38,000.

	Alpha	Beta
Selling price	60	45
Variable cost	36	29
Machine hours per unit	4	2
Maximum demand (units)	1,500	2,000

(a) Show that machine hours are a limiting factor. [1] (b) Calculate contribution per machine hour for each product. [2] (c) Calculate the production plan that maximises profit. [2] (d) Calculate total contribution and profit. [2] (e) Recommend whether to follow the plan, giving two non-financial factors. [3]

Answers

1. (a) (i) Direct material, variable [1]. (ii) Indirect labour, fixed [1]. (iii) Indirect labour, stepped [1]. (iv) Indirect expense, semi-variable [1]. [4] (b) Variable cost per loaf 750 / 15,000 = 0.05 [1]. Fixed part 1,900 − 1,000 = 900 [1]. [2] Examiner insight: A classification tends to earn credit when both the traceability and the behaviour label are given.

2. (a) Issue 1: 80 × 5.00 + 20 × 5.50 = 510 [1]. Issue 2: 100 × 5.50 + 20 × 6.00 = 670 [1]. Closing 80 × 6.00 = 480 [1]. [3] (b) Average after first receipt (400 + 660) / 200 = 5.30 [1]. After second receipt (530 + 600) / 200 = 5.65 [1]. Closing 80 × 5.65 = 452 [1]. [3] Examiner insight: A running record showing units, value and average after each movement lets a slip be traced.

3. (a) FIFO: closing units are the newest, 300 × 5.00 = 1,500 [1][1]. AVCO: total cost 800 + 1,350 + 2,500 = 4,650 for 1,000 units, average 4.65 [1]; closing 300 × 4.65 = 1,395 [1]. [4] (b) FIFO by 105 (1,500 − 1,395), because it charges less to materials used when prices rise [1]. [1] Examiner insight: Give the direction of the profit difference as well as its size.

4. (a) Materials arrive close to when needed, in small frequent deliveries [1]. Little inventory is held, with reliable suppliers [1]. [2] (b) A late delivery would stop production [1]. Late orders could lose customers [1]. JIT suits only if reliability improves or some safety stock is kept [1]. [3] Examiner insight: An assess question tends to reward a reasoned judgement, not a list of general points.

5. (a) Rent 24,000 / 800 = 30 per square metre: 12,000, 9,000, 3,000 [1]. Depreciation 9% of cost: 13,500, 2,700, 1,800 [1]. Subtotals: Press 35,000 [1]; Finishing 18,200 and Maintenance 10,000 [1]. [4] (b) Press 6,000 and Finishing 4,000 [1]. Totals: Press 41,000 and Finishing 22,200 [1]. [2] (c) Press 41,000 / 4,100 = 10.00 per machine hour [1]. Finishing 22,200 / 3,700 = 6.00 per labour hour [1]. [2] Examiner insight: Show each apportionment basis and check that the totals still equal 63,200.

6. (a) Rate 96,000 / 12,000 = 8.00 [1]. Absorbed 12,900 × 8.00 = 103,200 [1]. Over-absorbed by 103,200 − 100,500 = 2,700 [1]. [3] (b) Profit is increased by 2,700 [1]. [1] (c) Activity was 900 hours above budget (7,200 more absorbed), outweighing 4,500 extra spending [1]. [1] Examiner insight: The label over- or under-absorbed and the effect on profit are separate points from the figure.

7. (a) Labour 36 × 40 + 20 × 30 = 2,040 [1][1]. Overhead 56 hours × 9.00 = 504 [1]. Total cost 2,040 + 240 + 504 = 2,784 [1]. Price 2,784 / 0.80 = 3,480 [1]. [5] (b) 1,600 / 800 = 2.00 [1]. Batch costing [1]. [2] Examiner insight: A margin is a percentage of selling price, so dividing cost by 0.80 differs from adding 20% to cost; show the method.

8. (a) Sales 240,000 [1]. Cost of sales 8,000 × 18 = 144,000 [1]. Profit after 30,000 overhead 66,000 [1]. [3] (b) Contribution 8,000 × 18 = 144,000 [1]. Fixed costs 84,000 [1]. Profit 60,000 [1]. [3] (c) Marginal profit 60,000 + closing inventory 1,000 × 6 = 66,000 [1][1]. [2] (d) Marginal costing gives the higher profit [1]: inventory falls by 500 units, so absorption costing charges 500 × 6 = 3,000 of earlier fixed overhead [1]. [2] Examiner insight: Linking the difference to the change in inventory units × fixed overhead per unit shows understanding.

9. (a) Contribution 25 − 15 = 10 [1]. Break-even 36,000 / 10 = 3,600 units [1]. [2] (b) C/S ratio 10 / 25 = 40% [1]. Break-even revenue 36,000 / 0.40 = 90,000 [1]. [2] (c) 4,500 − 3,600 = 900 units [1]; 900 / 4,500 = 20% [1]. [2] (d) (36,000 + 18,000) / 10 = 5,400 units [1]. [1] (e) The profit at that level of output [1]. [1] Examiner insight: Label each answer as units, revenue or percentage.

10. (a) Variable cost 10.00 a handle [1]. Making costs 60,000 + avoidable fixed 9,000 = 69,000 [1]. Buying costs 66,000 [1]. Buy, saving 3,000, if non-financial factors allow [1]. [4] (b) Contribution 21.00 − 17.00 = 4.00 [1]. Extra profit 1,500 × 4.00 = 6,000 [1]. [2] (c) Any two, for example: regular customers may ask for lower prices [1]; capacity may be needed for regular orders, or reputation for delivery could suffer [1]. [2] Examiner insight: Unavoidable fixed overhead is not relevant, so including the full 24,000 usually goes wrong here.

11. (a) Hours needed 6,000 + 4,000 = 10,000, above 7,000 [1]. [1] (b) Alpha (60 − 36) / 4 = 6 [1]. Beta (45 − 29) / 2 = 8 [1]. [2] (c) Beta first: 2,000 units use 4,000 hours [1]. Alpha 3,000 / 4 = 750 [1]. [2] (d) Contribution 32,000 + 18,000 = 50,000 [1]. Profit 12,000 [1]. [2] (e) Follow the plan, as it maximises profit [1]. Half of Alpha demand goes unmet, risking those customers [1]. Subcontracting the shortfall might help, but a third party’s quality is a concern [1]. [3] Examiner insight: Ranking by contribution per unit instead of per machine hour reverses the order here, so show the per-hour working.

Where marks are usually lost

• Giving one label when a cost needs a traceability and a behaviour label.
• Not recalculating the average after each receipt in perpetual AVCO.
• Using budgeted hours instead of actual hours to find overhead absorbed.
• Stating under or over absorption without the effect on profit.
• Dividing fixed costs by selling price, not contribution per unit.
• Adding unavoidable fixed overhead to a make-or-buy comparison.
• Recommending without any non-financial factor.

Frequently asked questions

Are these Cambridge 9706 costing questions from past papers? No. They are eleven original questions with worked answers on sections 2.1 and 2.2 of Cambridge 9706, written for revision. Use them alongside the official past papers.

How many labels does a cost classification need? A cost classification tends to earn credit when it gives both a traceability label, direct or indirect, and a behaviour label, such as fixed, variable, semi-variable or stepped.

What is the most common mistake in perpetual AVCO questions? Not recalculating the average cost after each receipt. A running record showing units, value and average after each movement lets a slip be traced.

How should I answer a costing decision question? Show the workings, exclude unavoidable fixed overhead, and include at least one non-financial factor in the recommendation. Recommending without any non-financial factor is a common way to lose marks.

Next steps

• Study guide and revision notes
• Course hub and checklist
• Take all free 10-minute diagnostics
• Book a free trial class at /trial/

Official syllabus

Cambridge International, AS & A Level Accounting 9706 syllabus for 2026, 2027 and 2028, sections 2.1 and 2.2.