Study Zone

Cracking the code

Our experts help you pass your AAT exams – so long as you follow their advice. So a big thank-you to top tutors Kirsty Blount, Rebecca Sargeant and Neil Young for their words of wisdom on passing ECR and MAC

How do I pass the ECR exam, you may ask. Firstly, you need to put yourself in the mindset of being a management accountant; look at the internal processes that happen in the finance department. Secondly, practise, practise, and more practise!
Section 1 of the paper starts with a materials questions. There will always be a stock card for a raw material relating to the business where you will use LIFO, FIFO or AVCO to value the stock issues at (LIFO is usually a discursive question).
The exam will then move onto labour, where there will be a wages calculation; to be successful you will need to know the difference between overtime premium and overtime.
Direct overheads will be the next examinable area, where you will be asked to either allocate or apportion to the correct department. The key to correct allocation and apportionment is reading the scenario and gathering a good understanding of how that business works. Using this information you will be asked to calculate the absorption rate and decide whether you have under or over absorbed. Learn your formula to calculate absorption; learn budgeted costs and budgeted activity.
Section 2 is less predictable and tests understanding. Common themes are calculating contribution and looking at the differences between marginal and absorption costing and explaining the differences (how you have dealt with your fixed costs).
Long-term decision making is tested in this section but never rely on pro-formas. You will be asked to calculate payback and net present value and you will only have to discuss internal rate of return. From your calculations you will be asked to make a decision on whether to advise the company to invest in the project or not. Always base your answer on the policies of the company in the question and refer to them with your advice.
Limiting factors and process costing questions are also common subjects in section 2; always show your workings as it is very easy to make a mistake in these areas.
Throughout your exam make sure that if a number represents money it should have a ‘£’ sign attached to it. If you are calculating a cost per unit figure you should have ‘per unit’ after the figure. This will show your examiner that you understand what you are calculating and therefore gain maximum marks.
Look out for articles from Les Nightingale in the AAT magazine – he often discusses his pet hates and top tips.
• Rebecca Sargeant and Neil Young

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