Cost and Revenues
The exam consists of 10 tasks and it's 2 ½ hours long:
- Task 1: Inventory control - FIFO, LIFO and AVCO, EOQ calculations
- Task 2: Cost accounting journal entries
- Task 3: Calculation of direct labour costs
- Task 4: Overhead allocation and apportionment
- Task 5: Overhead absorption/choice of costing principles
- Task 6: Activity effects/segmental reporting
- Task 7: Breakeven (C-V-P) analysis
- Task 8: Limiting factor decision making/types of costing systems (process, batch, job)
- Task 9: Flexed budgets and variance analysis
- Task 10: Capital investment appraisal – Payback, net present value/cost, internal rate of return
What to look out for in the exam
Knowledge of short term cost behaviours (fixed, variable, semi variable and stepped) will be assumed from earlier units. However, the use of high low method to split semi variable costs will be examined and is new knowledge at this level.
Calculations involving FIFO/LIFO and AVCO may be tested and you may need to explain the principles behind each method. Inventory control methods such as buffer stock, lead times, minimum/maximum order quantities and Economic Order Quantity may also be examined and you will need to know the formulae for each of these.
Overhead allocation, apportionment and absorption
You will need to select the appropriate basis for apportionment from data given. You may also need to select and justify the most appropriate bases for absorbing overheads for both manufacturing businesses (machine hours, direct labour hours) or service sector organisations. Under and over absorption of overheads will also be tested
This task may include calculations for breakeven point (units, revenue) margin of safety (units, revenue, %), target profit (units, revenue).
To give you the best chance of passing, we recommend that you join a Kaplan course. There are various options available: Classroom, Live Online, and Distance Learning. Alternatively, you could purchase separate Kaplan Publishing study text and or revision kit.