Overhead Cost

MyStudyBro - Revision Exercise Tool
This Revision Handout includes the Questions and Answers of a total of 5 exercises!
Chapters:
Overheads - Unit 1 (Pearson Edexcel)
Page 1 (WAC01 or WAC11) 2019 Winter
Job Costing
Page 4 (WAC01 or WAC11) 2019 Winter - Answer

Also Includes:
Job Costing
Page 9 (WAC01 or WAC11) 2018 Winter

Page 11 (WAC01 or WAC11) 2018 Winter - Answer
Page 16 (WAC01 or WAC11) 2017 Autumn
Page 18 (WAC01 or WAC11) 2017 Autumn - Answer
Page 24 (WAC01 or WAC11) 2016 Summer
Page 26 (WAC01 or WAC11) 2016 Summer - Answer
Page 29 (WAC01 or WAC11) 2016 Autumn
Page 32 (WAC01 or WAC11) 2016 Autumn - Answer
Winter 2019 www.mystudybro.com Accounting Unit 1
Past Paper This resource was created and owned by Pearson Edexcel WAC01 or WAC11
5 Fix-it is a business that repairs double glazing in customers’ homes.

The business employs five technicians who carry out the repairs in customers’ homes.
Fix-it is preparing estimates for the next financial year ended 31 December 2019. The
following information is available.
(1) Materials and parts
All materials and parts used will be charged to customer jobs at cost plus £15 per
job.
(2) Labour
• Each technician works 50 hours per week for 48 weeks per year.
• Each technician spends 75% of their time on jobs chargeable to the customer,
the remainder of their time is travelling and administration.
• Technicians are paid £7 per hour for the first 40 hours per week and time and
a half for the remaining hours.
• A bonus of £32 per working week is also paid to each technician.
(3) Overheads
• Total budgeted overhead cost £135 000
• Overheads are recovered on the basis of total direct labour hours for all
technicians hours chargeable to customers.
(4) The mark-up on all jobs will be 25%.
Required
(a) Explain the accounting term job costing.
(2)
(b) Calculate the:
(i) number of labour hours for each technician chargeable to the customer
per year
(2)
(ii) labour rate per hour that customers must be charged to recover the total
labour cost
(3)
(iii) overhead recovery rate to be charged per direct labour hour.
(2)
(c) Prepare a quotation for a customer where it is estimated that the materials and
parts will cost £103 and the job will take 7 direct labour hours to complete.
(5)
(d) State two reasons why overheads might be over-absorbed in a year.
(2)
12
P54957A
MSB - Page 1
Fix-it has a total budgeted overhead cost of £135 000 for the year ended
31 December 2019.
Fix-it has three departments: administration, stores and repairs.
The owner has provided the following information.
(1) Budgeted overheads
£
Allocated-
administration 9 800
stores 2 700
repairs 4 500
Motor vehicle expenses 35 000
Rent and rates 25 000
Management salaries 48 000
Premises insurance 10 000
(2) Other information
Administration Stores Repairs
Motor vehicle (number) 1 1 5
Floor area (Sq m) 4 000 1 000 -
Employees (number) 4 1 5
Required
(e) (i) Explain the difference between allocation of overheads and apportionment
of overheads
(2)
(ii) Calculate, by completing the table in the Question Paper, the total budgeted
overheads for each department for the year ended 31 December 2019.
(6)
(f ) Evaluate the use of overhead apportionment.
(6)
(Total for Question 5 = 30 marks)
13
P54957A
MSB - Page 2 Turn over
(ii) Calculate, by completing the table the total budgeted overheads for each
department for the year ended 31 December 2019.
(6)
£ £ £
Allocated
Motor vehicle expenses
Rent and rates
Management salaries
Premises insurance
Total
Workings
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*P54957A02936*
29
Past Paper (Mark Scheme) This resource was created and owned by Pearson Edexcel WAC01 or WAC11
Question Answer Mark

Number
5 (a) AO1 (2)
AO1: Two marks for explaining the accounting
terms.
Job costing – Used where jobs are unique (1) AO1 and to
meet the specific order requirements (1) AO1 of the
customer.
(2)

Number
5 (b)(i) AO1 (1), A02 (1)
A01: One mark for calculating rates.
A02: One mark for total budgeted labour.
(2)
Chargeable hours 50 x 48= 2 400 (1) AO1 x 75% = 1 800 hours (1) AO2

Number
5 (b)(ii) AO2 (2), A03 (1)
A02: Two marks for calculating rate to be charged.
A03: One mark for total budgeted labour cost.
(3)
Labour rate per hour

((40 x £7)+(10 x £10.5)+£32)x48=20 016 (1) AO3=£11.12 per hour (1of)
1 800 (1of) AO2 AO2
Or
100 080 (1) AO3 = £11.12 per hour (1of) AO2
9 000 (1of) AO2
MSB - Page 4

Number
5 (b)(iii) AO2 (2)
A02: Two marks for calculating overhead recovery
rate.
(2)
Overhead recovery rate

135 000 = £15 (1of) AO2 per direct labour hour
9 000 (1of) AO2

Number
5 (c) AO1 (1), AO2 (4)
AO1: One mark for calculating total price.
A02: Four marks for calculating quotation
components.
(5)
Quotation
£ £
Raw materials 103 + 15 118 (1of) AO2
Direct labour 7 x £11.12 77.84 (1of) AO2
Overheads 7 x £15 105 (1of) AO2
300.84
Profit 75.21 (1of) AO2
Price to customer 376.05 (1of) AO1
MSB - Page 5

Number
5 (d) AO1 (2)
AO1: Two marks for stating reasons.
• Workers worked more hours on productive work

than planned
• Less overtime was worked than planned
• Actual overheads were lower than budgeted.
(2)
2 x (1) AO1

Number
5 (e)(i) AO1(2)
AO1: Two marks for explaining the difference
between terms.
Allocated costs are those which are wholly

identifiable to one cost centre. (1) AO1
Apportioned costs are shared between cost centres on
some equitable basis. (1) AO1 (2)
MSB - Page 6

Number
5 (e)(ii) AO1 (1), AO2 (3), A03 (2)
AO1: One mark for calculating totals
A02: Three marks for allocated overheads and
two way apportionment.
A03: Two marks for overheads requiring three way
apportionment.

£ £ £
Allocated 9 800 2 700 4 500
(1)
Motor 5 000 5 000 25 000
vehicle (1)
expenses
Rent and 20 000 5 000 -
rates (1)
Managem 19 200 4 800 24 000
ent (1)
salaries
Premises 8 000 2 000 -
insurance (1)
62 000 19 500 53 500
(1)
(1) AO1 x 1
(2) AO2 x 2 (6)
(3) AO3 x 3
MSB - Page 7
Question Indicative Content Mark

Number
5 (f) AO2 (1), AO3 (2), AO4 (3)
Positive points for apportionment
Uses the most appropriate ‘cost driver’ to divide the overhead

into departments.
Enables costs of departments etc to be calculated and used for
management purposes.
Negative points for apportionment
Lacks precision, only the best cost driver available can be used.
Only an estimate of cost of a department or activity.
Decision
Candidates may conclude that apportionment of overheads is
positive or negative. Candidates should support that decision (6)
with an appropriate rationale.
Level Mark Descriptor
0 A completely incorrect response.

Level 1 1-2 Isolated elements of knowledge and understanding which are
recall based.
Generic assertions may be present.
Weak or no relevant application to the scenario set.
Level 2 3-4 Elements of knowledge and understanding, which are applied
to the scenario.
Some analysis is present, with developed chains of reasoning,
showing causes and/or effects applied to the scenario,
although these may be incomplete or invalid.
An attempt at an evaluation is presented, using financial and
perhaps non-financial information, with a decision.
Level 3 5-6 Accurate and thorough knowledge and understanding.
Application to the scenario is relevant and effective.
A coherent and logical chain of reasoning, showing causes and
effects is present.
Evaluation is balanced and wide ranging, using financial and
perhaps non-financial information and an appropriate
decision is made.
MSB - Page 8
4 Highclass Garages repairs accident damaged cars. It has two production departments:
body repair shop and paint shop, and two service departments: stores and
administration.
The following information is available for the year ended 31 December 2018.
(1) Total overheads for each department will be:
£
Body repair shop 62 000
Paint shop 43 000
Stores 16 000
Administration 12 000
(2) The use of the two service departments has been estimated to be:
Body repair
Paint shop Stores Administration
shop
Stores 50% 25% - 25%
Administration 60% 30% 10% -
(3) Annual hours for each department that can be charged to customers’ jobs will be:
Body repair shop 6 400 labour hours per year
Paint shop 3 400 labour hours per year.
Required
(a) (i) Define the term allocation of overheads.
(2)
(ii) Explain why some overheads cannot be allocated.
(2)
(b) Reapportion the total overheads of the service departments to the production
departments using the continuous allotment method.
(12)
(c) Calculate the hourly overhead recovery rate, to the nearest pence, for the:
(i) body repair shop
(2)
(ii) paint shop.
(2)
8
P54343A
MSB - Page 9
In the previous year, ended 31 December 2017, the overhead recovery for the
paint shop was under absorbed by £3 800
(d) (i) Explain the meaning of the term under absorbed
(2)
(ii) Identify two possible reasons for the paint shop’s overhead recovery being
under absorbed.
(2)
(e) Evaluate the use of apportionment in determining the cost of operating
a department.
(6)
9
P54343A

Level 1 1-2 Isolated elements of knowledge and understanding
which are recall based.
Level 2 3-4 Elements of knowledge and understanding, which are

applied to the scenario.
Some analysis is present, with developed chains of
reasoning, showing causes and/or effects applied to the
scenario, although these may be incomplete or invalid.
An attempt at an evaluation is presented, using
financial and perhaps non-financial information, with a
decision.
A coherent and logical chain of reasoning, showing
causes and effects is present.
Evaluation is balanced and wide ranging, using financial
and perhaps non-financial information and an
appropriate decision is made.

Number
4 (a) AO1 (4)
AO1: Four marks for explaining the term
allocation and its limitation.
(i) Costs which are wholly identifiable with one

cost centre (1) AO1 are charged direct to
that cost centre. (1) AO1
(ii) For some costs the benefit of the

expenditure are felt by several cost centres.
(1) AO1 The total has to be shared or
apportioned on some equitable basis. (1)
AO1
(4)
MSB - Page 11

Number
4 (b) AO1(1), AO2(8), AO3 (3)
AO1: One mark for totalling both the body
repair shop and paint shop.
A02: Eight marks for calculating the
re-apportionment.
AO3: Three marks for calculating the
effect on the service departments.
(12)
Body repair shop Paint shop Stores Administration

£ £ £ £
62 000 43 000 16 000 12 000
8 000 (1) AO2 4 000 (16 000) (1) 4 000
(1) AO2 AO3
9 600 (1) AO2 4 800 1 600 (1) (16 000)
(1) AO2 AO2
800 (1) AO2 400 (1 600) (1) 400
AO3
240 120 40 (400) (1)
(1) AO2 AO3
25 (1of) 15 (40)
AO2
80 665 52 335
(1) AO1
Both
Accept reasonable rounding.
MSB - Page 12

Number
4 (c) AO2(4)
A02: Four marks for calculating the
re-apportionment.
(i) Body repair shop £80 665 of = £12.6 per hour (1)of AO2
6 400 hrs (1) AO2
(2)
(ii) Paint shop £52 335 of = £15.39 per hour (1)of AO2
3 400 hrs (1) AO2
(2)
(4)

Number
4 (d) AO1 (4)
AO1: Four marks for explaining the term
under absorbed and identifying two
possible reasons.
(i) The total of the overhead recovered is less (1)

AO1 than the actual overhead expenditure. (1)
AO1
OR
Actual overhead costs is greater (1) AO1 than
budget. (1) AO1
(2)
(ii) The original calculation of rate per hour was

based upon incorrect figures.
The projection of hours of recovery was
overstated.
Expenditure was greater than projected
The time of painters finishing jobs improved.
2 x (1) AO1
(2)
(4)
MSB - Page 13

Number
4 (e) AO2 (1), AO3 (2), AO4 (3)
Potential positive arguments for apportionment
The cost must be recovered in the price charged

to the customer and therefore to do this the cost
must be charged to a specific productive cost
centre. Apportionment is just a means of charging
the cost.
The cost driver will be used to ensure a
reasonable match between the usage of the cost
and the sum apportioned to the cost centre.
Potential negative points against apportionment
Because the cost is used across many cost

centres the sum apportioned to a specific cost
centre is only an estimate of the usage.
With some costs it may be difficult to establish a
strong cost driver. Therefore, any apportionment
will largely be arbitrary. Continuous allotment
when used to re-apportion overheads may be an
example of that arbitrary apportionment.
The need for an experienced practitioner to carry
out the calculations and the time required to do
so.
Decision
Candidates may conclude that it is a satisfactory
or unsatisfactory way of determining the cost of
operating. The candidate’s decision should be
supported by reference to positive and negative
points.
(6)
MSB - Page 14

decision.


Number
5 (a) AO2(4)
AO2 Four marks for calculating the
depreciation to be charged on each vehicle.
(4)
Year ended motor motor motor motor Total

vehicle A vehicle B vehicle C vehicle D
£ £ £ £ £
31 December 1 500 3 200 2 700 2 000 9 400
2017 (1) AO2 (1) AO2 (1) AO2 (1) AO2
MSB - Page 15
Autumn 2017 www.mystudybro.com Accounting Unit 1
5 Ding Repairs is in business as a car body repair workshop. The business has three
departments: Metal shop, Paint shop and Administration. The following information is
available:
(1) Raw materials – car parts and paint.
All car parts and paint to repair cars are purchased to order and will be charged to
the customer at cost plus 20%
(2) Labour
Metal shop employees are paid £7.50 per hour.
Paint shop employees are paid £10.00 per hour.
Metal shop employees work 45 hours per week for 50 weeks per year.
80% of all employee working hours are charged directly to customer repair jobs.
Paint shop employees work 48 hours per week for 50 weeks per year.
75% of all employee working hours are charged directly to customer repair jobs.
(3) Overheads
Allocated overheads:
£
• Metal shop 39 000
• Paint shop 53 000
• Administration 24 000
Other overheads:
£
Depreciation of equipment 28 000
Insurance 7 000
Additional information
Metal shop Paint shop Administration

Floor area (sq m) 600 300 100
Employees (number) 5 3 1
Equipment value (£) 20 000 100 000 20 000
The total overhead for Administration is reallocated: 75% Metal Shop, 25% Paint
Shop.
12
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MSB - Page 16
Required
(a) Explain the accounting terms:
(i) semi-variable cost
(2)
(ii) overhead allocation
(2)
(iii) absorption of overheads.
(2)
(b) Calculate the total overhead cost (including the reallocation of Administration),
of the:
• Metal shop
• Paint shop.
(7)
(c) Calculate the overhead recovery rates per labour hour for the:
(i) Metal shop
(2)
(ii) Paint shop.
(2)
A customer has requested a quotation for the repair of his car. Ding Repairs will
purchase the car parts and paint for £250. The repair will take 16 hours in the Metal
shop and 20 hours in the Paint shop. Ding Repairs will include an additional charge of
£150 on the total cost for profit.
Required
(d) Prepare the quotation for the customer.
(7)
(e) Evaluate the usefulness of apportioning overheads to departments.
(6)
13
P50730A

Number
5 (a) (i) AO1 (2)
A01: Two marks for explaining the terms.
Semi-variable cost
The cost includes a fixed (1) AO1 and a variable

component (1) AO1
OR
Electricity, telephone charges where there is a
fixed cost (standing charge) (1) and a variable
cost (cost of calls or electricity usage) (1). (2)

Number
5 (a) (ii) AO1 (2)
Overhead allocation
Costs which are wholly identifiable (1) AO1 with

one cost centre. (1) AO1
(2)
MSB - Page 18

Number
5 (a) (iii) AO1 (2)
Absorption of overheads
A basis of recovering the total costs of a cost

centre by the jobs that pass through them (1)
AO1. This may be by a labour hour rate or
machine hour rate. (1) AO1
OR
The money charged for customers jobs (1) based

on the calculated budgeted overhead absorption
rate (1)
(2)
MSB - Page 19

Number
5 (b) AO1 (2), AO2 (4), AO3 (1)
AO1: Two marks for transferring the
allocated overheads and totalling.
A02: Four marks for identifying the correct
basis of apportionment and carrying out the
apportionment.
AO3: One mark for apportioning
depreciation.
Metal shop Paint shop Administration

£ £ £
Allocated overheads 39 000 53 000 24 000 (1) AO1
Rent and rates 12 000 6 000 2 000 (1) AO2
Depreciation 4 000 20 000 4 000 (1) AO3
Insurance 1 000 5 000 1 000 (1) AO2
Management salaries 25 000 15 000 5 000 (1) AO2

81 000 99 000 36 000
Reallocation 27 000 9 000 (1)of AO2
Total 108 000 108 000 (1)of AO1
(7)
MSB - Page 20

Number
5 (c) (i) AO2 (1), AO3 (1)
A02: One mark for calculating the hourly rate.
A03: One mark for calculating the annual
hours chargeable to customer’s jobs.
Metal shop
£108 000 = £12 (1)of AO2

9 000 (1) AO3
(2)

Number
5 (c) (ii) AO2 (1), AO3 (1)
A02: One mark for calculating the hourly rate.
A03: One mark for calculating the annual
hours chargeable to customer’s jobs.
Paint shop
£108 000 = £20 (1)of AO2

5 400 (1) AO3
(2)
MSB - Page 21

Number
5 (d) AO1 (1), AO2 (6)
A01: One mark for transferring the profit
figure to the quotation.
A03: Six marks for calculating the corrected
figure and then correctly inserting it into the
quotation.
Quotation
£ £
Raw materials £250 + 20% 300 (1) AO2
Direct labour
Metal shop 16 x £7.5 120 (1) AO2
Paint shop 20 x £10 200 (1) AO2
320
Overheads
Metal shop 16 x £12 192 (1)of AO2
Paint shop 20 x £20 400 (1)of AO2
592
Total 1 212
Profit 150 (1) AO1
Quotation price 1 362 (1)of
AO2
(7)
MSB - Page 22

Number
5 (e) AO2 (1), AO3 (2), AO4 (3)
Potential positive arguments for apportionment

A realistic estimate of the usage of specific costs by
each department.
A departmental rate can be calculated for
quotations.
Potential negative points for apportionment

Only an estimate.
Cost may not be reduced if the department is
removed or under performs.
Costly, time consuming, requires skill.
Decision
Candidates may decide that apportionment is useful or
not useful. Candidate’s decisions must be supported by
a rationale of key points in arriving at that conclusion.
(6)
decision.
MSB - Page 23
Summer 2016 www.mystudybro.com Accounting Unit 1
5 Hiruni makes parts for washing machines. Her largest contract is to supply part PNC3
to a major manufacturer, Wash the World.
The following information is available for part PNC3:
• Manufacture of part PNC3 is in batches of 200
• Raw materials cost £303.70 per batch
• Direct labour per batch – 30 hours Assembly
20 hours Finishing
Direct labour is paid at the rate of £5 per hour for Assembly and £4 per hour
for Finishing
• Overheads:
£
Employment insurance 9 000
Premises maintenance 12 000
There are three departments, two production departments, Assembly and Finishing
and one service department, Administration
Assembly Finishing Administration
Floor area occupied (sq m) 4 000 2 400 1 600
Direct labour hours (per annum) 9 200 5 600 3 200
Administration costs are reapportioned to the production departments on the basis
of 50% to Assembly and 50% to Finishing.
Overheads are recovered on the basis of direct labour hours
• Mark-up
Hiruni adds 15% to production cost for her profit.
Required
(a) Explain the terms:
(i) semi-fixed cost
(2)
(ii) semi-variable cost.
(2)
(b) Explain the difference between allocated overheads and apportioned
overheads.
(4)
12
P49575A
MSB - Page 24
(c) Calculate the:

(i) total overhead for each of the three departments
(7)
(i) overhead recovery rate to be used in each of the Assembly and
Finishing Departments.
(2)
(d) Calculate the selling price of one part PNC3.
(7)
Hiruni has been requested by Wash the World to reduce the price of part PNC3 from
the existing £5 per part to £4 per part.
(e) Evaluate whether Hiruni should meet Wash the World’s request to reduce her
selling price for part PNC3.
(6)
13
P49575A
Question Indicative content

Number
5 (a) AO1 (4)
A01: Two marks for explaining the term semi-fixed cost and two
marks for explaining the term semi-variable cost.
• A semi-fixed cost are fixed over a limited range of output

(1 AO1) but once that limit is reached it increases but then
remain fixed over the next range of output (1 AO1)
• A semi-variable cost includes both a fixed and a variable
component (1 AO1) The fixed cost will be incurred if there is no
output but the variable element will increase directly with usage
(1 AO1)
Accept valid diagrams but not examples on their own.

Number
5 (b) AO1 (4)
A01: Four marks for differentiating between allocated
overheads and apportioned overheads.
Allocated overheads are those costs which directly relate to a

department or cost centre (1 AO1) therefore they can be directly
allocated to those specific departments or cost centres (1 AO1).
Apportioned overheads relate to at least two departments or cost
centres (1 AO1) they must be apportioned on the most
appropriate and reasonable basis (I AO1).
MSB - Page 26

Number
5 (c) AO1 (1), AO2 (12), AO3 (3)
A01: One marks recording the correct raw material.
A02: Twelve marks for correct calculations.
A03: Three marks for the correct basis for calculating the
product overheads and unit cost.
(c)
(i) Total overhead
Assembly Finishing Administration
£ £ £
Rent and rates 8 000 4 800 3 200 (1 AO2)
Employment insurance 4 600 2 800 1 600 (1 AO2)
Premises maintenance 6 000 3 600 2 400 (1 AO2)
Management salaries 9 200 5 600 3 200 (1 AO2)
27 800 16 800 10 400 (1 AO2)
Re-apportionment 5 200 5 200 (10 400) (1 AO2)
33 000 22 000 (1 AO2)
(ii) Overhead recovery rate
Assembly Finishing
Overhead £33 000 = £3.59 per hour £22 000 = £3.93 per hour
Labour hours 9 200 (1of AO2) 5 600 (1of AO2)
Any reasonable rounding.
(d) Cost of manufacture

5 (d) £
Raw material 303.70 (1 AO1)
Direct labour Assembly 30 x £5 150.00 (1 AO2)

Finishing 20 x £4 80.00 (1 AO2)
Overhead Assembly 30 x £3.59 107.70 (1of AO3)

Finishing 20 x £3.93 78.60 (1of AO3)
720.00
Mark up 15% 108.00 (1of AO2)
828.00
Cost per component £4.14 each (1of AO3)
MSB - Page 27

Number
5(e) AO2 (1), AO3 (2), AO4 (3)
A02: One mark for applying positive or negative aspects of
Hiruni’s pricing policy, drawing out key points.
A03: Two marks for interpreting and analysing possible
solutions to pricing, using a developed chain of reasoning.
A04: Three marks for evaluating the scenario counterbalancing
the arguments giving weight to a range of financial and non-
financial aspects to arrive at a logical conclusion.
Potential positive arguments for reducing the price

• The actual manufacturing cost without mark-up is less than the
£4 per component requirement
• Hiruni will need to consider whether she wishes to lose a major
customer for her components
• Still leaves a positive contribution.
Potential negative points for reducing the price
• The actual cost of manufacture at £4.14 per component,
including mark-up, is greater than what Wash the World will pay
• If Huruni is to meet the price a reduced profit/profit margin will
be made on the component.

recall based.
to the scenario.
A coherent and logical chain of reasoning, showing causes
and effects is present.
decision is made.
MSB - Page 28
5 Martino has been asked to make recommendations for the purchase and network
rental of mobile phones.
He has obtained the following information from three suppliers:
Mobile phone Monthly contract

Company Call costs
purchase price network rental
2 pence (£0.02) per minute for
£50 per month the first 500 minutes per month.
National
£120 for a period of 12 10 pence (£0.10) per minute for
Telecom
months. all minutes over 500 minutes per
month.
£10 per month
One2one 15 pence (£0.15) per minute for all
£260 for a period of 20
Link minutes per month.
months.
£45 per month
8 pence (£0.08) per minute for all
Speed Call £90 for a period of 15
minutes per month.
months.
(1) Mobile phones purchased will have no resale value at the end of the contract
period.
(2) Mobile phones are only required by two managers, whose projected usage is:
• Sales Manager – 600 minutes per month
• Purchasing Manager – 300 minutes per month.
10
P48250A
MSB - Page 29
Required
(a) Explain the difference between variable and fixed costs.
(4)
(b) Give one example of a variable cost and a fixed cost from the purchase or
network rental of mobiles phones.
(2)
(c) Complete the table in your Question Paper showing the cost per month for
the usage of a mobile phone from each supplier for the Sales Manager and the
Purchasing Manager.
(16)
(d) Recommend which supplier of mobile phones is the most cost effective for the:
• Sales Manager
• Purchasing Manager.
(2)
The business is considering apportioning the cost of mobile phones between
its departments.
(e) Evaluate the proposal of apportioning business mobile phone costs.
(6)
11
P48250A
(c) Complete the table below showing the cost per month for the usage of a mobile
phone from each supplier for the Sales Manager and the Purchasing Manager.
(16)
Company Sales Manager Purchasing Manager
National Telecom
One2one Link
Speed Call
22
MSB - Page 31 *P48250A02228*

recall based.
to the scenario.
decision is made.

Number
5(a) AO1 (4)
A01: Four marks for explaining the two terms.
A variable cost varies directly (1) with activity levels (1)

Fixed costs do not change (1) with the level of activity (1)
(4)

Number
5(b) AO1(2)
A01: Two marks for carrying out the calculation.
Variable costs – Call charges (1)

Fixed cost – Depreciation of phone or network rental (1)
(2)

Number
5(c) AO2(12), AO3(4)
A02: Twelve marks for carrying out the calculation.
AO3: Four marks for carrying out multiple
calculations correctly.
(16)
MSB - Page 32
Company Sales Manager Purchasing Manager
National Telecom Fixed costs £ Fixed costs £

Depreciation 10 (1) AO2 Depreciation 10
Rental 50 Rental 50
60(1) AO3 60
Semi-var/Vari Variable
Call 10 Call costs 6(1) AO2
10 Total costs 66(1 of) AO2
20(1) AO3
Total cost 80(1 of) AO2
One2One Link Fixed costs £ Fixed costs £

Depreciation 13 Depreciation 13
Rental 10 Rental 10
23(1) AO3 23
Variable Variable
Call 90 (1) AO2 Call 45 (1)
90 AO2
Total cost 113(1 of) AO2 45
Total cost 68(1 of) AO2
Speed Call Fixed costs £ Fixed costs £
Depreciation 6 Depreciation 6
Rental 45 Rental 45
51 (1) AO3 51
Variable Variable
Call 48 (1) AO2 Call 24 (1) AO2
48 24
Total cost 99(1 of) AO2 Total cost 75(1 of) AO2

Number
5(d) AO1(2)
A01: Two marks for identification.
• Sales Manager National Telecom (1of)

• Purchasing Manager National Telecom (1of)
(2)
MSB - Page 33
Question Indicative content Mark

Number
5(e) AO2 (1), AO3 (2), AO4 (3)
Potential arguments for apportionment

• Overhead is divided on the most reasonable basis. The
sales and purchasing managers will be responsible for the
provision of services to a number of departments. There is
a requirement to apportion this cost and the most
reasonable basis for apportionment must be determined
• A fair share of overheads is attached to each department.
What amounts to a ‘fair share’ will be determined by the
method of apportionment chosen
• The apportionment will be based upon the cost driver for
that overhead. The factor which links the expenditure to
the volume of use must be determined.
Potential arguments against apportionment

• The division of the cost is an estimate of use and not a
precise calculation
• Apportionment can be an accurate calculation because
there is a strong link between the cost and the ‘driver’.
However, the link can be arbitrary if the link between the
cost and the ‘driver’ is not strong
• Requires considerable work to determine the basis of
apportionment. Detailed consideration of the driving
factors and collection of data to enable the
apportionment to be completed will be required
Conclusion
• Candidates may argue for or against apportioning the
mobile phone costs. Candidate’s decision should be
supported by key arguments in arriving at that decision.
(6)
MSB - Page 34

recall based.
to the scenario.
decision is made.

Number
6(a) AO1 (4)
AO1: Four marks for correct explanations.
Capital expenditure is the acquisition of or enhancement of non-

current assets (1) which will provide a benefit to the business
for more than one year. (1)
Revenue expenditure is day to day expenditure (1) the benefit

of which will only be in the current year. (1)
(4)
MSB - Page 35

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MyStudyBro - Revision Exercise Tool

Page 4 (WAC01 or WAC11) 2019 Winter - Answer

Page 9 (WAC01 or WAC11) 2018 Winter

5 Fix-it is a business that repairs double glazing in customers’ homes.

Administration Stores Repairs

Motor vehicle (number) 1 1 5

Floor area (Sq m) 4 000 1 000 -

(Total for Question 5 = 30 marks)

Administration Stores Repairs

Motor vehicle expenses

Rent and rates

Question Answer Mark

Question Answer Mark

Question Answer Mark

Labour rate per hour

Question Answer Mark

Overhead recovery rate

Question Answer Mark

Question Answer Mark

• Workers worked more hours on productive work

Question Answer Mark

Allocated costs are those which are wholly

Question Answer Mark

Administration Stores Repairs

Question Indicative Content Mark

Positive points for apportionment

Uses the most appropriate ‘cost driver’ to divide the overhead

Negative points for apportionment

0 A completely incorrect response.

Stores 50% 25% - 25%

Administration 60% 30% 10% -

(Total for Question 4 = 30 marks)

Level Mark Descriptor

Level 2 3-4 Elements of knowledge and understanding, which are

Question Answer Mark

(i) Costs which are wholly identifiable with one

(ii) For some costs the benefit of the

Question Answer Mark

Body repair shop Paint shop Stores Administration

Question Answer Mark

Question Answer Mark

(i) The total of the overhead recovered is less (1)

(ii) The original calculation of rate per hour was

Question Indicative Content Mark

Potential positive arguments for apportionment

The cost must be recovered in the price charged

Potential negative points against apportionment

Because the cost is used across many cost

An attempt at an evaluation is presented, using

Level 3 5-6 Accurate and thorough knowledge and understanding.

Question Answer Mark

Year ended motor motor motor motor Total

Metal shop Paint shop Administration

(Total for Question 5 = 30 marks)

Question Answer Mark

The cost includes a fixed (1) AO1 and a variable

Question Answer Mark

Costs which are wholly identifiable (1) AO1 with

Question Answer Mark

A basis of recovering the total costs of a cost

The money charged for customers jobs (1) based

Question Answer Mark

Metal shop Paint shop Administration