Mark Scheme

July 2022

Pearson LCCI Certificate in Cost &

Management Accounting
Level 3 (ASE 20111)
LCCI Qualifications

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Publication Code: ASE20111_01_2207_MS

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© Pearson Education Ltd 2022

2 LCCI ASE20111, July 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.

3 LCCI ASE20111, July 2022

Question Answer AO2 2 Mark

1(a) (2)
Good prodn = 4 500 + 500 rejects = 5 000 units (1) / 50 = 100 batches (1)
Question Answer AO2 4 Mark
1(b) (4)
Material Aye = 4kg / 0.8 = 5kg (1) x 5 000 units (of) = 25 000 kg (1of)

(Production units = 5 000 x 4 kg = 20 000 kg plus wastage 5 000 kg)

Material Bee = 2kg / 0.8 = 2.5kg (1) x 5 000 units (of) = 12 500 kg (1of)

(Production units = 5 000 x 2 kg = 10 000 kg plus wastage 2 500 kg)

Question Answer AO2 2 Mark

1(c)(i)
Aye: Purchases 25 000 (of 1b) less opening inventory 5 000 kg plus closing (2)
inventory (5 000 kg x 90%) 4 500 kg = 24 500 kg (1) x $5 = $122 500 (1of)

Question Answer AO2 2 Mark

1(c)(ii)

Bee: Purchases = 12 500 (of 1b) less opening inventory 2 000 kg plus closing
inventory (2 000 kg x 80%) 1 600 kg =12 100 kg (1) x $8 = $96 800 (1of) (2)

Question Answer AO2 2 Mark

1(d)(i) (2)
Mat Aye waste 25 000 (of 1b) x 20% =5 000 kgs (1of) x $2= $10 000 (1of)

Question Answer AO2 2 Mark

1(d)(ii) (2)
Rejected units = 5 000 (of ia) x 10 % = 500 (1of) x $25 = $12 500 (1of)

Question Answer AO1 2 AO3 2 Mark

1(e)
Award 1 AO1 mark for basic point and 1 AO3 point for development.
Answers might include: (4)
• Business will hold enough inventory (1) – thus avoiding problems of lost
production/sales/customers as a result of running out (1).
• Business more likely to hold the right type of inventory (1) – this might
mean that the business maximises sales (1).
• The business won’t hold too much inventory (1) – meaning that holding
costs are reduced / less money is tied up / less wastage (1)
• Employees might realise that as the business knows how much inventory is
being held (1) – and so might be discouraged from stealing it (1).
TWO required

TOTAL FOR QUESTION 1 = 18 MARKS

4 LCCI ASE20111, July 2022

Question Answer AO2 9 Mark

2(a)
Process account (physical units)

Kg $ Kg $

Material Alpha 2 000 30 000 both Product Exe 2 000 65 100 (1of)

Material Gamma 4 000 45 000 (1) Product Whye 1 500 48 825 (1of)

Labour 36 000 both Product Zed 1 500 48 825 (1of)

Overheads 54 000 (1) Product Delta 400 3 600 (1)

Scrap disposals 1 350 (1) Normal loss 600 (1) NIL

6 000 166 350 6 000 166 350

Workings – joint cost apportionment

Product Exe 162 750 x 2 000 / 5 000 = $65 100 Alternative answer:

Product Whye 162 750 x 1 500 / 5 000 = $48 825 $162 750 / 5 000 = $32.55

Product Zed 162 750 x 1 500 / 5 000 = $48 825 Exe = $32.55 x 2 000 = $65 100

166 350 – 3 600 = $162 750 (1) Whye and Zed =

Normal loss = 6 000 less 5 400 = 600 [1] $32.55 x 1 500 = $48 825

Scrap costs 600 x $2.25 = $1 350 [1] (9)

Question Answer AO1 2 AO3 2 Mark

2(b) 1 (AO1) mark for basic point and 1 (AO3) mark for development.
MUST explain the differences between the two and NOT a description
of each item
• Joint-products are intentionally produced by a single manufacturing process
(1) whereas by-products are an incidental consequence of the process (1). (4)
• The sale proceeds from joint-products tends to be commercially significant
(1) The sale proceeds of by-products is generally regarded as being of minor
value (1).
• The costs of the process prior to the split-off point are apportioned be-
tween the joint-products (1) but are not apportioned to the by-products (1).
• Joint products are usually separated at some point and each requires further
work (1) whereas by-products are usually disposed of straightaway (1).
A maximum of two points to be made.

Question Answer AO3 2 Mark

2(c) Products do not sell for the same price (1) products making a greater contribution
to the business’ profitability are not bearing a higher share of the costs – which is
unfair (1).

The method results in all joint products having the same cost per unit,
which might mean those with lower prices show a loss (1) This might be
misleading for decision making as the nature of joint products is that
they all have to be produced from the common process (1).
ONE required (2)

5 LCCI ASE20111, July 2022

Question Answer AO1 2 AO3 2 Mark

2(d)
1 AO1 mark for basic point and 1 AO3 mark for development.

• The computer can carry out all calculations (1) – this will reduce
errors and save time (1). (4)
• When data is entered onto the system, all relevant parts of the system
will be updated (1) This means information is up-to-date / there
is only one figure stored for any given item (1).
• Computerised systems usually have a reports menu where formats
can be adapted (1) – this means that reports can be produced
quickly / in the required format (1).
• Computerised systems usually have inbuilt protections / audit
tools (1) – so it is less likely that improbable data can be
entered and will highlight irregular / fraudulent behaviour (1).

2 points required which must relate to the BENEFITS of

operating such a system

TOTAL FOR QUESTION 2 = 19 MARKS

Question Answer AO2 2 Mark

3(a)(i) (2)
Contribution = $160 – $96 = $64 (1)

Fixed costs $168 000 / $64 = 2 625 units (1)

Question Answer AO2 2 Mark

3(a)(ii) (2)
Sales in units to make required profit of = $168 000 + $144 000

= $312 000 (1) /$64 (of) = 4 875 units (1of)

Question Answer AO2 6 Mark

3(b) (6)
$
Required Profit for the period 186 50 0
Fixed Costs 295 000
Total Contribution 481 500 (1)
Product Beta 1 500 x $85 (180 - 95) (127 500) (1)
Product Delta 2 250 x $80 (135 – 55) (180 000) (1)
Balance of contribution 174 000 (1of)
$174 000 / (125 -65) $60 (1) = 2 900 units of Gamma (1of)

6 LCCI ASE20111, July 2022

Question Answer AO2 6 Mark

3(c) (6)
Increase in demand
(4 500 output / 75% x 90%) = 5 400 units (1)
Variable costs: $252 000 / 4 500 x 5 400 = $56 per unit (1)
New contribution = $85 less $56 = $29 per unit (1of)
$29 (of) x 5 400 = $156 600 (1of)
$156 000 less fixed costs $117 000 (1) = $39 600 profit (1of)

Answer: $
Sales 5 400 units (1) x $85 459 000 (1)
less Direct materials 226 800
Fixed prod ohs 63 000
Variable ohs 32 400 322 200 (1)
Gross profit 136 800 (1of)
less admin overheads
fixed costs 54 000
variable 43 200 97 200 (1)
Profit 39 600 (1of)
Question Answer AO4 2 Mark

3(d) (2)
The original situation makes the highest profit (1of) therefore the
business should not go ahead with the alternative proposal (1of)

Question Answer AO1 2 AO3 2 Mark

3(e) (4)
In terms of behaviour, costs in the short-term can be thought of
as variable, semi-variable or fixed (1) However, as time progresses,
all costs are thought to be variable (1).

An example of this is factory rent, which in the short term is fixed.

(1) Rent could increase when (over time) output increases and
further premises have to be rented / or inflation increases the rental
charge (1).

TOTAL FOR QUESTION 3 = 22 MARKS

7 LCCI ASE20111, July 2022

Question Answer AO2 6 Mark

4(a) Overhead cost re-apportionment (budget) (6)

Cost centres Machining Assembly Finishing Factory Admin

& Testing Maint Support

Indirect labour ($) 160 000 240 000 80 000 280 000 200 000

Other expenses ($) 103 600 98 600 112 800 140 000 80 000
263 600 338 600 192 800
280 000

Admin support 56 000 56 000 112 000 56 000 (280 000) (1)

476 000 (1) nil

Factory maintenance 190 400 190 400 95 200 (476 000) (1)
510 000 585 000 400 000 nil
(1of) (1of) (1of)

Question Answer AO2 3 Mark

4(b) Cost centre overhead absorption rates (3)

Machining Assembly Finishing & Testing

Total overheads ($) 510 000 585 000 400 000

Machine hours 30 000 30 000

Direct Labour hours ______ ______ 10 000

$17.00 $19.50 $40.00

per m/c hour per m/c hour per dir lab hour

(1of) (1of) (1of)

Question Answer AO2 6 Mark

4(c) (6)

Calculation of over absorption or under absorption:

Machining Assembly Finishing & Testing

Actual machine/labour hours 29 710 29 905 10 100

Overhead absorption rate ($) 17.00 19.50 40.00

Overheads absorbed – ($) 505 070 (1of) 583 147 (1of) 404 000 (1of)
Overheads incurred – ($) 487 000 632 800 439 260

over/under absorption 18 070 (49 653) (35 260)

over under under

(1of) (1of) (1of)

8 LCCI ASE20111, July 2022

Question Answer AO4 4 AO5 2 Mark

4(d) (6)
In the machining department the actual overheads incurred were lower than
budgeted (1of) The overhead recovery has been greater leading to an over
absorption. (1of)

In the assembly and finishing departments, there has been a serious under-
absorption of overheads. The actual overhead costs were significantly higher
than the budgeted costs (1of). The budgeted costs have been
underestimated and the OAR has been insufficiently calculated (1of)

Four marks maximum

Conclusion

For period 10, the business has under-absorbed by $66 843, meaning that not
all the overheads have been passed on to the customer (1of) – which is eating
into the profits of the business (1of).

If the company continues to do less work than budgeted / continues to

underestimate its costs (1) then there will be less contribution made and
therefore less profit in the future (1).

Two maximum

Must be an evaluation of the current overhead absorption and how this

will affect future periods

TOTAL FOR QUESTION 4 = 21 MARKS

9 LCCI ASE20111, July 2022

Question Answer AO2 14 Mark

5(a) (14)
Month Three Month Four Month Five

Receipts $ $ $
Trade receivables 480 415 501 660 550 440 (4)
Less payments
Materials 194 950 201 300 216 200 (3)
Wages 140 241 141 475 144 457 (2)

Overheads 178 700 200 500 213 500 (2)

Total 513 891 543 275 574 157 (1of)

Net cash flow (33 476) (41 615) (23 717) (1of)
Balance b/f (31 500) (64 976) (106 591)
Balance c/f (64 976) (106 591) (130 308) (1of)

Workings:

Receipts Month Three Month Four Month Five

Month One – 35% 184 100 196 000 228 200 [1]

Month Two – 35% 177 275 184 100 196 000 [1]

Month Three – 30% x 0.8 119 040 121 560 126 240 [1]
480 415 501 660 550 440 [1of]

Payments to trade payable Month Three Month Four Month Five

Month One – 30% 61 200 63 600 70 200 [1]

Month Two – 40% 74 800 81 600 84 800 [1]

Month Three – 30% 58 950 56 100 61 200 [1]

194 950 201 300 216 200

Wage payments Month Three Month Four Month Five

Month One – 65% 91 325 92 300 94 757 [1]

Month Two – 35% 48 916 49 175 49 700 [1]

140 241 141 475 144 457

Overhead payments Month Three Month Four Month Five

Month One – 75% 138 000 154 500 162 000 [1]

Month Two – 25% 40 700 46 000 51 500 [1]

178 700 200 500 213 500

10 LCCI ASE20111, July 2022

Question Answer AO4 4 AO5 2 Mark

5(b) Answers may include: (6)

Positive factors:

The direct wages appear to be stable (1)

The business is increasing its sales revenue each month, with a significant
increase in month five (1)

The direct costs (materials and overheads) seem to be increasing in line (not at a
faster rate) with the projected sales increase (1)

TWO Maximum

Negative factors:

In all three months the business has a negative cash flow – costs are higher than
revenue (1)

The business has a growing overdraft requirement (1)

Receipts from trade receivables are too slow and there is a significant irrecovera-
ble debt (1)

An investigation of costs needs to be undertaken (1)

TWO maximum

Conclusion

At the current levels of cash flow, the business is not sustainable (1)

Without taking some immediate action the business is heading for serious liquidity
difficulties (1)

Receipts need to be recovered quicker than a three-month period, especially as

materials are being paid for in two months (1)

TWO maximum

TOTAL FOR QUESTION 5 = 20 MARKS

TOTAL FOR PAPER = 100 MARKS

11 LCCI ASE20111, July 2022