1. Profile photo of accakeisha says

    great lecture …what course do you recommend to write after F5? because i was writing them in order but since i have gotten to F5 i have realised that i should have done F5 as soon as i completed F2

  2. avatar says

    Thank you for your quick reply.
    I have another question:
    I have found that first step in target costing is to find exact selling price and then we have to decide on objective and finally calculate the cost but eventually when we find cost gap and we do not want to change costs figures,is it possible to change selling price to reduce the gap to the point?
    Thank you again for your response .

    • Profile photo of John Moffat says

      I do actually mention this in the lecture.

      If it were the case that the costs could not be reduced enough, then it may be necessary to consider reducing the profit required, or increasing the selling price, or deciding not to produce the product.

      However, this is not the aim of the exercise – the basic aim is to set a target for the cost and then do everything possible to try and achieve that target.

  3. avatar says

    I am grateful for your helpful lecture Mr Effort .
    I have got a question : I think when we increase the number of same product we certainly reduce costs also our target will approach .
    Thank you

    • Profile photo of John Moffat says

      No – lectures can only be watched online.
      It is the only way that we can keep this website free of charge.

      (Please stop posting under this lecture. If you have questions then please ask them in the F5 Ask the Tutor Forum.)

  4. avatar says

    No, I didn’t watch the video of throughput accounting but I will try to watch it tomorrow, now i realized what derives me to complete ACCA is opentuition, opentuition is what helps me to strive hard to become an ACCA qualified member “I love accounting” thanks

  5. avatar says

    Sir John Moffat, thanks for your lecture about ABC and traditional absorption costing it is the first lecture I’ve watched from opentuition, I really understood it naturally, truly speaking you’re the motivating factor to complete ACCA thank you very much live long god bless you

  6. avatar says

    i watched from LSBF video

    lecture that throughput accounting is used to maximize profit by deducting selling price minus Direct material all others assumed to be fixed and it is done it by ranking and prioritizing them

  7. avatar says

    Sir Moffat, in throughput accounting, step 5 which is finding out maximum profit with regards to bottleneck limitations for example i multiplied product sales units with selling price per unit according to previous ranking in the bottleneck then i deduct product sales units times direct mat. cost/unit taking into account with the bottleneck then where can i get the deduction of factory costs, how can i find the factory cost, is it labor cost/unit +OH cost/unit times sales units or the given operating expenses for labour or is it the amount of fixed production OH which one I prefer these three I am really confused

    • Profile photo of John Moffat says

      Unfortunately you cannot focus just on particular chapters. Now that part of the exam is multiple choice questions, the exam covers the whole syllabus.
      There is no choice but to study everything.

      If you are watching our free lectures (together with the lecture notes), then the only book you really need is the Revision Kit because it is full of exam-standard questions, and practice at questions is vital. It does not matter which of the approved publishers you use – they are all good.

  8. avatar says

    Sorry Mr. Moffat, I didn’t mean to order you, I am confused about the complexity of ACCA approved publishers like for example BPP & Kaplan, BPP is more difficult at the side of how they laid out their questions of their exam Bank and as well as their revision kit, which one do you think would be more benfitable for me as per the june 2015 exams

    • avatar says

      Hello my friend. Open tution lectures are great i have passed my exams by just studying open tution. I havve also bought bpp revesion kits and whenever i stuck on questions i used to ask respected sir mr john or mike little. They are knowledge bank of acca. They are expert.. i salute them they are genious … they always reply…. so keep ur head down start watching open tution and trust me u will fly through very easily… thank you

  9. avatar says

    Hi John. I am Nandhini from India. I hate listening to lectures from my School days. But you had made a difference. First time in my life I enjoyed Listening to your Lectures. This helped me a lot. Excellent Lectures. Thank you very much.

  10. Profile photo of siddiqui93 says

    For filling the cost Gap:

    1) Can we charge the low selling price ?
    2) Can we reduce some % portion of our desirable profit ?

    As per as I think that we are introducing the new product. When we are offering/launching the same product on a same selling price (market price) then why should the customer/consumer buy our product if he/she is satisfied to the existing product.

    I believe it as a customer that this situation seems to be like that a person has 2 pockets & have $110 in each pocket
    Because it dose not make any difference.

    • Profile photo of John Moffat says

      We are not launching the same product – it is a new product.

      Charging a lower selling price would not reduce the cost gap because we would end up making less profit.

      We could review the profit that we wished to achieve certainly.

      However the whole point of target costing is to decide the maximum cost we can allow in order to make the profit we want, and then to look for ways of achieving that lower cost.

      Again – it is not a product that we are already selling – I do make it clear in the lecture that it relates to a new product that we are considering producing. That is why we are able to look for ways of redesigning the product etc in order to reduce the manufacturing cost.

  11. avatar says

    Thank you for your wonderful lectures…May God bless you to have good health and long life . Appreciate if you can improve the quality of audio and video. Aldo put an option to donate to your website. I believe you have lots of expenses for running this free website. Some students may think of supporting you once they get a job after qualifying ACCA.

  12. avatar says

    Hello John thanks a lot for this lecture. I’m in Kampala (Uganda) and preparing to sit for F5 this Dec. However I came across this target cost number that has been driving me crazy I really need some explanation. Question is follows;

    Target selling price $20 per unit
    Target mark-up on cost 1/3
    Estimated production cost $16 per unit

    Find the cost gap

  13. avatar says

    Hello John,
    I was wondering if during the lecture a mistake was made. You said the cost of producing the table is $12. However, you answered a question from Javid and you gave the calculation to be 100/140×20= $14.27
    Should the $12 in your lecture be $14.27 instead?


    • Profile photo of John Moffat says

      There is no mistake.

      Firstly, I never said that the cost of producing the table is $12. I said that the target cost was $12 – that is the maximum cost that we can afford if we are to make the profit we want. We then compare this $12 with the actual cost.

      Secondly, the question says that we want a profit of 40% of selling price. (I assume that you have downloaded the free Course Notes – if not, then there is no point in watching the lectures. It says above each lecture that they are based on the Course Notes and gives the link to download them).

      The $14.27 was simply explaining that if instead the objective had been to get a profit of 40% of cost, then the target cost would indeed be $14.27. However in this question the objective was 40% of selling price, and so the target cost is indeed $12.

  14. avatar says

    hi sir john.. i need your help.
    product A target selling price per unit is $10
    target profit is 25% on cost
    current cost $8.40 per unit
    what is the target cost gap for product A???
    pls answer me…. many thanks

  15. avatar says

    Mr.Moffat, I really enjoyed this lecture to well. My question is Target Costs are planned estimated costs before production schedule. What will happen if the cost input escalate all of a sudden after the production commences? Secondly, Can Target Costing combat under hyperinflationary economic conditions to sustain pricing?

    Thank you!!!

    • Profile photo of John Moffat says

      Firstly, target costs are not planned estimated costs. The target cost is the cost that has to be achieved in order to get the required level of profitability. The company will compare this with the estimated costs – if the target cost is lower than the estimated cost, then they will look for ways of reducing the estimate actual cost.

      Target costing is not intended (and can not) combat high levels of inflation.
      Obviously estimated levels of inflation will be taken into account is determining the target cost (and in estimating the likely actual cost), but target costing itself cannot remove the risk that always exists.

      I am pleased that you enjoyed the lecture :-)

  16. avatar says

    Great lecture! Sir you really make our learning Interesting… I have a question that is bothering me. What if the estimate of actual cost of production turns out of to be incorrect. Afterall, it is an estimate, it would turn out to be a bad decision if the actual cost turned out to be more than what we estimated.? What would we do in that situation.? As you said we work out target cost before actually making products, if we started producing how do you see the effect of wrong estimate in the first place ?. Cheers

    • Profile photo of John Moffat says

      Thank you :-)

      All of costing is based on estimations and there is always the risk that the estimates are wrong.

      The whole point of target costing is that the cost is driven by the selling price (and not the other way round as is traditionally the case).

      Obviously it is important that if they do go ahead that they make sure the control the costs. If the costs get too high then they would have to consider whether it was possible to increase the selling price or whether to accept a reduced profit, or even whether they should cease production.

  17. avatar says

    Hi Sir, what is the difference between the studio recorded lecture and the normal one apart from the normal one being longer in time. Which one should we follow or should we watch both the live and the studio one to get a better understanding?

    Thank you :)

  18. Profile photo of Et says

    @admin, Can you please tell me if F5 Audio Lectures have been removed ? I used them in the past but this time although the icon is still there it does not seem to be working . Tried to play it but nothing is happening.

      • Profile photo of Et says

        @admin, Thank you for your reply. The video lecture plays well and I have no problem with it. I actually was talking about the Audio Lectures .They used to be found on the ACCA F5 page. As you scroll down the page you will find lists of practice questions for paper F5 from old papers just bellow the lists the Audio Lectures were found.The icon still exists but it does not play any more. I do remember listening to CH6 of the audio about life cycle costing ,CH8 Cost Volume and CH9 limiting factor and some other chapters.
        Sorry to bother you .I should just make the best out of what is available and be appreciative of what O.T has provided for us for FREEEEE. Keep the good work up!

    • Profile photo of John Moffat says

      @deesha, You are correct and December 2001 question 1 is a hard question.
      However the difficult parts in the question are not Target Costing.
      Target costing is parts (a), (b), and (c) of the question and they are fully covered in the lecture and total 12 marks.
      Part (d) is the hard part, but this is not target costing. It is essentially basic costing from Paper F2, but has several tricks in it.
      If you can get 12 marks on the first three parts, you do not need to get too much right in part (d) to be able to pass the question.

      Because target costing itself is easy, it will never be 100% of a question. The question will also include calculating expected cost (as in this question) or maybe will also have life-cycle costing. But…if you can get the target costing part correct then it will be a good start to a question :-)

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