Accounting 9706/42 February/March 2025: question paper and mark scheme

Mark scheme

Components using point-based marking: • Point marking is often used to reward knowledge, understanding and application of skills. We give credit where the candidate’s answer shows relevant knowledge, understanding and application of skills in answering the question. We do not give credit where the answer shows confusion. From this it follows that we: are correct c DO credit answers where candidates give more than one correct answer in one prompt/numbered/scaffolded space where extended writing is required rather than list -type answers. For example, questions that require n reasons (e.g. State two reasons …). d DO NOT credit answers simply for using a ‘key term’ unless that is all that is required. (Check for evidence it is understood and not used wrongly.) e DO NOT credit answers which are obviously self -contradicting or trying to cover all possibilities f DO NOT give further credit for what is effectively repetition of a correct point already credited unless the language itself is being tested. This applies equally to ‘mirror statements’ (i.e. polluted/not polluted). g DO NOT require spellings to be correct, unless this is part of the test. However spellings of with which they may be confused (e.g. Corrasion/Corrosion) • Slashes (/) or the word ‘or’ separate alternative ways of making the same point. • Semi colons (;) bullet points (•) or figures in brackets (1) separate different points. • Content in the answer column in brackets is for examiner information/context to clarify the indicate negative numbers).

Mark scheme

Calculation questions: each step, the correct answer(s) and the mark for each answer • If working/explanation is considered essential for full credit, this will be indicated in the calculation should be given full credit, even if no supporting working is s hown. award equivalent marks for reaching equivalent stages. • Where an answer makes use of a candidate’s own incorrect figure from previous working, the ‘own figure rule’ applies: full marks will be given if a correct and complete method is exceptions to this general principle will be noted. PUBLISHED

Mark scheme

Annotation: • For point marking, ticks can be used to indicate correct answers and crosses can be used to indicate wrong answers. There is no direct relationship between ticks and marks. Ticks have no defined meaning for levels of response marking. • For levels of response marking, the level awarded should be annotated on the script. • Other annotations will be used by examiners as agreed during standardisation, and the meaning will be understood by all examiners who marked that paper. PUBLISHED Annotations guidance for centres Examiners use a system of annotations as a shorthand for communicating their marking decisions to one another. Examiners are trained during the standardisation process on how and when to use annotations. The purpose of annotations is to inform the standard isation and monitoring processes and guide the supervising examiners when they are checking the work of examiners within their team. The meaning of annotations and how they are used is specific to each component and is understood by all examiners who mark the component. see on copies of scripts. Note that there may not be a direct correlation between the number of annotations on a script and the mark awarded. Similarly, the use of an annotation may not be an indication of the quality of the response. The annotations listed below were available to examiners marking this component in this series. Annotations Annotation Meaning Π Correct and relevant point made in answering the question. × Incorrect point or error made. LNK Two statements are linked. REP Repeat A An extraneous figure N0 No working shown AE Addition error (Arithmetic error) R1 Required item 1 R2 Required item 2 OF Own figure EVAL Evaluation NAQ Not answered question BOD Benefit of the doubt given. SEEN Noted but no credit given Highlight Highlight Off page Off page comment Comment PUBLISHED Abbreviations and guidance OF = own figure. The answer will be marked correct if a candidate has correctly used their own figure from a previous part or calculation. W = working. The working for a figure is given below. Where the figure has more than one mark associated with it, the working will show where individual marks are to be awarded. CF = correct figure. The figure has to be correct i.e. no extraneous items have been included in the calculation Extraneous item = an item that should not have been included in a calculation, including indirect expenses such as salaries in calculation of gross profit when there is one OF mark for gross profit’ Curly brackets, }, are used to show where one mark is given for more than one figure. If the figures are not adjacent, each is marked with a curly bracket and a symbol e.g. }* row = all figures in the row must be correct for this mark to be awarded Marks for figures are dependent on correct sign/direction Accept other valid responses. This statement indicates that marks may be awarded for answers valid. PUBLISHED Question Answer Marks 1(a)(i) Discuss: 2 whether or not apportioning the factory rent on a per unit basis is the most suitable way to apportion that cost. It is simple to apply (1) but may not be realistic (1) and floor area might be a more suitable basis (1). Max 2 Accept other valid responses. 1(a)(ii) Discuss: 2 whether or not setting selling prices by use of a fixed mark-up is the most suitable way to set them. It is also simple to apply (1) but does not consider the price that competitors may be charging (1). If costs reduce then a fixed percentage mark-up will reduce the profit (1). Max 2 Accept other valid responses. 1(b) Calculate the total annual cost of quality inspections if production of Z 2 takes place. [(2.34 × 1000) + (1.3 × 3000)] (1) × 2 = $12 480 (1) 1(c)(i) Calculate the increase per year in the following costs which would occur 2 if production of Z takes place. machine set ups 13 020 – [(3.6 × 1000) + (1.95 × 3000)] (1) = $3570 (1) 1(c)(ii) Calculate the increase per year in the following costs which would occur 2 if production of Z took place. factory rent 30 000 – (4000 × 6) (1) = $6000 (1) PUBLISHED Question Answer Marks 1(d) Calculate the selling price of one unit of each product if production of Z takes place. 8 X Y Z $ $ $ Direct costs 36.00 41.00 34.00 (1) row Quality inspections 2.88 1.60 2.40 W1 (1)OF (1)OF (1)OF Machine set ups W2 3.36 1.82 2.10 (1) row Factory rent W3 5.00 5.00 5.00 (1) row Total 47.24 49.42 43.50 Mark-up 23.62 24.71 21.75 (1)OF row Selling price 70.86 74.13 65.25 (1)OF row W1 Quality inspections X 12 480 (OF) × 300/1300 × 1/1000 = 2.88 Y 12 480 (OF) × 500/1300 × 1/3000 = 1.60 Z 12 480 (OF) × 500/1300 × 1/2000 = 2.40 W2 Machine set ups X 13 020 (CF) × 40/155 × 1/1000 = 3.36 Y 13 020 (CF) × 65/155 × 1/3000 = 1.82 Z 13 020 (CF) × 50/155 × 1/2000 = 2.10 W3 Factory rent 30 000/(1000 + 3000 + 2000) = 5.00 1(e) Advise the directors whether or not they should reduce the number of 7 quality inspections of product Z. Justify your answer Once production is well established it should be clear to management that the quality is satisfactory (1). Although a second member of staff has been employed it may be possible to reduce the hours which one or both are working/deploy them elsewhere (1) but this may demotivate other employees (1). However this will reduce total costs (1) and therefore the mark up / selling price (1). If the salaries of the inspection staff are fixed (1) the total cost cannot be reduced (1) and the inspection cost apportioned to the other products will increase (1). There may be an impact on quality (1) which may affect customer satisfaction (1). Max 6 Decision supported with a comment (1) Accept other valid responses PUBLISHED Question Answer Marks 2(a)(i) State how a budget may be: 1 a motivating influence for staff If staff are involved in the setting of the budgets they may be motivated (1). Accept other valid responses 2(a)(ii) State how a budget may be: 1 a demotivating influence for staff. If the budgets are imposed on staff they may be demotivated (1). Accept other valid responses 2(b) Calculate the percentage of credit customers who pay in the month 1 following sale. 20% (1) 2(c) Prepare a revised trade receivables budget for February and March 6 based on the directors’ assumptions about the discount. February March $ $ Balance b/f 172 400 * 120 400 Sales 100 000 92 000 272 400 212 400 Receipts – one month after sale 73 440 (1) 72 000 (1) Discount 8 160 (1) 8 000 (1) Receipts – two months after 70 400 *(1) 20 400 sale Balance c/f 120 400 112 000 (1)OF *(1) for both items unaffected as pre-change PUBLISHED Question Answer Marks 2(d) Prepare a revised budgeted statement of financial position at 31 March 4 2026 based on the directors’ assumptions about the discount. $ Non-current assets 426 000 Current assets Inventory 91 000 Trade receivables 112 000 (1)OF Bank (-22180+43840) 21 660 (1)OF Total assets 650 660 Equity Share capital 500 000 Retained earnings (77320 – 16160) 61 160 (1)OF Current liabilities Trade payables 89 500 Total equity and liabilities 650 660 (1) if both totals agree 2(e) State three reasons why the company might find it useful to prepare its 3 budgets using spreadsheets rather than manually. Arithmetical errors should be avoided. (1) Speed of calculation will be improved. (1) There is automatic recalculation if one variable is changed. (1) Security can be enhanced with passwords. (1) Multiple user applications may be available. (1) ‘Sort’ or ‘select’ functions may be useful. (1) Enhanced presentation. (1) Max 3 Accept other valid responses 2(f) State two advantages of using variance analysis. 2 Measures the deviation from budgeted costs and revenues (1) Identify reasons / causes of deviations (1) Leads to improvements in future plans / take remedial action (1) Max 2 Accept other valid responses PUBLISHED Question Answer Marks 2(g) Advise the directors whether or not they should make one of the 7 supervisors redundant. Justify your answer. The fixed overhead expenditure variance would have been $10 000 favourable (1) and so the problem may not lie with the amount spent (1) so much as with actual output being less than budgeted (1). Redundancy costs might be incurred (1) and labour efficiency might be affected adversely (1) which may lead to defective production (1) which may lead to customers not being satisfied (1). When the next budget is set the budgeted fixed overheads will fall (1). The change would save money / improve profitability (1) but the remaining supervisor may be demotivated (1). Max 6 Decision supported with a comment (1) Accept other valid responses