Edexcel A-Level Accounting: Introduction to costing (YAC11) – 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 cover topic 1.4, Introduction to costing, of the Pearson Edexcel International Advanced Subsidiary/Advanced Level in Accounting (XAC11/YAC11) specification, Issue 2, September 2018: outcomes 1.4.1 to 1.4.13. This is Unit 1 (The Accounting System and Costing) content, part of the International AS. All money amounts are in dollars.

Course hub: Edexcel A-Level Accounting. Checklist: YAC11 topic checklist. Free 10-minute diagnostics.

Questions

1. State two characteristics of job costing. [2]

2. Ostrey Feeds holds sacks of animal feed.

(a) State one characteristic of LIFO as a method of inventory valuation. [1] (b) A sack of discontinued feed cost 84. It can be sold for 90 after re-bagging costing 9, with sales commission of 5% of the selling price. Calculate its inventory value. [3]

3. Classify each overhead as fixed, semi-fixed, semi-variable or variable.

(a) Straight-line depreciation of factory machinery. [1] (b) Electricity: a standing charge each quarter plus a charge per unit used. [1] (c) Hire of forklift trucks: one truck for each 5,000 units produced in a month. [1] (d) Lubricating oil used at a fixed amount per machine hour. [1]

4. Ostrey Feeds had the following transactions for one feed in June.

1 June   Opening inventory   150 kg at 2.40
6 June   Purchased           250 kg at 2.60
11 June  Issued              300 kg
20 June  Purchased           200 kg at 2.80
27 June  Issued              180 kg

(a) Calculate the value of closing inventory using FIFO. [2] (b) Calculate the value of closing inventory using LIFO on a perpetual basis. [3] (c) Calculate the value of closing inventory using LIFO on a periodic basis. [2]

5. Using your answers to question 4, all 480 kg issued in June were sold at 5.00 per kg.

(a) Calculate gross profit using FIFO and using LIFO (perpetual). [3] (b) Explain why the two gross profit figures differ. [2]

6. A machinist is paid 11 per hour. In one week she works 42 hours and produces 360 units. The time allowed is 8 minutes per unit. Calculate her gross earnings under:

(a) day work [1] (b) piecework at 1.40 per unit [1] (c) the Halsey scheme (50% of time saved) [2] (d) the Rowan scheme. [2]

7. A team of three packers earns a group bonus of 0.75 for each unit packed above a weekly target of 1,500 units. In one week it packs 1,720 units. Hours and rates were: Asha 40 hours at 12, Bilal 38 hours at 12, Chen 32 hours at 15. The bonus is shared in proportion to hours worked. The employer pays contributions of 10% of gross pay.

(a) Calculate each packer’s share of the bonus. [3] (b) Calculate the total employer cost of the team for the week. [2]

8. A packing line produced 2,040 units in 340 labour hours in week 1 and 2,170 units in 350 labour hours in week 2. Calculate labour productivity for each week and the percentage change. [3]

9. Tarnwell Joinery has two production departments (Cutting, Assembly) and two service departments (Canteen, Stores). Allocated overheads are: Cutting 23,000; Assembly 17,300; Canteen 3,100; Stores 2,800. Rent of 19,200 is apportioned by floor area: Cutting 500 m², Assembly 450 m², Canteen 150 m², Stores 100 m².

Canteen serves Cutting 40%, Assembly 50% and Stores 10%. Stores serves Cutting 60%, Assembly 30% and Canteen 10%. Budgeted activity: Cutting 9,100 machine hours; Assembly 5,800 direct labour hours.

(a) Apportion the rent and calculate each department’s total overhead. [3] (b) Re-apportion the service department overheads using continuous allotment, starting with Canteen. [4] (c) Calculate a machine hour rate for Cutting and a labour hour rate for Assembly. [2] (d) Justify the use of a machine hour rate in Cutting. [1]

10. In the year, Tarnwell’s Cutting department used 8,800 machine hours and incurred overheads of 36,050. Assembly used 6,000 labour hours and incurred overheads of 29,640. Using your rates from question 9, calculate the over or under absorption in each department and state the net effect on profit. [5]

11. Tarnwell receives a customer order, Job 77, and also makes a batch of 120 stools. Use your rates from question 9. Direct labour costs 14 per hour in Cutting and 12 per hour in Assembly.

	Job 77	Batch of stools
Direct materials	1,260	1,920
Cutting labour hours	18	24
Assembly labour hours	40	30
Cutting machine hours	35	48

(a) Calculate the production cost of Job 77. [4] (b) Administration overhead is added at 15% of production cost and the price is total cost plus a 25% mark-up. Calculate the price of Job 77. [2] (c) Calculate the production cost per stool. [3] (d) Explain why batch costing is used for the stools rather than costing each stool as a separate job. [1]

Answers

1. Any two: work is done to the customer’s specification [1]; each job is separately identified, with costs collected on its own job cost sheet [1]. [2] Examiner insight: Two different characteristics are needed; “each job is unique” and “each job is different” are the same point.

2. (a) The most recently purchased units are assumed to be issued first, so closing inventory is valued at the oldest prices [1]. [1] (b) Commission = 5% x 90 = 4.50 [1]. NRV = 90 - 9 - 4.50 = 76.50 [1]. NRV is below cost of 84, so value at 76.50 [1]. [3] Examiner insight: State the comparison with cost; an NRV figure alone does not show the lower of cost and NRV rule.

3. (a) Fixed [1] (b) Semi-variable [1] (c) Semi-fixed [1] (d) Variable [1] [4] Examiner insight: Semi-fixed and semi-variable are not interchangeable: a cost with a standing charge plus a usage charge is semi-variable, while a cost that jumps in steps is semi-fixed.

4. (a) Units left = 150 + 250 - 300 + 200 - 180 = 120 kg [1]. FIFO: 120 x 2.80 = 336.00 [1]. [2] (b) 11 June issue: 250 at 2.60 + 50 at 2.40, leaving 100 at 2.40 [1]. 27 June issue: 180 at 2.80, leaving 20 at 2.80 [1]. Closing = 100 x 2.40 + 20 x 2.80 = 240 + 56 = 296.00 [1]. [3] (c) Total issues 480 kg taken from 200 at 2.80, 250 at 2.60 and 30 at 2.40 [1]. Closing = 120 x 2.40 = 288.00 [1]. [2] Examiner insight: Show the layers left after each issue, so one wrongly priced issue does not hide the rest of your method.

5. (a) Revenue = 480 x 5.00 = 2,400; goods available = 360 + 650 + 560 = 1,570 [1]. FIFO cost of sales = 1,570 - 336 = 1,234, gross profit 1,166 [1]. LIFO cost of sales = 1,570 - 296 = 1,274, gross profit 1,126 [1]. [3] (b) Purchase prices rose during June [1]. FIFO charges the older, cheaper units to cost of sales, so cost of sales is lower and gross profit is 40 higher [1]. [2] Examiner insight: Say which way prices moved; the ranking of the methods reverses when prices fall.

6. (a) 42 x 11 = 462.00 [1] (b) 360 x 1.40 = 504.00 [1] (c) Time allowed = 360 x 8 / 60 = 48 hours; time saved = 6 hours [1]. 462 + 0.5 x 6 x 11 = 462 + 33 = 495.00 [1] (d) Bonus = 42/48 x 6 x 11 = 57.75 [1]. 462 + 57.75 = 519.75 [1] [6] Examiner insight: Show time allowed and time saved as separate lines; a wrong bare total leaves no method for the examiner to credit.

7. (a) Pool = (1,720 - 1,500) x 0.75 = 165 [1]. Total hours = 40 + 38 + 32 = 110, so 1.50 per hour [1]. Asha 60, Bilal 57, Chen 48 [1]. [3] (b) Basic pay = 480 + 456 + 480 = 1,416; gross pay = 1,416 + 165 = 1,581 [1]. Employer cost = 1,581 x 1.10 = 1,739.10 [1]. [2] Examiner insight: Employer contributions are calculated on gross pay including the bonus; applying them to basic pay alone understates employer cost.

8. Week 1: 2,040 / 340 = 6.0 units per hour [1]. Week 2: 2,170 / 350 = 6.2 units per hour [1]. Change = (6.2 - 6.0) / 6.0 x 100 = 3.33% increase [1]. [3] Examiner insight: Total output alone is not productivity; hours changed too, so compare output per hour.

9. (a) Rent: Cutting 8,000; Assembly 7,200; Canteen 2,400; Stores 1,600 [1]. Totals: Cutting 31,000, Assembly 24,500 [1], Canteen 5,500, Stores 4,400 (check: 65,400) [1]. (b)

                      Cutting   Assembly   Canteen    Stores
Canteen 5,500.00     2,200.00   2,750.00      -        550.00
Stores 4,950.00      2,970.00   1,485.00    495.00       -
Canteen 495.00         198.00     247.50      -         49.50
Stores 49.50            29.70      14.85      4.95       -
Canteen 4.95             1.98       2.48      -          0.49
Stores 0.49 (60:30)      0.33       0.16      -          -
Received             5,400.01   4,499.99

First Canteen and Stores rows correct [1]; repeated rows until a negligible balance [1]; Cutting 36,400 [1] and Assembly 29,000 to the nearest dollar [1]. (c) Cutting: 36,400 / 9,100 = 4.00 per machine hour [1]. Assembly: 29,000 / 5,800 = 5.00 per labour hour [1]. (d) Cutting is machine-intensive, so machine hours drive most of its overhead, such as depreciation and power [1]. [10] Examiner insight: End with a check that production totals equal the starting overhead, showing nothing was lost or double counted.

10. Cutting absorbed = 8,800 x 4 = 35,200 [1]; actual 36,050, so under absorbed 850 [1]. Assembly absorbed = 6,000 x 5 = 30,000 [1]; actual 29,640, so over absorbed 360 [1]. Net under absorption of 490 reduces profit [1]. [5] Examiner insight: Label each result as over or under absorbed and say which way it moves profit; a figure of 850 with no direction is ambiguous.

11. (a) Direct materials 1,260; direct labour 18 x 14 + 40 x 12 = 252 + 480 = 732 [1]. Prime cost = 1,992 [1]. Overheads: Cutting 35 x 4 = 140; Assembly 40 x 5 = 200 [1]. Production cost = 2,332 [1]. (b) Administration 15% = 349.80; total cost = 2,681.80 [1]. Price = 2,681.80 x 1.25 = 3,352.25 [1]. (c) Labour 24 x 14 + 30 x 12 = 336 + 360 = 696; overheads 48 x 4 + 30 x 5 = 192 + 150 = 342 [1]. Batch cost = 1,920 + 696 + 342 = 2,958 [1]. Per stool = 2,958 / 120 = 24.65 [1]. (d) The stools are identical, so it is simpler and cheaper to collect costs for the whole batch and divide by the number made [1]. [10] Examiner insight: Label each subtotal (prime cost, production cost, total cost) so each stage can be credited even if a later figure is wrong.

Where marks are usually lost

• Calculating NRV but not comparing it with cost.
• Using time taken instead of time saved in a bonus calculation.
• Applying employer contributions to basic pay only when a bonus has been earned.
• Sharing a group bonus equally when the question says it is shared by hours or by pay.
• Re-apportioning only one service department, or ignoring the service each gives to the other.
• Not stating whether an over or under absorption increases or reduces profit.

Next steps

• Costing revision notes
• Introduction to costing study guide
• Edexcel A-Level Accounting hub
• Printable checklist
• Try all free 10-minute diagnostics.
• Book a free trial class.

Official syllabus

Pearson Edexcel International Advanced Subsidiary/Advanced Level in Accounting (XAC11/YAC11) specification, Issue 2, September 2018 (first teaching September 2015), Pearson Education Limited. Unit 1: The Accounting System and Costing, topic 1.4 Introduction to costing.