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hi there,
I need help with this years question, the problem is with part d …. i dont seem to understand the question…what do they mean by “marginal cost should be included in budget cost calculations as this would avoid the need for arbitrary overhead allocations to products”???I believe it’s a good idea to study in depth relevant chapters from study text and do some small practical examples that it provides. This preparation will provide you with knowledge enough to access revision kit questions.
well in Brick by brick (BBB) as in most questions on costing methods you need to compare traditional (marginal) and absorption costing.
In part D you are provided with the statement that you need to discuss briefly. maximum what u cna get is 4 marks for it, so you need to provide at least 4 relevant ideas, which should incule statements illustrating advantages and disadvantages of each of those costing methods.Here the manager suggests that marginal costing will be more appropriate to use and gives the reason , explaining that using marginal costing will help to avoid allocation of overheads to products which is almost never reliable.
And he is right in his statement, however you can always find reasons why overhead allocation might be necessary.
Marginal costing means that only variable cost of say making a product will be included to cost of product , that is labour and materials, while overheads are omited from calculations.
Absorption costing means that you will need to include all production costs , including overheads. But as you can’t clearly trace how many overhead costs go to this or that product, you need to use any basis for allocation of those costs.
A very usual example is to allocate and absorb overhead costs on the base of labour or machine hours. In this example they use labour hours. Total number of hours is used to find overhead absorption rate (OAR), which later will help you to calculate amount of overheads that should be absorbed to the certain product.As you can imagine allocation and absorption of overheads is a time consuming and quite a tough job. Plus as a company decides itself which base for OAR to use, you can never expect a reliable result. Because if you use another base you will get a different result etc.
Use of marginal costing could help to avoid all those costs for overhead treatment. However amount of overheads in the product might be quite significant, so the use of marginal costing might not always be so advantageous.
For example Activity based costing illustrates how overheads can be found using various activities / cost drivers that are related to this product. And specially as in this example you are provided with some activity costs (e.g. number of visits etc) you can use ABC , which will at one hand make you deal with overheads, but at the same time willl help you to find a cost that might reflect the reality better, then if you just omited overhead costs completely using marginal costing.okay, that’s enough for the moment. Hope it makes sense for you.
By the way, it’s a past exam question, so try to read solution for relevant past paper or read answer from kit several times trying to understand each and every idea.
good luck,
ansihi there!!!
thank you so much….. i do get it now…..u made it seem so easy !!! i did read the answers but wasnt getting it……they write it in such a tricky manner……!! r u done with ur F5???!!anyways thank u once again for all the help!!!
btw ….. for a 4 marks quesiton do i have to talk about ABC over here…..as all of this makes the answers really broad….and i also need to finish up in time…..:S!!
i’m happy that my answer was helpful for you 🙂 feel free to ask questions and i’ll try to help when i can.
I was sitting F5 this June. Don’t know yet if i am done with it or no. we will see in august.
You know whole F5 might seem very tricky for you and somehow a useless paper. But believe me, it’s just the first impression. All you need is to understand key concepts very well, like different costing methods, then everything will start to make sence.
As for broad answer ..
well , in exam conditions you won’t be able to write much. First of all, many things will be just forgotten due to stress, secondly , question requirment might seem so complicated taht you will be lost.
Of course for 4 marks you don’t need to write 4 pages. Maximum 1 page …very very maximum. However I recommend you to mention ABC because otherwise you won’t be able to give suggestions to support and critisize marginal costing.wow!!! u gave ur F5 this june..?? so did i!!!! was a total disaster so i started studying early…………actually i got really sick before my xams…and couldnt cover the syllabus :(!!!!!!………… btw did u practice all the kaplan exam kit questions(not the past papers)……..they seem really tricky n tough to understand….not understandable without guidance……which is hard for me to get over here….as i cant find a single gud tutor in my country :(!!!!!… well thnx a lot for the help :D!!!!!!! my university tutor ddnt even touch the exam kit questions…and for the past papers theories…he just dictates wats written….really depressing….!!!!
to hell such tutors then (sorry for a strong word).
Do self studies!Yea, i sat F5 this june ..and it was tricky for me as well. I didn’t really practice all of kit questions. That was the main reason why paper seemed hard.
Try to BPP revision kit as well. Sometimes it explains answers to questions in more details and so it’s easier to understand.
But again and again. Revision of study book goes first.If you are not clear with certain topic , then it will be so hard to do kit questions. You need to fill in all the blanks in your knowledge 🙂
it’s great to see such enthusiasm from you ! 🙂 I feel unhappy with my F6 sitting, so i aslo started to revise it again , just in case.Practice questions until you very clear about everything and revise them again and again. Then you should be okay .
wish you very best of luck with F5. And hopefully you will get your pass already in august 🙂ur stong words are highly right… !!!! i sort of lost hope with ACCA after F5 exams…..as i wasnt getting any guidance or help……..but OT n u guys are just of great help!!! cant describe it in words….and dnt worry with ur F6 !!! u will definitely pass…!!!! 😀 !…..well i have no hope with my exam of F5…so hopefully this december ……..
btw is open tuition notes and kaplan study book enough or wud u say there r more books to gain knowledge from??
Moreover did u try this question from kaplan exam kit…..no 4 …Abkaber Plc….??? i am sort of having trouble with the theory part b…i cant seem to understand the evaluations they did in the answers of the marketing director, managing director and the chairman…. 🙁 !!
like the point about the interdependencies in costs and revenue and they are also tlaking about historic experience in the next point….so does it mean that in ABC ….the activites and cost drivers past figure are useless for the future?? as the cost drivers and even the activities may be different in the future??And for the Managing director the second and thrid point seems to be the problem……
Lastly for the Chariman’s evaluation….wat is the relationship of i nventory with ABC :S !!
hope u have done these question …….. will be of gr8 help…..and Thanks a lot for everything :D!!!
you are crazy, girl :D:D
You know, your success with ACCA papers depend on how much you practice questions of exam format and how often you revise them.
No need to loose hope. I know lots of really smart people who were sitting the same paper 3-4 times and sooner or later everyone pass it all , unless those who give in.
I realized on my own exprerience and experience of others that almost everything depends on your approach and first impression of the paper.IF from the very beginning you think it’s hard and boring then you will end up preparing from time to time, skipping many parts of material, and at revision phase step by step things might start to be clear, but it will be already too late. And then you start blaming yourself why you didn’t study same hard from the very beginning.
Just think it and try to believe it “all ACCA papers are easy”.
Easy is quite relative words. But better to belive they are easy then otherwise 🙂
It’s never a rocket science anyway (though peole who study rocket science tell the same about economics .lol)I guess i said this 3 times , but it’s worth repeating endlessly, never leave any bit unclear ..just never. Ask people, ask tutors here ..anyone , but make it crystal clear. I hope you understand why.
Thank you for your support. We will see if i passed or not 🙂 Maybe i failed F5 as well, then we will sit it together 🙂
I am a bit lazy to copy links here, so please go to F7 or F8 forums and open my topics about schedule. Below schedule you will find lots and lots of links to various resources. Many of them contain F5 as well. Plus then open topic called chat history and open first. In the introduction i provided links to some other materials 🙂
Kaplan, BPP and OT are generally enough , but if you are a crazy person like me , then download and get all you can 🙂 But dont buy more then kaplan and bpp.
As for that question, i didn’t really work it out well, so i need to revise it before i can reply you.
so ..to be continued ..
heyy!!! thnx for all the support :D!!!!! and ya ur soo right about not leaving anything unclear….
and i definitely take a look at the materials u recommended!!!
and dnt worry….u will definitely pass this August….!!!:D!!! i admire ur level of confidence!!! 🙂
and abt the question … ya….pls do reply whn u read abt it…..kind of stuck in it….
thnx once agn!!! tc!! 😀
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