OxfordAQA A-Level Accounting: Marginal 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.

These questions cover 3.1.10 Marginal costing, International AS content assessed on Paper 2 of the OxfordAQA International AS and A-level Accounting (9615) specification, Version 1.2. Figures are in dollars; the firms are fictional.

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Questions

1. (multiple choice) Which one of these is a stepped cost? [1]

A. Warehouse rent of 2,000 a month B. A royalty of 3 on every unit sold C. A security guard paid 2,600 a month for each 4,000 square metres of warehouse in use D. A franchise fee of 5,000 a year plus 2% of sales

2. (multiple choice) A product sells for 40 and has a marginal cost of 25. Fixed costs are 57,000. What is the break-even sales revenue? [1]

A. 57,000 B. 91,200 C. 95,000 D. 152,000

3. For each cost of Kestwick Tiles, a floor-tile maker, give its traceability (direct or indirect) and its behaviour (variable, fixed, semi-variable or stepped).

(a) Coloured pigment mixed into each tile [1] (b) The factory manager’s annual salary [1] (c) A glazing machine maintenance contract of 1,200 a year plus 0.05 per tile glazed [1] (d) Forklift hire of 700 a month for each 20,000 tiles moved in the month [1]

4. Mirelow Soaps sells handmade soap at 6.40 a bar. Per bar, direct materials cost 2.20, direct labour 1.00 and variable overheads 0.40. Fixed costs are 33,600 a year. Budgeted sales are 15,000 bars.

(a) Calculate the contribution per bar. [1] (b) Calculate the break-even point in bars. [2] (c) Calculate the budgeted profit. [2] (d) Calculate the number of bars needed for a profit of 11,200. [2] (e) A supplier raises the price of materials by 0.30 a bar. Calculate the new break-even point. [2]

5. Dunmara Juice has drawn a break-even chart. At 4,000 cartons the total cost line reads 33,000 and the sales revenue line reads 24,000. At 10,000 cartons the total cost line reads 51,000 and the sales revenue line reads 60,000.

(a) Calculate the selling price per carton. [1] (b) Calculate the variable cost per carton and the fixed costs. [2] (c) Calculate the break-even point in cartons and in sales revenue. [2] (d) State what the vertical gap between the two lines at 4,000 cartons represents, with its value. [1]

6. Sandimore Print makes planners. In March it made 5,000 planners and sold 4,600 at 14 each. There was no opening inventory. Variable costs per planner were materials 3.10, labour 2.60 and variable overheads 0.90. Fixed production overheads were 18,500 and fixed administration costs 9,200.

Prepare an income statement for March using marginal costing. [6]

7. Pellmont Cycles makes 4,000 saddles a year for its bicycles. Cost per saddle: direct materials 9.80, direct labour 6.40, variable overheads 1.60 and absorbed fixed overheads 5.60. A supplier offers saddles at 21.50 each.

(a) Calculate the full cost and the marginal cost of one saddle. [2] (b) Calculate the effect on annual profit of buying the saddles if no fixed costs are avoided. [2] (c) If Pellmont buys, a saddle technician’s salary of 11,000 a year is saved and the freed space can assemble extra bicycles earning 6,500 of contribution a year. Calculate the revised effect on profit and state the decision on financial grounds. [2] (d) Give two non-financial reasons Pellmont might hesitate to stop making saddles. [2]

8. Torvane Ceramics can make 9,000 planters a year and expects to sell 8,200 at 32 each. Marginal cost is 19 per planter. A landscaping firm offers to buy 1,200 planters at 25 each, printed with its logo at an extra cost of 1.50 per planter. The order must be accepted in full or not at all.

(a) Calculate how accepting the order would change annual profit. [4] (b) Recommend whether Torvane should take the order, using (a) and non-financial factors. [4]

9. Nettlecombe Furniture has 3,100 machine hours next year. Fixed costs are 52,000.

Product	Selling price	Marginal cost	Machine hours per unit	Maximum demand
Stool	85	49	1.5	600
Bench	210	120	5	300
Table	340	196	4.5	200

(a) Show that machine hours are a limiting factor. [1] (b) Rank the three products, showing the contribution each earns per machine hour. [3] (c) Set out the output of each product that gives the highest profit, and state that profit. [4]

10. Maresby Foods has three production departments. Shared fixed costs are split between them by staff numbers.

	Bakery	Chilled	Frozen	Total
Sales	260,000	190,000	150,000	600,000
Variable costs	156,000	114,000	117,000	387,000
Fixed costs	72,000	54,000	45,000	171,000
Profit or (loss)	32,000	22,000	(12,000)	42,000

Closing Frozen would end 14,000 of freezer lease and supervisor costs; its other fixed costs would continue.

(a) Calculate Maresby’s profit for the year without Frozen. [3] (b) A neighbour would rent the vacated space for 15,000 a year. Recalculate the profit. [3] (c) Assess the case for and against closing Frozen, and recommend a course of action. [6]

11. Brisholt Kayak Tours plans 1,600 guided trips next year. Each trip has a marginal cost of 40, and fixed costs are 52,000. The partners aim to earn 20,000 profit.

(a) Calculate the price per trip that achieves this aim. [2] (b) Express the contribution per trip as a percentage mark-up on marginal cost. [1] (c) Explain two limitations of this pricing method. [4]

Answers

1. C – flat until more space is used, then jumps [1] Examiner insight: D is semi-variable (a fixed base plus a smooth rise); a stepped cost sits level between jumps.

2. Contribution 15; 57,000 ÷ 15 = 3,800 units; 3,800 × 40 = D, 152,000 [1] Examiner insight: C is total variable cost at break-even; B divides by the variable cost ratio.

3. (a) Direct, variable [1] (b) Indirect, fixed [1] (c) Indirect, semi-variable [1] (d) Indirect, stepped [1] Examiner insight: Give both labels for every cost; behaviour alone answers only half the question.

4. (a) 6.40 − (2.20 + 1.00 + 0.40) = 6.40 − 3.60 = 2.80 [1] (b) 33,600 ÷ 2.80 [1] = 12,000 bars [1] (c) 15,000 × 2.80 = 42,000 [1]; 42,000 − 33,600 = 8,400 [1] (d) (33,600 + 11,200) ÷ 2.80 [1] = 16,000 bars [1] (e) New contribution = 2.80 − 0.30 = 2.50 [1]; 33,600 ÷ 2.50 = 13,440 bars [1] Examiner insight: Every later part rests on (a), so set out the contribution where an examiner can follow it.

5. (a) 24,000 ÷ 4,000 = 6 [1] (b) Variable cost = (51,000 − 33,000) ÷ (10,000 − 4,000) = 3 per carton; fixed costs = 33,000 − (4,000 × 3) = 21,000 [1] [1] (c) 21,000 ÷ (6 − 3) = 7,000 cartons [1]; 7,000 × 6 = 42,000 [1] (d) The loss at 4,000 cartons: 33,000 − 24,000 = 9,000 [1] Examiner insight: The change in total cost between two outputs gives variable cost per unit; a single total cost reading does not.

6.

Sandimore Print: income statement for March (marginal costing)
Sales revenue (4,600 × 14)                 64,400   [1]
Variable cost of production (5,000 × 6.60) 33,000   [1]
Less closing inventory (400 × 6.60)        (2,640)  [1]
Variable cost of sales                     30,360
Contribution                               34,040   [1]
Fixed costs (18,500 + 9,200)               27,700   [1]
Profit for March                            6,340   [1]

Examiner insight: Closing inventory is valued at marginal cost (6.60); adding fixed overheads turns it into absorption costing.

7. (a) Full cost = 9.80 + 6.40 + 1.60 + 5.60 = 23.40 [1]; marginal cost = 17.80 [1] (b) Extra cost per saddle = 21.50 − 17.80 = 3.70 [1]; 3.70 × 4,000 = profit falls by 14,800 [1] (c) −14,800 + 11,000 + 6,500 = profit rises by 2,700 [1]; so buy on financial grounds [1] (d) Any two: supplier’s quality; reliability of delivery; loss of control; staff morale; future price rises [1] [1] Examiner insight: Comparing 21.50 with the full cost of 23.40 shows a false saving, because absorbed fixed overheads continue either way.

8. (a) Contribution per planter on the order = 25 − 19 − 1.50 = 4.50 [1]; 1,200 × 4.50 = 5,400 [1] Spare capacity is 800, so 400 normal sales are lost: 400 × (32 − 19) = 5,200 [1] Net effect = 5,400 − 5,200 = profit rises by 200 [1] (b) The gain of 200 is tiny for the effort [1]. Regular customers turned away may not come back [1]. The landscaping firm may reorder [1]. Reject unless repeat business at a better price is likely [1]. Examiner insight: A strong recommendation sets a non-financial point against the 200 and then commits to a decision.

9. (a) Hours needed for full demand = (600 × 1.5) + (300 × 5) + (200 × 4.5) = 3,300, more than 3,100 available [1] (b) Stool 36 ÷ 1.5 = 24; Bench 90 ÷ 5 = 18; Table 144 ÷ 4.5 = 32 [1] [1]. Rank: Table, Stool, Bench [1] (c) Tables 200 (900 hours), stools 600 (900 hours) [1]; benches 1,300 ÷ 5 = 260 [1] Contribution = 28,800 + 21,600 + 23,400 = 73,800 [1]; profit = 73,800 − 52,000 = 21,800 [1] Examiner insight: The bench earns most per unit but least per hour; ranking per unit spoils the plan.

10. (a) Contribution of Frozen = 150,000 − 117,000 = 33,000 [1]; profit = 42,000 − 33,000 + 14,000 [1] = 23,000 [1] (b) 23,000 + 15,000 [1] = 38,000 [1], which is still 4,000 below the current 42,000 [1] (c) Frozen’s contribution of 33,000 exceeds its 14,000 avoidable costs [1]. Its loss comes from 31,000 of shared fixed costs that would continue [1]. Closure cuts profit by 19,000, or 4,000 with rent [1]. Shoppers who buy frozen goods with other lines may go elsewhere, cutting other departments’ sales [1]. Against this, rent is steady, risk-free income [1]. Conclusion: keep Frozen open on these figures [1]. Examiner insight: Finish with a recommendation tied to the figures; a balanced list with no verdict leaves the task unfinished.

11. (a) (52,000 + 20,000) ÷ 1,600 = 45 contribution per trip [1]; price = 40 + 45 = 85 [1] (b) 45 ÷ 40 × 100 = 112.5% [1] (c) Any two: a price near marginal cost may not cover fixed costs [1], causing long-run losses [1]; demand and rivals’ prices are ignored [1], so 1,600 trips may not sell at 85 [1]; the fixed/variable split may be wrong. Examiner insight: Develop each limitation: state the weakness, then show what it could do to Brisholt’s profit.

Where marks are usually lost

• Question 7: setting 21.50 against the full cost of 23.40, which invents a saving.
• Question 8: forgetting the 400 regular planters displaced once spare capacity runs out.
• Question 9: putting benches first because they earn most per unit.

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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 3.1.10 Marginal costing.