Mark Scheme (Final)

June 2022

Pearson LCCI Certificate

In Cost and Management Accounting
(ASE20111) Level 3
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June 2022
Question Paper Log Number P72079A
Publications Code ASE20111_01_2206_MS
All the material in this publication is copyright
© Pearson Education Ltd 2022
General Marking Guidance

• All candidates must receive the same treatment. Examiners must mark the

first candidate in exactly the same way as they mark the last.

• Mark schemes should be applied positively. Candidates must be rewarded for

what they have shown they can do rather than penalised for omissions.

• Examiners should mark according to the mark scheme not according to their

perception of where the grade boundaries may lie.

• There is no ceiling on achievement. All marks on the mark scheme should be

used appropriately.

• All the marks on the mark scheme are designed to be awarded. Examiners

should always award full marks if deserved, i.e. if the answer matches the

mark scheme. Examiners should also be prepared to award zero marks if the

candidate’s response is not worthy of credit according to the mark scheme.

• Where some judgement is required, mark schemes will provide the principles

by which marks will be awarded and exemplification may be limited.

• When examiners are in doubt regarding the application of the mark scheme

to a candidate’s response, the team leader must be consulted.

• Crossed out work should be marked UNLESS the candidate has replaced it

with an alternative response.

Abbreviation

of Own Figure rule

Accuracy marks can be awarded where the candidate’s answer does not match
the mark scheme, though is accurate based on their valid method.

cao Correct Answer Only rule

Accuracy marks will only be awarded if the candidate’s answer is correct,
and in line with the mark scheme.
Question Answer AO2 2 marks Mark
1(a) Direct material total

Standard price x standard usage ($6 x 5kg x 10 600) 318 000

Actual price x actual usage ($5.70 x 56 000) 319 200 (1)
$1 200 Adv (1)

Alternative answer:16 800 Fav (of) less 18 000 Adv (of) = $1 200 Adv
(of)
(2)

Question Answer AO2 2 marks Mark

1(a)(ii) Direct material price

Actual price x actual usage ($5.70 of x 56 000) 319 200 (of)

Standard price x actual usage ($6 x 56 000kg) 336 000 (1)
$16 800 Fav (1of)

Alternative answer: (5.70 – 6.00) $0.30 of x 56 000 = $16 800 Fav (1of)
($319 200 / 56 000) = $5.70 (1)
(2)

Question Answer AO2 2 marks Mark

1(a)(iii) Direct material usage variance

Not 18 000 kg Standard price x actual usage 336 000 (of – aii)
Standard price x standard usage ($6 x 5kg x 10 600) 318 000 (1)
$18 000 Adv (1of)

Alternative answer: (53 000 – 56 000) = 3 000 x $6 = $18 000 Adv (1of)
(10 600 x 5kg) = 53 000 kg (1)
(2)

Question Answer AO2 2 marks Mark

1(a)(iv) Direct labour total

Standard rate x standard hours ($9 x 4hrs x 10 600) 381 600

Actual rate x actual hours (41 340 x $9.80) 405 132 (1)
$23 532 Adv (1)

Alternative answer: 33 072 Adv (of) less 9 540 Fav (of) = $23 532 Adv
(of)
(2)
Question Answer AO2 2 marks Mark
1(a)(v) Direct labour rate

Actual rate x actual hours (41 340 x $9.80 of 405 132 (of)
Standard rate x actual hours ($9 x 41 340) 372 060 (1)
$33 072 Adv (1of)

Alternative answer: (9.80 – 9.00) 0.8 x 41 340 = $33 072 Adv (1of)
(405 132 / 41 340) = $9.80 (1)
(2)

Question Answer AO2 2 marks Mark

1(a)(vi) Direct labour efficiency

Not 9 540 Standard rate x actual hours 372 060 (of – av)
hours Standard rate x standard hours ($9 x 4hrs x 10 600) 381 600 (1)
$9 540 Fav (1of)

Alternative answer: (41 340 – 42 400) x $9 = $9 540 Fav (1of)

(10 600 x 4) = 42 400 hours (1)
(2)

Question Answer AO1 1 mark AO3 1 marks Mark

1(b)(i) Award 1 AO1 mark for basic explanation and 1 AO3 mark for
development.

An attainable standard is considered to be challenging but achievable

under normal operating conditions (1) It allows for a small amount of
wastage/idle time or inefficiency (1).
(2)

Question Answer AO1 1 mark AO3 1 mark Mark

1(b)(ii) Award 1 AO1 mark for basic explanation and 1 AO3 mark for
development.

An Ideal Standard is set under the highest level of performance

/efficiency under perfect operating conditions (1) – making no
allowance for wastage, inefficiency/production problems (1)
(2)
Question Answer AO3 2 marks Mark
1(c) Award 1 AO1 mark for basic explanation and 1 AO3 mark for
development.

Answers may include:

Given that perfect conditions rarely exist (or cannot be bettered) (1), it
is likely that most variances will be adverse (1).
As this standard is unlikely to be achieved (1) – workers are likely to
become demotivated (1).
If products have been priced on the basis of an ideal standard, it is
likely that most jobs will cost more than has been budgeted (1) –
profits will therefore be less than expected (1).
(2)

(Total for Question 1 = 18 marks)

Question Answer AO2 3 marks Mark
2(a)(i) Award 1 mark for both correct entries on the debit side.
Award 1 mark for each of WIP and Prod overhead entries on the credit
90% of side.
165 000 = 148 The account must be balanced off to be awarded the 3 marks.
500
Raw Materials Control Account
10% = $ $
16 500 Balance b/d 90 000 W I P control 162 000 (1)
= 1 mark [a1]
Financial ledger control 165 000 (1) Prod ohs control 18 000 (1)
[a2] Balance c/d 75 000
255 000 255 000

Workings: Raw materials issued 90 + 165 – 75 = 180 000 [1]

90% direct = $162 000 10% indirect = $18 000 [1of]

Deduct one mark for incorrect labelling (maximum of 3) (3)

Question Answer AO2 2 marks Mark

2(a)(ii) Award 1 mark for each of the WIP and Prod
overheads entries on the credit side.

Wages Control Account

$ $
Financial ledger control 150 000 W I P control 135 000
(1) [b] Prod ohs control 15 000
(1) [c] 150 000 150 000

Workings: WIP = 90% of $150 000 = $135 000 [1]

Production overheads = 10% of $150 000 = $15 000 [1]

Deduct one mark for incorrect labelling (maximum of 2) (2)

Question Answer AO2 3 marks Mark
2(a)(iii) Award 1 mark for all three entries on debit side (excluding the balance
c/d).
Award 1 mark for Balance c/d on debit side.
Award 1 mark for balance b/d and the W-I-P on the credit side.

Production Overheads Control Account

Raw materials control 18 000 of [a2] Balance b/d 7 000

Wages control 15 000 of [c] W I P control 148 500
(1)[d]
Fin ledger control 115 000 (1)
Balance c/d 7 500 (1of) ______
155 500 155
500

Workings: $135 000 x 110% = $148 500

Deduct one mark for incorrect labelling (maximum of 3) (3)

Question Answer AO2 3 marks Mark

2(a)(iv) Award 1 mark for first two entries on debit side (allow of for Mats
control).
Award 1 mark for second two entries on the debit side (allow both as
own figure)
Award 1 mark for of calculation of FG control and balance on credit
side.

W I P Control Account
$ $
Balance b/d 75 000 Finished goods 450 500
(of)[e]
Materials control 162 000 (1) (of)[ai]
Wages control 5 000 (of) [b]
Prod ohs control 148 500 (1) (of) [d] Balance c/d 70 000
520 500
520 500
Deduct one mark for incorrect labelling (maximum of 3) (3)
Question Answer AO2 2 marks Mark
2(a)(v) Award 1 mark for both debit entries (allow of for WIP control).
Award 1 mark for both credit entries (allow of for Prod cost of sales).

Finished Goods Control Account

$ $
Balance b/d 120 000 Prod cost of sales 420 500
(of)[f]
WIP control 450 500 (of) [e] Balance c/d 150 000

570 500 570 500

(2)

Question Answer AO2 4 marks Mark

2(a)(vi) Award 1 mark for sales on debit side and 1 mark for balance provided
that workings are shown if incorrect.
Award 1 mark for the first four credit entries. Award 1 mark for profit
provided that workings are shown if incorrect.

Financial Ledger Control Account

$ $
Sales 600 000 (1) Balance b/d 278 000
Raw mats control 165 000
Wages control 150 000
Prod ohs control 115 000 (1 for
all 4)
Balance c/d (W1) 287 500 (1) Profit c/d (W2) 179 500 (1)
887 500 887 500

W1 Balance =
RM $75 000 + W I P $70 000 + FG $150 000 = $295 000 less
prod o/h $7 500 (of) = $287 500 (of)

W2
Sales $600 000 less production cost of sales $420 500 (of)[f] =
Profit $179 500 (of)

Note: $295 000 less prod o/h $9 000 (of) = $286 000 (of)

$600 000 less $422 000 (of)[f] = Profit $178 000 (of)

$600 000 less $407 000 (of)[f] = Profit $193 000 (of) (4)
Question Answer AO1 1 mark AO3 1 mark Mark
2(b) Award 1 AO1 mark for basic explanation and 1 AO3 mark for
development.

In a non-integrated system the cost accounts are kept separate

from the financial accounts (1) so a reconciliation is needed to
ensure that both sets of accounts are accurate (1) (2)

Question Answer AO1 1 mark AO3 1 mark Mark

2(c) Award 1 AO1 mark for basic explanation and 1 AO3 mark for
development.

Using control accounts will enable the business to frequently check

the accuracy of the accounts (1) and to quickly highlight and
eliminate any errors (1)

The financial ledger control account will keep a record of all the
individual control account balances (1), as a further means of
checking on the accuracy of the control accounts (1)

ONE required (2)

(Total for Question 2 = 21 marks)

Question Answer AO2 6 marks Mark
3(a) Product Delta Gamma Omega
$/unit $/unit $/unit

Direct materials 60.00 120.00 90.00 (1)

Direct labour 37.50 30.00 22.50 (1)

Production overhead 78.80 63.04 47.28 (3of)

Production cost 176.30 213.04 159.78 (1of) [NO

aliens]

Workings: Direct labour hours = (2 000 x 2.5) 5000 + (1 600 x 2) 3 200

+ (1 200 x 1.5) 1 800 = 10 000 [1]
$315 200 / 10 000 = $31.52 [1of]
$31.52 x 2.5 = $78.80 $31.52 x 2 = $63.04 $31.52 x 1.5 = $47.28 [1of]
(6)

Question Answer AO2 13 marks Mar

k
3(b) Material handling
Material (2 000 x 4kg) 8 000 + (1 600 x 8kg) 12 800 + (1 200 x 6kg) 7 200
Total material used = 28 000 kg. [1] $77 000 / 28 000 kg = $2.75 per kg
used [1of]
Product Delta = 4 kg x $2.75 (OF) = $11.00 per unit.
Product Gamma = 8 kg x $2.75 = $22.00 per unit
Product Omega = 6 kg x $2.75 = $16.50 per unit [1 of for all three –
must be in units]
Machine set up
$115 200 / 200 batches = $576 per batch [1]
Product Delta = $576 (OF) x 80 batches = $46 080 / 2 000 units = $23.04
per unit
Product Gamma = $576 x 60 batches = $34 560 / 1 600 units = $21.60 per
unit
Product Omega = $576 x 60 batches = $34 560 / 1 200 u's = $28.80 per
unit
[1 of for all three – must be in units]

Machining
M/C hours (2 000 x 1.5) 3 000 + (1 600 x 3) 4 800 + (1 200 x 2) 2 400 = 10
200 [1]
$51 000 / 10 200 = $5.00 per machine hour [1of]
Product Delta = $5.00 (OF) x 1.5 machine hours = $7.50 per unit
Product Gamma = $5.00 x 3 machine hours = $15.00 per unit
Product Omega = $5.00 x 2 machine hours = $10.00 per unit
[1 of for all three – must be in units]

Finishing and packaging

$72 000 / 600 orders = $120.00 [1]
Product Delta = $120.00 x 260 / 2 000 units = $15.60 per unit
Product Gamma = $120.00 x 180 orders / 1 600 units = $13.50 per unit
Product Omega = $120.00 x 160 orders / 1 200 units = $16.00 per unit
[1 of for all three – must be in units]

Production overhead cost per unit

Product Delta Gamma Omega
$/unit $/unit $/unit
Material handling * 11.00 22.00 16.50 (3) [2of]
Machine set up * 23.04 21.60 28.80 (2) [1of]
Machining costs * 7.50 15.00 10.00 (3) [2of]
Finishing and packaging * 15.60 13.50 16.00 (2) [1of]
TOTAL 57.14 72.10 71.30 [10] [** 6]
Direct material 60.00 120.00 90.00
Direct labour 37.50 30.00 22.50
Total Cost 154.64 (1of) 222.10 (1of) 183.80 (1of) [**9]

ONLY award the total costs if all FOUR activities AND the direct
materials and direct labour figures are included.
*ALL figures must be in units (13)
 ** If total figures are shown for the activities and then divided by the
number of units for each product - deduct 4 marks

Question Answer AO4 2 marks Mark

3(c) If ABC was to be introduced the production overheads cost would be
more accurate (1) Product Delta’s production overhead cost would fall
from $176.30 to $154.64 (1of)
(2)

(Total for Question 3 = 21 marks)

Question Answer AO2 2 marks Mark
4(a)(i) Break even =
Selling price 75.00
Less variable costs 43.00 (9.50 + 25.00 + 8.50)
Contribution 32.00 (1)

Fixed overheads $81 440 / 32 = 2 545 units (1of)

(2)

Question Answer AO2 2 marks Mark

4(a)(ii) Profit = Contribution $32 (of) x 7 000 = $224 000 (1of)
Less fixed costs $81 440 = $142 560 (1of)
(2)

Question Answer AO2 2 marks Mark

4(b)(i) Revised break even =
Selling price 75.00
Less Variable costs 35.50 (9.50 + 17.50 + 8.50)
Contribution 39.50 (1of)

Fixed overheads $81 440 + 40%= $114 016 / 39.50 (of) = 2 887 units 1of) (2)

Question Answer AO2 2 marks Mark

4(b)(ii) Revised profit = Contribution $39.50 (of) x 7 000 = $276 500 (1of)
less fixed costs $114 016 = $162 484 (1of)
(2)

Question Answer AO1 2 marks Mark

4(c) Assumes:
The selling price per unit will remain constant across the
range of activity (1)
The variable cost per unit will remain constant across the range
of activity (1)
Total fixed costs will remain constant across the range of activity (1)
Costs can easily be determined as either fixed or variable (1)

TWO required
(2)
Question Answer AO2 2 marks AO3 4 marks Mark
4(d) Award 1 mark for correctly labeled axis and heading which must
clearly show the profit area, the loss area and units in 000s with
appropriate scaling

1 mark for each line: correctly labeled original position and revised
proposal

1 mark for both break-even:

BE1 2 545 units (of) and BE2 2 887 units (of)

1 mark for both fixed costs: FC1 $81 440 and FC2 $114 016 (of)

1 mark for both profits: original position $142 560 (of) and the
revised proposal $162 484 (of)

Chart needs to be clearly labelled

(6)

Question Answer AO4 4 marks AO5 2 marks Mark

4(e) Points in favour:

It is likely that the new machinery might improve the quality of the
product (1)
The business would make a greater contribution ($7.50 per unit) /
increased profit ($19 924) from the revised proposal (1)
The variable costs would fall from $43 to $39.50 per unit (1)

Two max

Points against:
The break-even is greater/margin of safety is lower/fixed costs are
higher (1) which might cause problems if sales start to fall (1)
The fixed costs increase as variable costs fall – could cause a
problem if sales start to fall, as the fixed costs will not reduce (1)
Has the business calculated the redundancy costs (1) and the
potential lack of goodwill from the labour force (1)
Can the business afford the cost of the new machine (1)

Two Max

Conclusion:
The business should/should not introduce the new machine (1)
One valid reason required to support the argument
[no repetition] (1)

Two Max
(6)
(Total for Question 4 = 22 marks)
Question Answer AO2 10 marks Mark
5(a) Working capital requirements:

Total production costs = $900 000 + $480 000 + $650 000 = $2 030 000 (1)
Sales value = 60 000 x $48.00 = $2 880 000 (1)
$ $
Direct material (8  365) days x $900 000 19 726 (1)
Work-in-progress
Direct material (10  365) days x $900 000 x 100% 24 657 (1)
Direct labour (10  365) days x $480 000 x 60 7 890 (1)
Production overheads (10  365) days x $650 000 x 40% 7 123 (1)
39 670 [3*]

Finished goods (14 365) days x $2 030 000 (of) 77 863 (1of)
Trade receivables (45  365) days x $2 880 000 (of) 355 068 (1of)
492 327
 
Less: Trade payables (35 365) days $900 000 (86 301) (1)
Total working capital requirements for the year 406 026 (1of)

*Only award 3 marks for 39 670 if it is correct – accept slight rounding

(10)
Question Answer AO4 4 AO5 2 marks Mark
5(b) Evaluate the importance of managing all aspects of the working capital cycle

Inventory:
The aim is to hold sufficient inventory to meet the immediate needs of the
customers (1), without holding excessive amounts of inventory which will tie
up working capital (1) and involve the business in unnecessary
holding costs (1)

Trade receivables
The business needs to offer attractive settlement terms to encourage
customers to purchase their products (1) but seek the earliest repayment
possible (1)

Trade payables
The business needs to get the best possible terms, discounts and repayment
period (1), whilst continuing to ensure that the
supplier is still willing to deal with their requirements (1)

Four maximum

Evaluation
However, cash must be collected in a timely fashion (1*) in order to pay
existing trade payables and to enable the business to purchase
more inventory (1*)
The aim is to delay payment to suppliers for as long as possible (1*)
so the business has sufficient ready cash to operate (1*)

Two maximum. Only award these marks (*) once (6)

Question Answer AO1 2 marks Mark

5(c) Two required:
Locks on doors / keypads / restricted areas (1)
Passwords on computers (1)
Limiting access to files by users (1)
(2)

(Total for Question 5 = 18 marks)

TOTAL FOR PAPER = 100 MARKS

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