MyStudyBro - Revision Exercise Tool

This Revision Handout includes the Questions and Answers of a total of 2 exercises!

Chapters:
Labour Remuneration - Unit 1 (Pearson Edexcel)
Page 1 (WAC01 or WAC11) 2017 Summer
Page 3 (WAC01 or WAC11) 2017 Summer - Answer
Page 7 (WAC01 or WAC11) 2013 Winter
Page 9 (WAC01 or WAC11) 2013 Winter - Answer
Summer 2017 www.mystudybro.com Accounting Unit 1
Past Paper This resource was created and owned by Pearson Edexcel WAC01 or WAC11

SECTION A
Answer BOTH questions in this section.
1 Amsha owns a plumbing business that installs and maintains plumbing systems in
properties.
The following balances were available from his books on 31 March 2017.
£
Purchase of raw materials 88 100
Plumbing technicians’ wages 139 200
Management salaries 75 000
Bank and cash 3 100 Dr
Inventory 1 April 2016 17 500
Trade payables 45 700
Trade receivables 70 000
Capital 65 000
Motor vehicle expenses 45 000
Electricity and gas 5 700
Rent of premises 32 000
Marketing expenses 65 000
Revenue 525 000
8% bank loan (repayable 31 May 2017) 60 000
Bank loan interest paid 3 000
Non-current assets (cost):
Motor vehicles 180 000
Office equipment 40 000
Loose tools 38 000
Provisions for depreciation:
Motor vehicles 72 000
Office equipment 25 000
Loose tools 8 000
Allowance for doubtful debts 900
Additional information at 31 March 2017
• Inventory £20 800
• A purchase of raw materials on credit of £2 500 made on 29 March 2017 had not
been recorded in the books.
• Management salaries include drawings of £18 000 paid to Amsha.
• Rent of premises of £4 000 was prepaid and marketing expenses of £1 900 were
owing.
• The 8% bank loan was taken out on 1 April 2016.
• Depreciation is charged as follows:
Motor vehicles at the rate of 20% per annum straight line
Office equipment at the rate of 15% per annum straight line
Loose tools by revaluation. At the year end the value was £18 000
• The allowance for doubtful debts is to be maintained at 3%.

2
P49576A
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Summer 2017 www.mystudybro.com Accounting Unit 1
Past Paper This resource was created and owned by Pearson Edexcel WAC01 or WAC11

Required
(a) Prepare the:
(i) Statement of Profit or Loss and Other Comprehensive Income for the year
ended 31 March 2017.
(17)
(ii) Statement of Financial Position at 31 March 2017.
(13)
Amsha is considering the hourly rates that he will charge in the next financial year for
his plumbing technician services. He provides you with the following information.
• Amsha will continue to employ 12 plumbing technicians each of whom is
provided with a motor vehicle in order to undertake their work.
• Each plumbing technician will be paid wages of £10 000 per annum.
• Amsha will pay employment taxes at 20% of the plumbing technicians’ wages.
• All of the motor vehicle depreciation relates to motor vehicles used by plumbing
technicians.
• Motor vehicle expenses for each vehicle will be £4 000 per annum.
• Loose tools depreciation is charged equally to the 12 plumbing technicians and is
estimated to be the same in the next financial year.
• Amsha applies a mark-up of 35% on costs for overheads and profit.
• Each plumbing technician works 45 hours per week for 50 weeks per year. Amsha
estimates that 80% of the hours worked are undertaking work that is directly
charged to the customer.
Required
(b) Calculate the:
(i) total cost (including overheads and profit) of employing one plumbing
technician for the next financial year
(7)
(ii) hourly rate that Amsha should charge customers in the next financial year for
plumbing technician services.
(2)
Amsha remunerates his plumbing technicians on a day work basis. He is considering
changing the method of remuneration to a group bonus scheme.
(c) Explain how a group bonus scheme would operate.
(4)
(d) Evaluate, from Amsha’s perspective, the use of a group bonus scheme for
remunerating the plumbing technicians.
(12)

(Total for Question 1 = 55 marks)

3
P49576A
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Summer 2017 www.mystudybro.com Accounting Unit 1
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Question Answer Mark

Number
1 (a)(i) AO1 (11), AO2 (17), AO3 (2)
A01: Eleven marks for recording the correct balance
into the financial statements without adjustment.
A02: Seventeen marks for recording the correct
balance into the financial statements with
adjustment.
A03: Two marks for calculating and applying two
stage adjustment.

Amsha
Statement of Profit or Loss and Other Comprehensive Income
for the year ended 31 March 2017
£ £
Revenue 525 000(1)AO1

Inventory 1 April 2016 17 500 (1)AO1

Purchases

(88 100 (1)AO1 +2 500(1)AO2) 90 600

108 100

Inventory 30 March 2017 (20 800) (1)AO1

Cost of sales (87 300)

Gross profit 437 700

Less
Plumbing technician’s wages 139 200 (1)AO1

Management salaries
(75 000- 18 000) 57 000 (1)AO2
Motor vehicle running expenses 45 000 (1)AO1
Electricity and gas 5 700 (1)AO1
Rent of premises (32 000 – 4 000) 28 000 (1)AO2
Marketing expenses (65 000 + 1 900) 66 900 (1)AO2
Bank loan interest (3 000 + 1 800) 4 800 (1)AO2
Provisions for depreciation:
Motor vehicles 36 000 (1)AO2

Office equipment 6 000 (1)AO2

Loose tools 12 000 (1)AO2

Allowance for doubtful debts 1 200 (1)AO2

401 800
Profit for the year 35 900(1)of+w AO2
437 700
(17)

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Question Answer Mark

Number
1 (a)(ii)
Statement of Financial Position at 31 March 2017

Cost Accumulated Carrying

Depreciation value
£ £ £
Non-current Assets
Motor vehicles 180 000 108 000 72 000 (1of)AO2
Office equipment 40 000 31 000 9 000 (1of)AO2
Loose tools 38 000 20 000 18 000 (1)AO2
258 000 159 000 99 000

Current Assets
Inventory 20 800 (1)AO1
Trade receivables 70 000
Less Allowance
for doubtful debts (2 100)
67 900 (1of)AO3
Other receivables 4 000 (1)AO2
Cash and bank 3 100 (1)AO1
95 800
Total Assets 194 800

Capital 65 000
Profit for the year 35 900 of
100 900
Drawings (18 000)
82 900 (1of)AO3
Current Liabilities
Trade payables
(45 700 (1)AO1+ 2 500 (1)AO2) 48 200
Other payables:
(1 900 (1)AO2+ 1 800 (1)AO2) 3 700
8% Bank loan
(repayable 31 May 2017) 60 000(1)AO1
111 900
Total Capital and Liabilities 194 800
(13)

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Question Answer Mark

Number
1 (b)(i) AO1 (1), AO2 (7), AO3 (1)
AO1: One mark for correctly including the annual
wage.
A02: Seven marks for correctly calculating the
annual costs and hourly rate.
AO3: One mark for correctly calculating the
productive hours per annum.

Per plumbing
Technician
£
Wages 10 000 (1)AO1
Employment taxes 2 000 (1)AO2
Motor vehicle depreciation 3 000 (1)AO2
Motor vehicle running exp 4 000 (1)AO2
Loose tools depreciation 1 000 (1of)AO2
20 000
Overheads and profit 7 000 (1of)AO2
27 000 (1of)AO2
(7)

Question Answer Mark

Number
1 (b)(ii) Total cost 27 000 of
Productive hours per annum 1 800 hours per annum
(45 x 50 x 80%) (1)AO3

£15 per hour (1of)AO2

(2)

Question Answer Mark

Number
1 (c) AO1 (4)
AO1: Four marks for describing a group incentive
scheme.

A standard time would be established for each job

(1)AO1 All of the jobs undertaken by all of the plumbing
technicians would be allocated a standard time. The
total standard time to complete all jobs for all
technicians could then be established. (1)AO1

This would be compared with the actual time taken to

complete all jobs to establish the time saved. (1)AO1
The plumbing technicians would then share a
percentage (usually 50%) of the monetary value of time
saved. (1)AO1

NOT
Benefits and disadvantages of a group incentive
(4)

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Question Indicative Content

Number
1(d) AO1 (1), AO2 (1), AO3 (5), AO4 (5)

Potential arguments for

• Technicians may complete the job in less time
• More efficient use of time, more jobs completed
• Cost of each job reduces
• Fixed overheads spread over more jobs
• Quick completion of jobs would make the business more competitive,
gaining customers
• Improved team work.

Potential arguments against

• Quality issues/more supervision required
• Some technicians may not work more efficiently but may leave
others to complete the task more quickly
• Possible reduction in customer service
• More efficient technicians may see the bonus scheme as unfair and
become demotivated.

Decision
Candidates may conclude that the arguments for or against outweigh the
counter arguments. Having reached a decision the rationale for that
position should be developed.
(12)
Level Mark Descriptor
0 A completely incorrect response.
Level 1-3 Isolated elements of knowledge and understanding recall based.
1 Weak or no relevant application to the scenario set.
Generic assertions may be present.
Level 4-6 Elements of knowledge and understanding, which are applied to the
2 scenario.
Chains of reasoning are present, but may be incomplete or invalid.
A generic or superficial assessment is present.
Level 7-9 Accurate and thorough understanding, supported throughout by relevant
3 application to the scenario.
Some analytical perspectives are present, with developed chains of
reasoning, showing causes and/or effects.
An attempt at an assessment is presented, using financial and non-
financial information, in an appropriate format and communicates reasoned
explanations
Level 10-12 Accurate and thorough knowledge and understanding, supported
4 throughout by relevant and effective application to the scenario.
A coherent and logical chain of reasoning, showing causes and effects.
Assessment is balanced, wide ranging and well contextualised using
financial and non-financial information and makes informed
recommendations and decisions.

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Winter 2013 www.mystudybro.com Accounting Unit 1
Past Paper This resource was created and owned by Pearson Edexcel WAC01 or WAC11

SOURCE MATERIAL FOR USE WITH QUESTION 5

5. Fahl Manufacturing has a machine shop producing products for the building industry. The machine
shop contains six machines, each producing a different product.

The following information relates to one of the machines, Machine 107:

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Cost £90 000
Delivery £2 000
Installation £8 000
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Additional machine shop information:

  
 
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Required:

(a) Calculate, for Machine 107, for the year ended 31 December 2012, the:

(i) total overhead cost

(8)
(ii) overhead cost per hour of operating Machine 107.
(4)

(b) Explain the term labour productivity.

(4)

Machine 107 requires one machine operator who is paid on a daywork basis and works 40 hours
per week for 50 weeks per year. The rate is £6 per hour and output for the year is 2 400 units.

It has been proposed that the machine operator of Machine 107 should be paid by a bonus scheme
in future. The two alternatives are:

Alternative Option 1 Payment for each unit completed. The rate would be £3 per unit. Output
for the year is estimated to be 4 800 units.

Alternative Option 2 A bonus consisting of an hourly payment of £3.50 per hour for all hours
worked, plus £1.50 per unit produced. Output is estimated to be 3 600
units.

P42221A 9 Turn over

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Required:

(c) Calculate, the labour cost per unit, for the following three payment options:

(i) Current daywork payment

(4)
(ii) Alternative Option 1
(2)
(iii) Alternative Option 2.
(4)

(d) Identify the most productive of the three payment options for Fahl Manufacturing.
(2)

(e) Evaluate, from the perspective of Fahl Manufacturing, the use of a bonus scheme for
remunerating the operator of Machine 107.
(4)
(Total 32 marks)
Answer space for question 5 is on pages 27 to 29 of the question paper.

P42221A 10
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Question Answer Mark

Number
4(e)(i) Current ratio;
Current assets 37 000 √ = 3.4:1 √of
Current liabilities 11 000 √

4(e)(ii) Liquid (acid test) ratio 37 000 – 27 000 =10 000 √ = 0.91:1 √of
11 000 11 000 √ (6)

Note: For of must state :1.

Question Answer Mark

Number
4(f) Valid answers may include:
Points for
• The percentage gross profit to sales was achieved
• The current ratio is very good
Points against:
• She failed to meet her overall profit total
• Most of the current assets are in stock
(4)
√√ per valid point x 2 points. MAX 1 point for and MAX 1 point
against.

Question Answer Mark

Number
5(a)(i) £
Depreciation (100 000-25 000) x 25% 18 750 √√
Power (2 000 x 75%) x 5 x £0.50 3 750 √
Managers salary (18 000/9) 2 000 √
Cleaners salary (12 000/6) 2 000 √
Heat & light (6 000 x 200/1 000) 1 200 √
Total overhead cost 27 700 √√(√of)

(8)

Question Answer Mark

Number
5(a)(ii)
Total overhead cost = 27 700 √of = £18.46 per hour √of (4)
Productive hours 1 500 √√

Question Answer Mark

Number
5(b) Labour productivity is the relationship between the input and the outputs. √√ (4)
The measurement is usually the number of units produced per hour. √√
Production made in a specified period √√

Do NOT accept : Output produced.

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Question Answer Mark

Number
5(c)(i) Daywork 2 000hrs x £6 = £12 000 √ = £5 per unit √√ (4)
2 400 units √

Question Answer Mark

Number
5(c)(ii) Alternative Option 1 = £3 per unit √√ (2)

Question Answer Mark

Number
5(c)(iii) Alternative
Option 2 2 000 hrs x £3.5 = 7 000
£1.50 x 3 600 units = 5 400
12 400 √ (4)
Divided by 3 600 √ = £3.44 per unit√√

Question Answer Mark

Number
5(d) The most productive is Alternative Option 1 √√of (2)
Question Answer Mark
Number
5(e) Valid answers may include:
Points for
• Greater production
• Lower unit costs than at present
Points against:
• Quality issues
• Potential accidents

√√ per valid point x 2 points. MAX 1 point for and MAX 1 point (4)
against.

Question Answer Mark

Number
6(a)(i) A schedule of debtors is a summary of all the debtors sums grouped by
age of debt.√√
6(a)(ii)
It is presumed that the older the debt the less likely it is to be paid √√
A projected percentage of non-payment for each age category is
applied and a total provision estimated√√ (6)

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