Accounting 9706 · AS & A Level · Costs and cost behaviour

Costs and cost behaviour — practice question

DL Limited is shortly going to introduce a system of budgetary control. The directors know that it ought to bring several benefits. Even so, they are unsure about the effect budgetary control will have on the company’s departmental managers.
(a)[6]

Explain three effects on the departmental managers of a business when a system of budgetary control is introduced.

(b)[3]

Calculate the contribution per unit.

(c)[3]

Calculate how far the target profit was missed for the year ended 31 December 2019.

(d(i))[6]

Calculate the annual profit if the directors select Option A.

(d(ii))[5]

Calculate the annual profit if the directors select Option B.

(e)[7]

Advise the directors on whether they ought to choose Option A or Option B, making use of financial and non-financial factors. Justify your decision.

Worked solution & mark scheme

This 30-mark question has a full step-by-step worked solution and mark scheme. One marking point: When managers help to set budgets, motivation rises

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