Accept any reasonable alternative 1 mark 1 benefit 1 Page 8 Mark Scheme

Accept any reasonable alternative 1 mark 1 benefit 1

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Accept any reasonable alternative (1 mark) ×1 benefit [1]
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Page 8 Mark Scheme Syllabus Paper Cambridge International AS/A Level – March 20169706 32 © Cambridge International Examinations 2016 (d) AlphaBeta$$Machine set-up66 00044 000(1)both Machine maintenance81 00099 000(1)both Materials handling60 00030 000(1)both Product inspection100 00060 000(1)both 307 000233 000[4] (e) AlphaBeta$$Direct materials80 000240 000Direct labour150 000300 000Production overheads307 000(of) 233 000(of) Total production costs537 000773 000Unit cost537.00(1of)154.60(1of) Mark-up 50%268.5077.30(1of) Unit selling price805.50(1of)231.90(1of) [5] (f) Responses could include: the market price of the products the impact on the profit the impact on the customers/demand the effect on competition Accept any reasonable alternative (2 marks) ×3 explanations [6] (g)Responses could include: Should change/should not change (1)recommendation Jumal Limited set the selling price on cost-plus base, therefore accurate cost information is very important. Comparing the traditional approach with activity based costing approach, if traditional approach is adopted, Alpha is under-costed (Alpha consumes a higher level of resources) while Beta is over-costed (Beta consumes a lower level of resources). This is the consequence of subsidisation. The problem of product under costing and over costing gives rise to a wrong selling price setting. Accept any reasonable alternative (2 marks) ×explanation1 mark for recommendation[3] [Total: 25]
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Page 9 Mark Scheme Syllabus Paper Cambridge International AS/A Level – March 20169706 32 © Cambridge International Examinations 2016 6 (a) $ Sales 2 072 000(1) $1 184 000 ×175% Direct materials 288 000(1) 8000 units ×3 kilos ×$12 Direct labour 640 000(1) 8000 units ×4 hours ×$20 Fixed overhead 256 000(1) 8000 units ×4 hours ×$8 Manufacturing costs 1 184 000Gross profit 888 000(1)of [5] (b)Responses could include: Flexible budget facilitates variance analysis Comparison with the actual result is more meaningful if the budget is at the same activity level of the actual result. What the budget will be if the actual output is known? In contrast with static budget which is prepared at the beginning of the budget period, flexible budget is prepared at the end of the budget period. This facilitates comparing the actual result for control purpose. More realistic. Accept any reasonable alternative (1 mark) ×2 reasons [2] (c) (i)Direct materials price ($12 ×22 850kg) – $269 000 = $5200(1) (F) (1)(ii)Direct materials usage (7500 ×3kg – 22 850kg) ×$12 = $4200(1) (A) (1)(iii)Fixed overhead expenditure $256 000 – $250 000 = $600 091) (F) (1)(iv)Fixed overhead volume (8000 units – 7500 units) ×4 hours ×$8 = $16 000 (1)(A) (1)[8]
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Page 10 Mark Scheme Syllabus Paper Cambridge International AS/A Level – March 20169706 32 © Cambridge International Examinations 2016 (d) (i)Adverse direct labour rate variance wage rate increases trade union activity inflation use of more skilled labour increase in overtime poor labour supply increasing the rate per hour/ increase in minimum wage per hour.
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