OxfordAQA A-Level Accounting: Absorption and activity based costing (9615) – 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 3.2.2 Absorption and activity based costing of the OxfordAQA International AS and A-level Accounting (9615) specification, Version 1.2, for International AS exams May/June 2025 onwards and International A-level exams May/June 2026 onwards. All of it is International A-level only and is assessed on Paper 4: Accounting for analysis and decision making. All amounts are dollars and every business is invented.

Before you start: study guide · revision notes · course hub · printable checklist · free 10-minute diagnostics · marginal costing practice

Questions

1. A department absorbed overheads of 64,000. Its actual overheads were 61,500. Which one statement is correct? [1]

A. Under-absorbed by 2,500; profit is reduced B. Over-absorbed by 2,500; profit is increased C. Over-absorbed by 2,500; profit is reduced D. Under-absorbed by 2,500; profit is increased

2. Explain the difference between apportionment and attribution. [2]

3. Define a cost driver and suggest a suitable one for a machine maintenance cost pool. [2]

4. Yelland Kayaks has two production departments: Shell (machine-led) and Fitting-out (hand work). Budgeted overheads:

Overhead	Total
Indirect wages: Shell 29,300, Fitting-out 41,900	71,200
Factory rent	57,600
Plant depreciation	32,000
Canteen costs	13,500

	Shell	Fitting-out
Floor area (m²)	1,000	1,400
Cost of plant	360,000	40,000
Employees	7	20
Budgeted machine hours	10,700	900
Budgeted direct labour hours	2,300	17,740

(a) Prepare an overhead analysis showing each department’s total budgeted overheads. [5] (b) Calculate an appropriate overhead absorption rate for each department. [2] (c) One kayak uses 214.00 of materials, 1.5 direct labour hours and 4 machine hours in Shell, and 7 direct labour hours in Fitting-out. Labour is paid 17 an hour. Calculate the total cost of one kayak. [3] (d) Calculate the selling price at a 20% mark-up on cost. [1]

5. Dunholme Signs absorbs overheads at 12.50 per direct labour hour, based on 9,600 budgeted hours. Actual overheads were 118,300 and were under-absorbed by 3,550.

(a) Calculate the actual direct labour hours worked. [3] (b) Explain the under-absorption using the effects of activity and spending. [3] (c) State how the under-absorption is treated in the statement of profit or loss. [1]

6. Saltash Ropes makes 12,000 coils of Mooring line and 3,000 coils of Climbing rope a year. Production overheads of 216,000 are absorbed at a single rate per direct labour hour.

Per coil	Mooring	Climbing
Direct materials	21.40	38.20
Direct labour at 15 an hour	0.4 hours	0.8 hours

The overheads have also been analysed by activity:

Cost pool	Cost	Cost driver	Mooring	Climbing
Machine set-ups	63,000	Set-ups	10	60
Inspection	45,000	Inspections	60	90
Materials handling	36,000	Movements	200	280
Machine running	72,000	Machine hours	6,000	3,000

(a) Using absorption costing, calculate the total cost of one coil of each product. [3] (b) Repeat (a) using activity based costing. [7] (c) Using a 40% mark-up on cost, find each product’s price under absorption costing and under ABC. [2] (d) Comment on Saltash’s Climbing rope price if it continues to use absorption costing. [2]

7. Saltash had no opening inventory and closes with 600 coils of Mooring line and 250 of Climbing rope. Using question 6, calculate how much higher or lower profit is under ABC than under absorption costing. [3]

8. Kirkhope Planters makes one product. Variable production cost is 23 per unit and fixed production overheads are absorbed at 9 per unit, the same in both years. This year:

• opening inventory 800 units; production 9,000 units; sales 9,400 units at 48
• fixed production overheads 81,000, as budgeted (no under- or over-absorption)
• selling and administration expenses 62,000.

(a) Value the opening and closing inventory under marginal costing and under absorption costing. [2] (b) Prepare a statement showing profit for the year using marginal costing. [4] (c) Calculate profit for the year using absorption costing. [3] (d) Reconcile the two profit figures. [2]

9. A product’s ABC total cost is 64.80.

(a) Calculate the selling price that gives a 28% margin. [1] (b) Express the profit per unit as a mark-up on cost, to one decimal place. [1]

10. Glaisdale Bakery sells 400,000 loaves and 9,000 celebration cakes a year, pricing at a 30% mark-up on absorption cost. An ABC study gives these unit costs:

	Loaf	Celebration cake
Absorption cost	1.10	14.20
ABC cost	0.95	19.80

Running ABC would cost about 24,000 a year. Evaluate whether Glaisdale should adopt activity based costing for setting prices. [10]

Answers

1. B [1] [1] Examiner insight: Work out absorbed minus actual first; a positive figure is over-absorption, which adds to profit.

2. Apportionment shares an overhead between departments on a basis such as floor area [1]; attribution shares an ABC cost pool among products in line with how much of its driver each consumes [1]. [2] Examiner insight: Say what is shared and between what: departments for apportionment, products for attribution.

3. The factor whose quantity causes the cost of a pool to change [1]; for machine maintenance, the number of maintenance visits (or machine hours) [1]. [2] Examiner insight: The suggested driver must cause the cost to change; floor area would not.

4. (a)

	Shell	Fitting-out
Indirect wages (allocated)	29,300	41,900
Rent (1,000 : 1,400)	24,000	33,600
Depreciation (360,000 : 40,000)	28,800	3,200
Canteen (7 : 20)	3,500	10,000
Total	85,600	88,700

Indirect wages allocated [1]; rent [1]; depreciation [1]; canteen [1]; totals 85,600 and 88,700, adding to 174,300 [1]. (b) Shell 85,600 ÷ 10,700 = 8.00 per machine hour [1]; Fitting-out 88,700 ÷ 17,740 = 5.00 per direct labour hour [1]. (c) Labour 8.5 × 17 = 144.50 [1]; overheads 4 × 8.00 + 7 × 5.00 = 32.00 + 35.00 = 67.00 [1]; total 214.00 + 144.50 + 67.00 = 425.50 [1]. (d) 425.50 × 1.2 = 510.60 [1] [11] Examiner insight: Basing Shell’s rate on its labour hours misstates every later figure; use the activity that drives each department’s costs.

5. (a) Absorbed = 118,300 − 3,550 = 114,750 [1]; hours = 114,750 ÷ 12.50 [1] = 9,180 hours [1]. (b) Budgeted overheads were 9,600 × 12.50 = 120,000 [1]. Hours were 420 below budget, so 420 × 12.50 = 5,250 less was absorbed [1]; spending was 1,700 below budget, which offsets part of it: 5,250 − 1,700 = 3,550 under-absorbed [1]. (c) It is deducted from profit (added to cost of sales) [1]. [7] Examiner insight: Under-absorbed means absorbed was below actual, so subtract; adding 3,550 gives a wrong 9,748 hours.

6. (a) Labour hours 12,000 × 0.4 + 3,000 × 0.8 = 7,200; OAR 216,000 ÷ 7,200 = 30 per hour [1]. Mooring 21.40 + 6.00 + 12.00 = 39.40 [1]; Climbing 38.20 + 12.00 + 24.00 = 74.20 [1]. (b) Driver rates: set-ups 63,000 ÷ 70 = 900 [1]; inspections 45,000 ÷ 150 = 300 [1]; movements 36,000 ÷ 480 = 75; machine hours 72,000 ÷ 9,000 = 8 [1]. Mooring 9,000 + 18,000 + 15,000 + 48,000 = 90,000 [1]; Climbing 54,000 + 27,000 + 21,000 + 24,000 = 126,000 [1]. Mooring 90,000 ÷ 12,000 = 7.50, total 34.90 [1]; Climbing 126,000 ÷ 3,000 = 42.00, total 92.20 [1]. (c) Absorption: Mooring 55.16, Climbing 103.88 [1]. ABC: Mooring 48.86, Climbing 129.08 [1]. (d) At 103.88 Climbing earns only 11.68 a coil over its ABC cost of 92.20, not the intended 36.88 [1]; it is subsidised by Mooring line, which is overpriced and could lose sales [1]. [14] Examiner insight: Show every driver rate and attributed total so an examiner can follow your method if a final figure is wrong.

7. Overhead in inventory under absorption: 600 × 12.00 + 250 × 24.00 = 13,200 [1]; under ABC: 600 × 7.50 + 250 × 42.00 = 15,000 [1]; ABC profit is 1,800 higher [1]. [3] Examiner insight: Direct costs are identical under both methods, so only overhead in inventory affects the difference.

8. (a) Marginal: opening 800 × 23 = 18,400, closing 400 × 23 = 9,200; absorption: opening 800 × 32 = 25,600, closing 400 × 32 = 12,800 [1] [1]. (b)

Revenue (9,400 × 48)	451,200
Opening inventory	18,400
Variable production cost (9,000 × 23)	207,000
Less closing inventory	(9,200)
Variable cost of sales	216,200
Contribution	235,000
Fixed production overheads	(81,000)
Selling and administration	(62,000)
Profit	92,000

Revenue [1]; variable cost of sales 216,200 [1]; contribution 235,000 [1]; profit 92,000 [1]. (c) Cost of sales 25,600 + 288,000 − 12,800 = 300,800 [1]; gross profit 451,200 − 300,800 = 150,400 [1]; profit 150,400 − 62,000 = 88,400 [1]. (d) Inventory fell 400 units, so 400 × 9 = 3,600 of last year’s fixed overhead enters this year’s absorption cost of sales [1]; 92,000 − 3,600 = 88,400 [1]. [11] Examiner insight: With falling inventory absorption profit is lower; adding the 3,600 contradicts your own statements.

9. (a) 64.80 ÷ 0.72 = 90.00 [1] (b) 25.20 ÷ 64.80 × 100 = 38.9% [1] [2] Examiner insight: A margin is a share of price; adding 28% of 64.80 gives a wrong 82.94.

10. Cake price 14.20 × 1.3 = 18.46 is below its ABC cost of 19.80, a loss of 1.34 a cake [1]; on 9,000 cakes about 12,060 a year [1]. Loaf price 1.43 against an ABC-based 1.24 (0.95 × 1.3, rounded): about 0.19 overpriced, so rivals may undercut [1]. ABC shows cakes use costly small-batch activities, so managers can reduce drivers or reprice [1]. Against: 24,000 a year exceeds the cake loss alone [1]; pools and drivers are judgements, so ABC costs are estimates too [1]; a higher cake price may lose customers, since demand matters as well as cost [1]; rent still needs arbitrary sharing [1]. Judgement: adopt ABC, as the cake loss plus about 76,000 of loaf revenue open to undercutting (0.19 × 400,000) outweighs 24,000 [1], but review drivers yearly and test cake demand before repricing [1]. [10] Examiner insight: Strong evaluations use Glaisdale’s figures on both sides and end in a supported decision; generic ABC benefits add little.

Where marks are usually lost

• Using budgeted hours instead of actual hours to find overheads absorbed.
• Reversing the treatment of under- and over-absorption in the profit statement.
• Dividing a cost pool by units of output instead of total driver quantity.
• Confusing mark-up with margin in pricing questions.
• Charging fixed production overheads twice in an absorption statement.
• Forgetting opening inventory when reconciling absorption and marginal profit.
• Evaluations that never reach a decision or ignore the figures given.

Next steps

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

Official syllabus

OxfordAQA International AS and A-level Accounting (9615) specification, Version 1.2, for International AS exams May/June 2025 onwards and International A-level exams May/June 2026 onwards (OxfordAQA). Section 3.2.2 Absorption and activity based costing.