Cambridge AS & A Level Accounting 9706/42 is the May/June 2026 Paper 4 (Cost and Management Accounting), variant 2. It is an A Level component worth 50 marks, it lasts 1 hour, and you answer both 25-mark questions. The data is in an insert (Sources A and B). The biggest single part is the 12-mark cash budget in Question 1(c), and each question ends with a 7-mark “advise” part. This guide goes through every part, with the final figures and key workings from the official mark scheme. The paper and its mark scheme are free on the Tutopiya Learning Portal.

For an overview of all four 9706 papers from this series, see A Level Accounting 9706 May/June 2026 past papers: what came up and how it was marked.

9706/42 at a glance

The rubric is: answer all questions.

Question	Source	Topics	Marks
1	A	Budgeting: two disadvantages of JIT (2), purchases budget (4), cash budget for three months (12), advise on cutting the advertising budget (7)	25
2	B	Costing P1 and P2: unit cost with absorption costing (6), advantages and disadvantages of ABC (4), change in overheads per unit under ABC (8), advise on a 50% mark-up for P2 (7)	25
Total			50

Question-by-question walkthrough

As on the other 9706 papers, OF (own figure) marks are given for using your own earlier figure correctly, a curly bracket means one mark for a group of figures, and “row” means every figure in the row must be right.

Question 1: budgeting (25 marks)

• 1(a) Two disadvantages of JIT (2 marks): the risk of running out of inventory and delaying production or missing unexpected demand; being less likely to get bulk discounts; more frequent deliveries and higher ordering costs; and needing reliable suppliers, possibly more than one.
• 1(b) Purchases budget for September to November (4 marks): production follows the next month’s sales: 4200 units in September, 5000 in October and 6600 in November. October also needs an extra 400 units to build up the minimum inventory (1 mark), making 5400. Each unit uses 2 kg of material.

	September	October	November
Units	4200	5400	6600
Material (kg)	8400	10 800	13 200
Cost per kg	$4.50	$5.00	$5.00
Purchases	$37 800	$54 000	$66 000

Each month’s purchases figure was 1 mark.

• 1(c) Cash budget for September to November (12 marks):

	September $	October $	November $
Total receipts from sales	194 400	219 600	256 800
Suppliers	31 752	37 044	52 920
Labour	84 000	108 000	138 600
Bonus	–	–	1200
Fixed costs: current month	48 000	50 400	52 920
Fixed costs: last month	12 000	12 000	12 600
Advertising	–	40 000	–
Total payments	175 752	247 444	258 240
Net cash increase/(decrease)	18 648	(27 844)	(1440)
Opening balance	18 000	36 648	8804
Closing balance	36 648	8804	7364

The key workings:

• Receipts: each month combines receipts from the current month’s sales and the previous month’s. Each month’s total was 1 mark.
• Suppliers: paid the month after purchase, less a 2% discount. September pays for August’s purchases: 3600 × 2 kg × $4.50 × 98% = $31 752 (1 mark). October pays $37 800 × 98% = $37 044 and November $54 000 × 98% = $52 920 (1 mark together, OF from 1(b)).
• Labour: 4200 × $20 = $84 000 and 5400 × $20 = $108 000 (1 mark together), then the rate rises to $21 in November: 6600 × $21 = $138 600 (1 mark).
• Bonus: $1200 in November, worked as (5400 − 4800) × $20 × 10% (1 mark).
• Fixed costs: each month’s pair of current and last month figures was 1 mark.
• Closing balance: the whole row was 1 mark (OF).

That is 3 marks for receipts, 2 for suppliers, 2 for labour, 1 for the bonus, 3 for fixed costs and 1 for the closing balances. The $40 000 of advertising in October turns a positive month into a $27 844 outflow.

• 1(d) Advise on cutting the advertising budget (7 marks): a competitor has entered the market, and the finance director is worried about the cash position at 30 November. Up to 6 marks for comments and 1 for a decision supported with a comment. Points credited: spending reduces budgeted cash, and cutting it improves the cash position; there are other ways to boost sales, such as cutting the selling price; the rise in November and December sales is only an estimate; the business may not have the resources to meet extra demand; the advertising might not work; but advertising can strengthen the product’s image, protect market share and raise sales, and cash will rise if it succeeds.

Question 2: costing P1 and P2 (25 marks)

• 2(a) Unit production cost with absorption costing (6 marks): overheads of $300 000 are absorbed on machine hours. P1 is 4000 units at 4 hours and P2 is 2000 units at 2 hours, 20 000 hours in all, so the rate is $15 per machine hour.

	P1 $	P2 $
Direct materials	40	56
Direct labour	54	150
Production overheads	60	30
Production cost per unit	154	236

Marks: materials and labour together for each product (1 each), each overhead figure (1 each), and each unit cost (OF).

• 2(b) Two advantages and two disadvantages of ABC (4 marks): advantages include fairer, more accurate product costs and prices, and spotting wasteful activity costs so they can be controlled. Disadvantages include the time and cost of collecting and analysing data, the need for specialists or training, and ABC not being worthwhile when overheads are a small part of total cost or only one product is made.
• 2(c) Change in overheads per unit under ABC (8 marks): each cost pool is shared by its own driver.

Cost pool	Driver	P1 $	P2 $
Ordering materials ($100 000)	Purchase orders, 120:80	60 000	40 000
Inspection ($88 000)	Inspection hours: 4000 × 1.25 = 5000 and 2000 × 3 = 6000	40 000	48 000
Machine running ($112 000)	Machine hours, 16 000:4000	89 600	22 400
Total		189 600	110 400
Per unit		47.40	55.20
Under absorption costing		60.00	30.00
Change		(12.60) decrease	25.20 increase

Each cost pool row was 1 mark (both products), each per-unit figure was OF, the absorption costing figures were 1 mark together, and each change was OF. You had to say clearly which change is an increase and which a decrease.

• 2(d) Advise on a 50% mark-up for P2 (7 marks): P1 currently carries a 50% mark-up and the production manager wants the same for P2. Up to 6 marks for comments and 1 for the decision with a comment. Points credited: a uniform pricing policy is simple; the business makes a profit overall and ABC does not change total profit; a new product may need penetration pricing at first; P2 appears to be of better quality, so it could carry a higher mark-up; under ABC P1’s overheads per unit fell, so its mark-up could be higher; and competitors’ prices should be considered.

Where the marks are on 9706/42

Type of task	Parts	Marks
Budgets and costing calculations	1(b), 1(c), 2(a), 2(c)	30
Advise	1(d), 2(d)	14
State	1(a), 2(b)	6
Total		50

• Calculations carried 30 of the 50 marks, and the cash budget alone was 12.
• The two advise parts were 28% of the paper. Each allowed up to 6 marks for comments, so a well-developed answer with points on both sides is worth far more than a one-line verdict.
• The parts were linked. The 1(b) purchases fed the supplier payments in 1(c), and the 2(a) absorption figures were needed to work out the change in 2(c), which was then the evidence for 2(d).

How to self-mark 9706/42 with the mark scheme

1. Mark the cash budget line by line. Check receipts, suppliers, labour, the bonus and fixed costs month by month, using the mark allocation above. The advertising and net cash rows carry no marks of their own, but they feed the closing balance.
2. Apply OF to supplier payments. If your 1(b) purchases were wrong but you applied the one-month delay and the 2% discount correctly, the October and November supplier mark still stands.
3. Check bracketed marks strictly. In 2(c), each cost pool mark needs both products right; in 2(a), the materials and labour mark needs both figures.
4. Check that you stated increase or decrease in 2(c). A number without a direction is incomplete.
5. For the advise parts, count distinct, relevant comments up to 6, then add 1 only if your decision comes with a reason.
6. Log each lost mark as a timing error (wrong month), a missed adjustment (discount, minimum inventory, bonus), a wrong cost driver or an undeveloped comment.

Sit 9706/42 as a timed mock

The paper allows 60 minutes for 50 marks, just over a minute per mark.

Block	Marks	Time
Question 1: JIT, purchases and cash budgets, advertising decision	25	28 minutes
Question 2: absorption costing, ABC and the P2 pricing decision	25	28 minutes
Check totals, months and directions	–	4 minutes

Within Question 1, give the cash budget about 14 minutes and the advise part about 7. Lay the budget out in columns from the start; rewriting it costs time you don’t have.

Other May/June 2026 9706 papers

• 9706 Paper 12 (Multiple Choice)
• 9706 Paper 22 (Fundamentals of Accounting)
• 9706 Paper 32 (Financial Accounting)

Practise and download

• Download 9706/42 and its mark scheme on the Learning Portal →
• All 9706 May/June 2026 papers: overview and marking patterns
• Try a free A Level Accounting quiz

Need help with a 9706 topic? Book a free trial lesson with an A Level Accounting tutor →

Frequently asked questions

What topics were on 9706 Paper 42 May/June 2026? +

Two compulsory questions. Question 1 was budgeting: disadvantages of JIT, a purchases budget, a three-month cash budget and whether to cut a $40 000 advertising budget. Question 2 compared absorption costing with activity based costing for products P1 and P2 and asked about pricing P2.

How many marks is 9706/42 and how long is it? +

It is out of 50 marks and lasts 1 hour. Each of the two questions is worth 25 marks, and the data is in Sources A and B in the insert.

Is 9706/42 an AS or A Level paper? +

It is Paper 4, an A Level component. Full A Level candidates sit it with Papers 1, 2 and 3.

What were the closing cash balances on 9706/42 Question 1(c)? +

$36 648 at the end of September, $8804 at the end of October and $7364 at the end of November, starting from $18 000. The closing balance row was one own figure mark.

How did ABC change the overheads per unit on 9706/42? +

P1 fell by $12.60, from $60 to $47.40, and P2 rose by $25.20, from $30 to $55.20. The marks needed you to say clearly which was a decrease and which an increase.

Where can I download 9706/42 May/June 2026 and its mark scheme? +

Both are free to download and print on the Tutopiya Learning Portal, on the Cambridge AS & A Level Accounting 9706 past papers page.

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