Home For AAT student members AQ 2013 AAT Level 4 (Level 8 in Scotland)

Level 4 - Management Accounting Decision & Control 2016

I need some help to work out assessment task 2 online. The question:
Budgeted variable costs for the manufacture of 250 barrels.
Cost per unit £ Budgeted Cost£
Materials 36.00 9,000
Direct Labour 22.50 5,625
Variable overhead 10.50 2,625
Total cost 17,250

Actual production for the period was 300barrels and the total variances as follows:
Total variance£
Materials 1,200F
Direct Labour 390A
Variable Overhead 210F

During the period, the actual cost of material was £10 per kg and the standard quantity per unit was 3kg
420 actual hours were worked.
The standard labour time per unit was 1.5 hours.

Calculate Materials:

Actual Material Cost
Material Price Variance
Material Usage Variance
Standard Material Cost Of Production

Calculate Variable Overhead:

Actual Variable Overhead Cost
Variable Overhead Expenditure Variance
Variable Overhead Efficiency Variance
Standard Variable Overhead Cost Of Production


  • N4TN4T AAT Student Posts: 191
    Which bit are you having difficulty with? Any particular calculation or the whole question? Can you narrow it down as I'm not sure if I have to time to work everything out and give explanations?
  • SigitaGibSigitaGib Registered Posts: 6
    Would appreciate the whole question as I got totally confused. Any help would be perfect
  • N4TN4T AAT Student Posts: 191
    I am used to remembering and writing the calculations in a particular way that works for me but I'll try and write/explain it so you understand.

    Actual Material Cost
    Total Material Variance = Actual Cost v Actual Production @ std qty per unit @ std price per kg

    we know the above formula, and we know the variance and can work out the other..

    Total Material Variance = 1,200 F
    Actual production of 300 units should have used 900kg @ £12 per kg = £10,800

    Std qty is 3kg per unit. 300 unit x 3kg per unit = 900kg. Each kg costs £12per kg (we know budget production of 250 units is expected to use 750kg (3kg per unit) and 750kg have a budgeted cost of £9000, therefore std price is £9000/750kg = £12 per kg).

    Simply Budgeted unit cost is £9000/250 units = £36 per unit, Actual production of 300 units is expected to cost 300 x £36 = £10,800

    Putting these two figures into the formula:
    1,200F = Actual Cost v £10,800
    These means actual cost must be £1200 less than the budgeted cost, hence
    actual material cost is £9600

    Material Price Variance
    Material Price Variance = Actual material cost v Actual qty @ std price

    Actual cost we just worked out is £9600.
    We are told that actual cost of material is £10 per kg, therefore £9600/£10 per kg = 960 kg. Actual qty of 960kg is expected to cost £11,520 (at std price of £12 per kg).

    Material Price Variance = £9600 v £11,520 = £1,920 F

    Material Usage Variance
    Material Usage Variance = Actual qty @ std price v Actual production @ std qty @ std price

    You have already worked out the figures in bold.
    Material Usage Variance = £11,500 + £10,800=£720 A

    Standard Material Cost of Production
    I am guessing this is asking for the "standard material cost of actual production' The wording isn't clear but the answer you would have had to work out already £10,800, is this the answer?
  • N4TN4T AAT Student Posts: 191
    The second part is similar so if you understand my workings you can try the second part yourself.

    This unit really test your understanding of the variances so it's important you learn this thoroughly.

    As I am used to my own short hand it was difficult to type out an explanation so I hope I haven't confused you further.

    Good luck.
  • SigitaGibSigitaGib Registered Posts: 6
    Thank you so much, it's much clearer now. I know the formulas, just struggle to use them. Will give a go to a second part and practice practice.
  • SineadpSineadp Registered Posts: 67
    Im struggling with this a lot my exam is in a week and I cant seem to remember the Variance formulas to use in the exam, is there any easy way to remember this. I never know what information you use when given a paragraph really confuses me :(
  • N4TN4T AAT Student Posts: 191
    Hi Sinead,

    If you let me have your email address I am happy to share my notes on the variances. I know I can embed images onto the post but busy with work and studies to fiddle with it.

    I don't know if my notes will help or confuse you further, it's just a way I lay out the calculations, in shorthand because you haven't got the time in the exams. If you are only having problems with remembering the calculations and can apply them to the questions then it may help.

    You'll see a pattern, that for each you only have to memorise 3 calculations and not 6. and that basically the material, labour and variable overhead variances are very similar, so rather than remembering 18 calculations it's really only 3, the concepts are the same for each set.

    My trick is I visually remember each one it its order, always price, usage and then total for material. Rate, efficiency and then total for labour etc. There is a distinct pattern and with the stressful exam conditions I don't need the panic of remembering which figure goes where.

    The fixed overhead variances are a bit different though.

    Good luck with your exam next week!

  • SigitaGibSigitaGib Registered Posts: 6
    My exam in 2 weeks time and even knowing formulas it doesn't make sense where to use them. If you could share your notes with me also, I would really appreciate it N4T. My email [email protected]
  • N4TN4T AAT Student Posts: 191
    Just emailed you.
  • N4TN4T AAT Student Posts: 191
    Hi Sigita,

    I haven't said what is adv or fav because I think that its obvious and this would have been covered in L3. My advise to you is do more questions. Have you got exam or revision kits from Kaplan or BPP or Osborne? They will give you plenty of questions on one specific area. At the moment you are attempting exam type questions (which is good) but they throw a lot into one question which is confusing if you don't know the basics.

    So i strongly recommend you get hold of a revision/exam if you haven't got one already and build on your knowledge from there first. You have two weeks so enough time.
  • SineadpSineadp Registered Posts: 67
    hello that would be much appreciated I feel I might have hope of passing if I can learn a way to remember the variances
    my email is : [email protected]

    Thank you
  • N4TN4T AAT Student Posts: 191
    Hi Sinead,
    I just emailed the notes to you. Let me know if you dont receive it and I'll try again this evening.
  • Yalda20Yalda20 Registered Posts: 77
    Hi everyone, I am new to this forum so apologies if I am not supposed to be writing here. I am taking my Management accounting:Decision and control exam level 4 on Tuesday. Struggling with two questions from the AAT sample paper 2- can anyone please help?

    Task 8a-
    Question= The maximum profit from the optimal production plan would be?
    Answer=1785 not sure how this is worked out?

    Task 9c-
    Question=To the nearest whole units, the required sales volume is?
    Answer=25217 units, not sure how this is worked out?

    Any help would be much appreciated. Thanks so much.
  • IrrorateIrrorate Registered Posts: 139
    Task 9c:
    Reduced selling price per unit: £17.00
    Target net profit per unit (£17 x 25%): £4.25
    Target total cost per unit (£17 - £4.25): £12.75
    Expected variable cost per unit (£140k/£20k): £7.00
    Target fixed cost per unit (£12.75 - £7): £5.75

    Required sales volume:
    Total fixed costs / Target fixed cost per unit
    £145,000 / £5.75 = 25217
  • IrrorateIrrorate Registered Posts: 139
    Task 8a you need to account for the fixed costs per unit of product X - while we are producing less the fixed cost remains the same it's just under absorbed.

    Product X Profit: £414
    Product Y Profit: £660
    Product Z Profit: £800
    Total profit: £1874

    However, X was budgeted at 407 units meaning we still incur fixed costs for the 207 units @ £0.43/unit:
    207 x £0.43 = £89.01

    £1874 - £89.01 = £1784.99 therefore £1785

    ...and in doing this realised I did it wrong in my MDCL exam! Oops
  • Yalda20Yalda20 Registered Posts: 77
    Thank you so much Irrorate it makes sense now.
  • Yalda20Yalda20 Registered Posts: 77
    Hi All,
    Has anyone re-sit the D&C exam yet?just got my results and got 64% really devastated. First fail in my life.

    What sort of questions you had? Any tips or advice?

    Many thanks
  • gagangagan Registered Posts: 69
    Hi Yalda
    sorry to hear. I failed my first exam as well with 69%. I also made an appeal but didn't work it got rejected it is really frustrated.
    My exam didn't go that bad i had tasks 3, 8,9 exactly like assessment 2 rest of them was about standard costing lots of tricks also try to learn fixed costs variances. and learn thoroughly asset turnover.
    I'm going to re-sits soon if you can share with me how was your exam it will be great help.
  • Yalda20Yalda20 Registered Posts: 77
    Hi @gagan -
    Many thanks for your message. I am sorry that you have failed too. I am sure you will pass next time. I am probably re-sitting mine end of October now because of other exam and life commitments but of course I will share my experience. Can you please also let me know if you re-sit it before me that would be awesome. I think some of my class mates might be re-sitting soon so I will ask them and let you know. Good luck with your exam (s).
  • gagangagan Registered Posts: 69
    Yes sure I'll share my experience.
    Thanks for wishing me good luck.
    Good luck to you too.
  • Yalda20Yalda20 Registered Posts: 77
    @gagan - many thanks and I wish you success for your exam. Looking forward to hearing from you :)
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