CAMBRIDGE INTERNATIONAL EXAMINATIONS

Cambridge International Advanced Subsidiary and Advanced Level

MARK SCHEME for the October/November 2014 series

9706 ACCOUNTING
9706/22 Paper 2 (Structured Questions – Core),
maximum raw mark 90

This mark scheme is published as an aid to teachers and candidates, to indicate the requirements of
the examination. It shows the basis on which Examiners were instructed to award marks. It does not
indicate the details of the discussions that took place at an Examiners’ meeting before marking began,
which would have considered the acceptability of alternative answers.

Mark schemes should be read in conjunction with the question paper and the Principal Examiner
Report for Teachers.

Cambridge will not enter into discussions about these mark schemes.

Cambridge is publishing the mark schemes for the October/November 2014 series for
most Cambridge IGCSE®, Cambridge International A and AS Level components and some
Cambridge O Level components.

® IGCSE is the registered trademark of Cambridge International Examinations.

 Page 2 Mark Scheme Syllabus Paper
Cambridge International AS/A Level – October/November 2014 9706 22

1 (a) Nother Limited’s Manufacturing Account for the year ended 31 March 2014

$ $
Raw Material 360.
Inventory at 1 April 2013 1 896.
Purchases 2 256.

Inventory at 31 March 2014 (300) (1cf)

Cost of raw material consumed 1 956. (1)
Manufacturing wages (1250 + 40) 1 290. (1of) label needed
Prime cost 3 246.
Factory expenses (780 (1) + 112 (1)) 892
Provision for depreciation Premises 10 (1)
Machinery 18 (2) or 21 (1)
Loss on sale of machine (44 – 24 –14) 6 (1cf) 926.
4 172. (1) must be minus
Work in progress (210 – 220) (10)
Factory cost of production 4 162.

Own figure marks are awarded with no aliens.

Treat revenue as an alien if used in the manufacturing account, lose prime cost mark but all
other marks are available – potential maximum 9 marks.
Award marks for raw material cost, manufacturing wages and overheads irrespective of
direction.
Work in progress must be the final figure to be rewarded. [10]

(b) Nother Limited’s Income Statement for the year ended 31 March 2014
$ $
Revenue (5054 –14) 5 040 (1cf)
Finished goods
Inventory at 1 April 2013 432.
Cost of production 4 162. (1of)
4 594.
Inventory at 31 March 2014 (480) 4114
Gross profit (must be labelled) 926 (1of)
Administrative expenses (80 (1) – 8 (1)) 72
Sales expenses (416 (1) + 56 (1)) 472
Bad debts written off 16
Increase in provision for doubtful receivables (42 (1) – 36 (1)) 6 566
Profit for the year (must be labelled) 360 (1of)

Own figure marks are awarded with no aliens.

If retained earnings are entered before profit for the year treat as alien therefore no own
figure marks for profit for the year.
Loss on disposal is not to be treated as an alien in the expenses. [10]

© Cambridge International Examinations 2014

Page 3 Mark Scheme Syllabus Paper
Cambridge International AS/A Level – October/November 2014 9706 22

(c) (i) Direct costs – can be directly traced to a product unit. (1)

Examples – Direct materials (1)

Direct labour (1)
Direct expenses (1)
Maximum 1 for example [2]

(ii) Indirect costs – cannot be economically (1) traced to a product unit. (1)

Examples – Indirect wages (1)

Indirect materials (1)
Depreciation of factory machinery (1)
Insurance (1)
Power (1)
Other suitable examples
Maximum 2 for examples [4]

(iii) Prime cost – total of all direct expenses. (1) Must refer to total.

Direct materials + direct labour (+ direct expenses) (1) [2]

(iv) Production cost – total cost of producing the goods in the factory. (1)
Must refer to total.

Prime cost + factory overheads ± work in progress adjustment (1)

Must include work in progress. [2]

[Total: 30]

© Cambridge International Examinations 2014

 Page 4 Mark Scheme Syllabus Paper
Cambridge International AS/A Level – October/November 2014 9706 22

2 (a)
Bill and Charles
Calculation of partnership profit for the year ended 31 December 2013

$
Decrease in current account balances: (14 840) (1cf)
Bill ($17 000 – 2160) (20 800) (1cf)
Charles ($18 000 + 2800) (35 640)

Add: drawings (2 × $24 000) 48 000. (1 + 1)

Profit for the year 12 360. (1of) no aliens

Alternative answer – Profit for the year – 83 640 (4)

If calculation includes capital accounts treat as alien and no own figure marks for profit for
the year.
If only one partner is considered maximum of 2 marks (opening balance and drawings).
Award 2 marks for drawings irrespective of direction. [5]

(b)
Bill Charles Bill Charles
$ $ $ $
Goodwill 28 800 (1) 19 200 (1) Balance b/d 144 000 60 000 (1 both)
Balance c/d 147 200 56 800 Goodwill 32 000 (1) 16 000 (1)

176 000 76 000 176 000 76 000

Balance b/d 147 200 (1of) 56 800 (1of)

Bill’s balance b/d may be shown as 120 000 + 24 000. Still award 1 mark for both partners’
opening balances. Must be T account format or three column running balance.

Alternative answer

Capital Accounts – Bill

$ $
Goodwill 28 800 (1) Balance b/d 144 000
Balance c/d 147 200 Goodwill 32 000 (1)
176 000 176 000

Balance b/d 147 200 (1of)

Capital Accounts – Charles

Charles Charles
$ $
Goodwill 19 200 (1) Balance b/d 60 000 (1 both)
Balance c/d 56 800 Goodwill 16 000 (1)
76 000 76 000

Balance b/d 56 800 (1of)

© Cambridge International Examinations 2014

Page 5 Mark Scheme Syllabus Paper
Cambridge International AS/A Level – October/November 2014 9706 22

(c)
$
Profit for the year 12 000. (1cf)

Add interest on drawings

Bill 1 320
Charles 1 320 2 640. (1cf for both)

Less 14 640.
Interest on capital
Bill 5 888 (1of)
Charles 2 272 (1of) 8 160

Salary Bill 3 000

Charles 2 600 5 600 (1cf) (13 760)

880.

Share of profit
Bill ( 3 5 ) 528 (1of)
Charles ( 2 5 ) 352 (1of)
. 880

Interest on capital
Award own figure marks if closing capital account balance from (b) × 8% × 6 months.
Award ‘0’ marks if interest on capital is calculated on opening balances – Bill – 5760
Charles 2400.
Own figure marks for share of profit/loss must be candidates own figure shared in the correct
ratio.
[7]

(d)
Current account – Bill
$ $
Interest on drawings 1 320 (1of) Balance b/d 2 160 (1)
Drawings 12 000 (1) Salary 3 000 (1of)
Interest on capital 5 888 (1of)
Share of profit 528 (1of)
Balance c/d 1 744
13 320 13 320
Balance b/d 1 744 (1of) no aliens

Interest on drawings, interest on capital, salary and share of profit/loss must relate to the
candidates own figures from part (c). [7]

© Cambridge International Examinations 2014

 Page 6 Mark Scheme Syllabus Paper
Cambridge International AS/A Level – October/November 2014 9706 22

(e) (i) To try to limit partners’ drawings (1)

Reward partner with lower drawings (1)
Ensure cash is retained in the business (1)

Maximum 2 [2]

(ii) Reward the partner for business investment (1)

Encourage partners to introduce more capital (1)
Reward partners for the lost opportunity cost of capital invested (1)

Maximum 2 [2]

[Total: 30]

3 (a)
Total Machining Assembly Stores Cantee
n
Indirect wages (1cf) 232 000 61 867 123 733 30 933. 15 467.
Machine maintenance (1cf) 94 000 87 935 6 065
Machine insurance (1cf) 9 020 6 380 2 640
Rent and rates (1cf) 49 600 19 840 22 320 4 960. 2 480.
Buildings insurance (1cf) 12 800 5 120 5 760 1 280. 640.
Machine depreciation (1cf) 26 600 18 815 7 785
424 020 199 957 168 303 37 173. 18 587.
(1of) 5 576 10 225 2 788. (18 587)
39 961.
(1of) 33 126 6 835 (39 961)
238 659 185 361

All marks are for the complete line.

Own figure marks for Canteen and Stores must be in correct ratios. [8]

(b) Machining: [$238 659/46 400] (1of) = $5.14 [per machine hour] (1 for narrative)

Assembly: [$185 361/28 600] (1of) = $6.48 [per direct labour hour] (1 for narrative)

Do not accept ‘per hour’ for narrative marks. [4]

(c)
Machining Assembly
Actual overhead ($) 239 110 192 860
Absorbed $5.14 × 49 120 252 477
Absorbed $6.48 × 28 150 182 412
$13 367 (1of) $10 448 (1of)
Over absorbed (1of) Under absorbed (1of)
[4]

© Cambridge International Examinations 2014

Page 7 Mark Scheme Syllabus Paper
Cambridge International AS/A Level – October/November 2014 9706 22

(d) Machining department

$451 more overhead incurred than budgeted (1)
2720 more machine hours worked than were budgeted (1)

Assembly department
$7499 more overhead incurred than budgeted (1)
450 fewer labour hours worked (1)

One mark per department.

To award marks there must be reference to the individual departments (do not reward
generic answers). [2]

(e)
$
Direct materials 14.10 (1)
Direct labour machining ($7.80 × 50/60) 6.50 (1)
Direct labour assembly ($6.30 × 12/60) 1.26 (1)
Overheads machining department ($5.14 × 30/60) 2.57 (1of)
Overheads assembly department ($6.48 × 12/60) 1.30 (1of)
25.73
× 250 units = 6 432.50
Mark-up $6432.50 × (35/65) 3 463.65 (1of)
Total invoice value 9 896.15

Alternative answer
$
Direct materials 3 525.00 (1)
Direct labour machining 1 625.00 (1)
Direct labour assembly 315.00 (1)
Overheads machining department 642.50 (1of)
Overheads assembly department 324.00 (1of)
6 431.50
Mark-up $6431.50 × (35/65) 3 463.12 (1of)
Total invoice value 9 894.62

Own figure marks for overheads must relate to the candidates’ answer to part (e).
Allow for roundings. [6]

(f) 1. Allocation – Directly attributable costs (1) are allocated to the relevant department. (1)

2. Apportionment – Costs that cannot be directly attributed to a department (1) are

apportioned on an equitable basis. (1)

3. Absorption – Total costs (1) that have been allocated and apportioned to a department are
absorbed into products on the basis of the product’s use of the overheads. (1) [6]

[Total: 30]

© Cambridge International Examinations 2014