A Level Accounting: Standard 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 section 4.2 Standard costing (A Level content) of the Cambridge International AS & A Level Accounting 9706 syllabus for 2026, 2027 and 2028. All businesses and figures are invented and all amounts are in dollars. Quantity bought equals quantity used throughout. Start with the study guide or the revision notes. See the course hub, the printable checklist and the free diagnostics.

Questions

1. Explain what is meant by a system of standard costing, and give two examples of predetermined values it uses. [3]

2. Osgood Planters makes clay pots. The standard is 1.5 kg of clay per pot at 2.80 per kg. In June it made 6,000 pots and bought and used 9,300 kg of clay costing 24,180.

(a) Calculate the direct material price variance. [2] (b) Calculate the direct material usage variance. [2] (c) State the total direct material cost variance and whether it is favourable or adverse. [1]

3. Gransmoor Kayaks has a standard of 18 labour hours per kayak at 12.50 per hour. It made 40 kayaks, worked 760 hours and paid wages of 9,880.

(a) Calculate the direct labour rate variance. [2] (b) Calculate the direct labour efficiency variance. [2] (c) Suggest one possible cause for each variance. [2]

4. Hadleigh Print Works budgeted 2,400 jobs, needing 7,200 machine hours, with fixed overhead of 86,400. It completed 2,300 jobs using 7,000 machine hours. Actual fixed overhead was 88,100.

(a) Calculate the fixed overhead absorption rate per machine hour. [1] (b) Calculate the fixed overhead expenditure variance. [1] (c) Calculate the fixed overhead volume variance. [1] (d) Calculate the capacity and efficiency sub-variances. [2] (e) Show how the sub-variances relate to the volume variance. [1] (f) State what the capacity variance tells the owner. [1]

5. Vennerley Cycles budgeted to sell 500 bicycles at a standard price of 120. The standard cost is 85 per bicycle, after absorbing fixed overhead. It sold 540 at an average price of 114.

(a) Calculate the sales price variance. [2] (b) Calculate the sales volume variance. [2] (c) Evaluate whether the price reduction was worthwhile, using these two variances and one other consideration. [2]

6. A manufacturer reports two pairs of variances. Explain a possible link between the variances in each pair.

(a) Direct material price favourable, direct material usage adverse. [2] (b) Direct labour rate adverse, direct labour efficiency favourable. [2]

7. Explain one advantage and one disadvantage of standard costing for a business that makes many different custom products. [4]

8. Calder Hollow Rugs has a standard of 4 hours per rug at 10.00 per hour. It made 250 rugs. The labour efficiency variance was 500 adverse and the labour rate variance was 525 favourable.

(a) Calculate the actual hours worked. [2] (b) Calculate the actual rate per hour. [1] (c) Calculate the actual labour cost. [1]

9. Rushmoor Hampers budgets to make and sell 1,000 hampers. The standard card is below.

Per hamper	Standard
Material	2 kg at 5.00
Labour	1.5 hours at 8.00
Fixed overhead	1.5 hours at 4.00
Selling price	40.00

It made and sold 1,100 hampers at an average price of 38.50. Actual profit was 10,160. The cost variances were: material price 230 A, material usage 500 A, labour rate 510 A, labour efficiency 400 A, fixed overhead expenditure 350 A, fixed overhead volume 600 F.

(a) Calculate the sales price and sales volume variances. [4] (b) Prepare a statement reconciling budgeted profit with actual profit. [6] (c) Identify two adverse variances that may share a cause, and state the cause. [2]

10. Tavistock Candles budgets 10,000 candles using 0.5 kg of wax per candle at a standard price of 4.00 per kg. A new supplier offers wax at 3.40 per kg, but a trial suggests each candle would need 0.56 kg. Two staff say the new wax gives a weaker scent. The present supplier has served the firm for eight years.

(a) Calculate the material price and usage variances expected for 10,000 candles with the new wax. [4] (b) State the net effect on cost. [1] (c) Recommend whether to switch, using the figures and non-financial factors. [3]

11. Osgood Planters has a standard labour rate of 8.00 per hour. For four months its labour rate variance was adverse, as shown.

Month	1	2	3	4
Hours worked	820	760	900	860
Rate variance (A)	410	380	450	430

(a) Calculate the actual rate per hour and the total rate variance. [2] (b) Explain what the pattern suggests, and recommend actions to improve performance and the next budget. [4]

Answers

1. A system in which predetermined costs and revenues per unit are set [1]; actual results are compared with them and the differences (variances) analysed to assess performance [1]; examples: standard price per kg of material, standard hours per unit, standard selling price (any two) [1] [3] Examiner insight: Define the system through comparison, not just “planned costs”. Examples should be specific values.

2. (a) Price = (2.80 - 2.60) x 9,300, using actual price 24,180 / 9,300 = 2.60 [1] = 1,860 F [1] (b) Standard kg 6,000 x 1.5 = 9,000 [1]; usage = (9,000 - 9,300) x 2.80 = 840 A [1] (c) Total = 1,860 - 840 = 1,020 F [1] [5] Examiner insight: Writing the formula with the figures in it gives the marker evidence of method if one number slips. Always add F or A.

3. (a) Standard cost of hours worked 760 x 12.50 = 9,500 [1]; rate = 9,500 - 9,880 = 380 A [1] (b) Standard hours 40 x 18 = 720 [1]; efficiency = (720 - 760) x 12.50 = 500 A [1] (c) Rate: overtime premium, agency staff or a wage award [1]. Efficiency: new or untrained staff, or machine stoppages [1] [6] Examiner insight: In (b) the standard hours are for the actual output of 40 kayaks. Using budgeted hours is a common route to a wrong answer.

4. (a) 86,400 / 7,200 = 12 per hour (36 per job) [1] (b) 86,400 - 88,100 = 1,700 A [1] (c) (2,300 - 2,400) x 36 = 3,600 A [1] (d) Capacity = (7,000 - 7,200) x 12 = 2,400 A [1]; standard hours 2,300 x 3 = 6,900, so efficiency = (6,900 - 7,000) x 12 = 1,200 A [1] (e) 2,400 A + 1,200 A = 3,600 A, which equals the volume variance [1] (f) Fewer machine hours were used than budgeted, so capacity was under-used [1] [7] Examiner insight: Checking that the sub-variances add to the volume variance quickly catches a sign or hours error.

5. (a) (114 - 120) x 540 [1] = 3,240 A [1] (b) Standard profit 120 - 85 = 35 [1]; (540 - 500) x 35 = 1,400 F [1] (c) Net of 1,840 adverse, so on these two figures the cut was not worthwhile [1]; another consideration, such as extra market share or customer loyalty gained, or any effect on cost variances [1] [6] Examiner insight: An evaluation point tends to need a judgement and a reason. Quoting the two variances without a conclusion leaves the question unanswered.

6. (a) Cheaper, lower-grade material [1] was bought, which produced more waste or spoilage [1] (b) Higher-paid, skilled or experienced employees [1] worked faster and used fewer hours than allowed [1] [4] Examiner insight: A link needs both halves. One cause for one variance does not explain the relationship.

7. Advantage: variances flag the exceptions so managers can focus on the items that matter [1], such as an input that is consistently over standard [1]. Disadvantage: standards must be set for each custom product, which is slow and costly [1], and the standards may be unreliable because each job is different [1] [4] Examiner insight: Develop each point in context. A bare “it is costly” says less than a point tied to custom products.

8. (a) Standard hours 250 x 4 = 1,000 [1]; 500 A / 10.00 = 50 extra hours, so actual hours 1,050 [1] (b) Rate variance 525 F / 1,050 = 0.50 below standard, so 9.50 per hour [1] (c) 1,050 x 9.50 = 9,975 [1] [4] Examiner insight: Working backwards tests the formula. Say which formula you are rearranging.

9. (a) Sales price = (38.50 - 40.00) x 1,100 [1] = 1,650 A [1] Standard cost = 10 + 12 + 6 = 28, so standard profit = 40 - 28 = 12 [1]; sales volume = (1,100 - 1,000) x 12 = 1,200 F [1] (b)

Budgeted profit (1,000 x 12)                     12,000   [1]
Sales volume                  1,200 F
Sales price                  (1,650) A                    [1]
Material price and usage       (730) A                    [1]
Labour rate and efficiency     (910) A                    [1]
Fixed overhead (350 A, 600 F)   250 F                     [1]
Net variances                                (1,840)
Actual profit                                 10,160      [1]

(c) Material usage and labour efficiency [1], possibly because poor-quality material slowed work and increased waste [1] [12] Examiner insight: A statement that reaches the given actual profit shows the signs are right. If not, check signs first.

10. (a) Standard kg 10,000 x 0.5 = 5,000; actual kg 10,000 x 0.56 = 5,600 [1]. Price = (4.00 - 3.40) x 5,600 = 3,360 F [1]. Usage = (5,000 - 5,600) x 4.00 [1] = 2,400 A [1] (b) Net 960 F (3,360 - 2,400) [1] (c) The saving is about 5% of the 20,000 standard wax cost [1], but a weaker scent could harm quality and reputation, and a long-standing supplier may be more reliable [1]. Recommendation: do not switch yet; repeat the trial or negotiate with the present supplier, because the small saving is outweighed by the risk [1] [8] Examiner insight: A recommendation needs balance and a stated decision. Either choice can be justified using the figures and a non-financial factor.

11. (a) Each month: 410 / 820 = 0.50, and the same in the other months, so actual rate 8.50 [1]; total = 410 + 380 + 450 + 430 = 1,670 A [1] (b) The variance is the same size per hour every month, so it is permanent rather than random [1]. The standard rate is probably out of date, caused perhaps by a wage award or regular overtime [1]. Investigate the cause and revise the standard rate in the next budget [1]; consider non-financial effects such as morale and staff retention before cutting hours or pay [1] [6] Examiner insight: A pattern across periods supports a stronger answer than a single month. Say what the pattern means and what action follows from it.

Where marks are usually lost

• Leaving out F or A after a variance.
• Using actual hours or quantities where standard hours or quantity for actual output are needed.
• Using budgeted units in the sales price variance.
• Valuing the sales volume variance at standard selling price rather than standard profit per unit when the question implies the latter.
• Forgetting that capacity plus efficiency must add up to volume.
• Giving a cause that contradicts the direction of the variance.
• Listing variances without a link to a decision, or ignoring non-financial factors in a recommendation.

Frequently asked questions

Are these Cambridge 9706 standard costing questions from past papers? No. They are eleven original questions with full worked answers on section 4.2 of Cambridge 9706, written for revision. Use them alongside the official past papers.

Why should I write the variance formula with the figures in it? It gives the marker evidence of your method if one number slips, so it can still be credited. Always add F or A to the result.

What is the most common mistake in efficiency and usage variances? Using actual hours or quantities where the standard hours or quantity for the actual output are needed, or using budgeted output instead of actual output.

How do I check a profit reconciliation statement? Start from budgeted profit, add favourable and subtract adverse variances, and check that the result reaches the actual profit. If it does not, check the signs first.

Next steps

• Review the revision notes and study guide.
• See the course hub and checklist.
• Take one of the free 10-minute diagnostics.
• Book a free trial class.

Official syllabus

Cambridge International AS & A Level Accounting 9706 syllabus for examination in 2026, 2027 and 2028, published by Cambridge University Press & Assessment (Cambridge International Education), section 4.2 Standard costing.