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Professional Examinations Level 4 Financial Performance REVISION KIT
Professional Examinations Level 4
Financial Performance
REVISION KIT
AAT: FINANCIAL PERFORMANCE (FPFM)
i i KAPLAN PUBLISHING
British Library Cataloguing-in-Publication Data
A catalogue record for this book is available from the British Library.
Published by:
Kaplan Publishing UK
Unit 2 The Business Centre
Molly Millar’s Lane
Wokingham
Berkshire
RG41 2QZ
ISBN: 978-1-78415-364-9
© Kaplan Financial Limited, 2015
Printed and bound in Great Britain
The text in this material and any others made available by any Kaplan Group company does not amount to advice on a particular matter and should not be taken as such. No reliance should be placed on the content as the basis for any investment or other decision or in connection with any advice given to third parties. Please consult your appropriate professional adviser as necessary. Kaplan Publishing Limited and all other Kaplan group companies expressly disclaim all liability to any person in respect of any losses or other claims, whether direct, indirect, incidental, consequential or otherwise arising in relation to the use of such materials.
All rights reserved. No part of this examination may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without prior permission from Kaplan Publishing.
KAPLAN PUBLISHING i i i
CONTENTS Page
Index to questions and answers v
Assessment technique xi
Paper specific information xiii
Kaplan’s recommended revision approach xv
Features in this revision kit
In addition to providing a wide ranging bank of real assessment style questions, we have also included in this kit:
• paper specific information and advice on assessment technique.
• our recommended approach to make your revision for this particular subject as effective as possible.
You will find a wealth of other resources to help you with your studies on the AAT website:
www.aat.org.uk/
Quality and accuracy are of the utmost importance to us so if you spot an error in any of our products, please send an email to [email protected] with full details, or follow the link to the feedback form in MyKaplan.
Our Quality Co-ordinator will work with our technical team to verify the error and take action to ensure it is corrected in future editions.
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INDEX TO QUESTIONS AND ANSWERS
Page number Question Answer
THE BUSINESS ENVIRONMENT 1 Management Accounting v Financial Accounting 1 125 2 Functions of a Management Accountant 1 125 3 SWOT 1 125 4 PEST 2 125 COLLECTION OF COST INFORMATION 5 High – Low 2 126 6 Hilow 2 126 7 Stepped 3 126 8 Steeple 3 126 9 Pen 3 126 10 Poppy 3 127 11 Lapel 4 127 12 Slush 5 128 13 Eastern Bus Company 6 128 ACCOUNTING FOR OVERHEADS 14 Product R 6 129 15 Product D 7 129 16 Under / Over Absorption 8 130 17 Branded / Own Label 8 130 18 Mixing and Canning 9 130 19 Aircraft 10 130 20 Gary 10 131 21 CPL 11 132 22 Hairworks 13 133 23 RH 14 134 24 CAT 17 137 25 Smash-Hit 19 138 STANDARD COSTING 26 Budgie 22 140 27 Carrot 23 140 28 Rabbit 24 141 29 Bells 24 141 30 Tea Bags 25 141 31 Gem 25 142
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32 Bespoke Suit 26 142 33 Garden Sheds 26 142 34 Performance 27 142 35 Disco 27 142 36 Harry 27 142 37 Oscar 27 143 38 Pizza 27 143 MATERIAL VARIANCES 39 Smith 28 143 40 Orangina 28 143 41 Cuff 28 143 42 Sapphire 28 144 43 Material 29 144 44 Kilo 29 144 45 Mouse 29 144 46 Raw Materials 29 144 47 Alpha 30 145 48 Beta 30 145 49 Charlie 30 145 50 Delta 30 145 51 Epsilon 31 146 52 Fly 31 146 53 Mat (1) 31 146 54 Mat (2) 31 147 LABOUR VARIANCES 55 Beale 32 147 56 My 32 147 57 MCQ 32 147 58 Diamond 33 148 59 Jarvis 33 148 60 Gossip 33 148 61 Hit 33 148 62 Joy 34 148 63 Kap 34 148 64 Lemon 34 149 65 Muffin 34 149 66 Idle time (1) 35 149 67 Idle time (2) 35 149 68 Idle time (3) 35 150 69 Setting Budgets 35 150 70 Hinder 36 150
INDEX TO QUESTIONS AND ANSWERS
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71 Jayro 36 150 72 Picture Perfect 37 150 73 Division 37 151 74 Night 38 151 75 Standard Costing 38 151 76 Inflation 38 151 77 Labour 38 151 78 Basic 39 151 79 Standard 39 151 80 Lab (1) 39 152 81 Lab (2) 39 152 VARIABLE OVERHEAD VARIANCES 82 Jif 40 153 83 Callum 40 153 84 Valerie (1) 40 153 85 Valerie (2) 41 153 86 Shirley (1) 41 154 87 Shirley (2) 41 154 88 Var (1) 41 154 89 Var (2) 42 155 FIXED OVERHEAD VARIANCES 90 Overhead 43 155 91 Budget 43 156 92 Frank 43 156 93 Fixed Overheads 43 156 94 Trumpet 44 157 95 Trombone 44 157 96 Floppy 44 157 97 Violin 44 158 98 Harp 45 158 99 Cymbal 45 158 100 Piano 45 159 101 Organ 45 159 102 Fiddle 46 159 103 Fix (1) 46 160 104 Fix (2) 46 160 OPERATING STATEMENTS 105 Goggle 47 161 106 Pug 48 162 107 Budgetary control Report 50 163
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108 Budget v Actual 51 163 109 Operating Statement 52 164 CONTROLLABLE AND UNCONTROLLABLE VARIANCES 110 Bugle (1) 53 164 111 Bugle (2) 53 164 112 Bugle (3) 53 165 113 Bugle (4) 54 165 114 Bust (1) 54 165 115 Bust (2) 54 165 116 Bust (3) 55 165 117 Bust (4) 55 166 118 Controllable 55 166 119 Uncontrollable 56 167 120 Axa 56 167 121 Skybe 57 168 122 Journals 57 168 TIME SERIES, LINEAR REGRESSION AND INDEXING 123 Trend 57 169 124 RPI 58 169 125 Product Z 58 169 126 Tanzanite 58 169 127 March 58 170 128 Cost per unit 59 170 129 Product Y 59 170 130 A Company 59 170 131 Product X 60 171 132 Index 60 171 133 Dexter 60 171 134 Waste 60 171 135 Fizz 61 172 136 Acrid 61 172 137 Product J 61 172 138 Abco 61 172 139 Soap 62 172 140 Asphalt 62 173 141 Best fit 62 173 142 Least 62 173 143 Most 63 173 144 Tea 63 173 145 Fruit 63 173 146 Yankee (2) 64 174
INDEX TO QUESTIONS AND ANSWERS
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147 Seb 65 174 148 Fred 65 174 149 Alex 65 174 VARIANCE ANALYSIS WRITTEN QUESTIONS 150 Arteta 66 175 151 Mertersacker 67 176 152 Top Dog 69 177 153 Opstat 70 178 154 Dixon 72 180 155 Grippit (2) 75 181 156 Foodrink 77 183 PERFORMANCE INDICATORS CALCULATION QUESTIONS 157 Control Ratios 79 184 158 Employees 79 184 159 Revenue 79 185 160 Operating Profit 79 185 161 Gross Profit 80 185 162 Inventory 80 185 163 Receivables 80 185 164 Value Added 80 185 165 Payables 80 185 166 Tees R Us 81 186 167 Party 82 186 168 Fudge 83 186 169 Dejavu 84 187 170 Gransden 85 187 BREAK EVEN ANALYSIS 171 BE 86 187 172 Breakeven 86 187 LIMITING FACTOR ANALYSIS 173 LF 86 188 174 BQ 87 188 175 Learn 88 189 176 Frome 89 189 WHAT IF ANALYSIS 177 Wat 90 189 178 Shifty 90 190 179 Crafty 91 190 180 Piper 92 191 181 Joyce 93 191 182 Dagger 94 191
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183 Bosun 95 192 184 Keel 95 192 185 Sail 96 192 186 Caff Co 97 193 187 Sunshine 98 193 188 Us 99 193 LIFECYCLE COSTING 189 NPV 100 194 190 Daffy 101 194 191 Lifecycle costing 102 194 192 Houlter 102 195 193 Yankee (1) 103 195 194 Budge 104 196 TARGET COSTING 195 Target costing 105 196 196 Holder 106 197 197 Akea 106 197 198 Shorty 107 197 199 Long 108 198 200 Grippit (1) 108 198 201 Shock 108 198 202 Tricky 109 198 203 Format 109 199 204 Celsius 109 199 PERFORMANCE INDICATORS WRITTEN QUESTIONS 205 Voltair 110 199 206 Archimedes 112 200 207 Tempest 114 201 208 Animal 117 202 209 Fruity 119 203 210 TQM 122 204 211 Cost Reduction 123 204 212 Value Analysis 124 205 MOCK ASSESSMENT Questions 207 Answers 217
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ASSESSMENT TECHNIQUE
• Do not skip any of the material in the syllabus.
• Read each question very carefully.
• Double-check your answer before committing yourself to it.
• Answer every question – if you do not know an answer to a multiple choice question or true/false question, you don't lose anything by guessing. Think carefully before you guess.
• If you are answering a multiple-choice question, eliminate first those answers that you know are wrong. Then choose the most appropriate answer from those that are left.
• Don’t panic if you realise you’ve answered a question incorrectly. Getting one question wrong will not mean the difference between passing and failing
Computer-based assessment – tips • Do not attempt a CBA until you have completed all study material relating to it.
• On the AAT website there is a CBA demonstration. It is ESSENTIAL that you attempt this before your real CBA. You will become familiar with how to move around the CBA screens and the way that questions are formatted, increasing your confidence and speed in the actual assessment.
• Be sure you understand how to use the software before you start the assessment. If in doubt, ask the assessment centre staff to explain it to you.
• Questions are displayed on the screen and answers are entered using keyboard and mouse. At the end of the assessment, you are given a certificate showing the result you have achieved.
• In addition to the traditional multiple-choice question type, CBAs will also contain other types of questions, such as number entry questions, drag and drop, true/false, pick lists or drop down menus or hybrids of these.
• In some CBAs you will have to type in complete computations or written answers.
• You need to be sure you know how to answer questions of this type before you sit the assessment, through practice.
AAT: FINANCIAL PERFORMANCE (FPFM)
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PAPER SPECIFIC INFORMATION
THE ASSESSMENT
FORMAT OF THE ASSESSMENT
There will be 10 tasks within the assessment.
The topics for each task are as follows, together with the maximum marks that may apply:
Task Maximum
Marks
Title for topics within task range
1 12 Standard costing
2 16 Material, labour and variable overhead variances
3 16 Fixed overhead variances
4 12 Operating statements
5 12 Controllable and uncontrollable variances, time series, linear regression and indexing
6 22 Variance analysis written question
7 20 Performance indicators calculations
8 12 Break even, limiting factors, what if analysis
9 12 Lifecycle costing, target costing
10 22 Performance indicators written question
Time allowed
150 minutes (2 ½ hours)
PASS MARK
The pass mark for all AAT CBAs is 70%.
Always keep your eye on the clock and make sure you attempt all questions!
DETAILED SYLLABUS The detailed syllabus and study guide written by the AAT can be found at:
www.aat.org.uk/
AAT: FINANCIAL PERFORMANCE (FPFM)
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KAPLAN’S RECOMMENDED REVISION APPROACH
QUESTION PRACTICE IS THE KEY TO SUCCESS Success in professional examinations relies upon you acquiring a firm grasp of the required knowledge at the tuition phase. In order to be able to do the questions, knowledge is essential.
However, the difference between success and failure often hinges on your exam technique on the day and making the most of the revision phase of your studies.
The Kaplan textbook is the starting point, designed to provide the underpinning knowledge to tackle all questions. However, in the revision phase, poring over text books is not the answer.
The Kaplan workbook helps you consolidate your knowledge and understanding and is a useful tool to check whether you can remember key topic areas.
Kaplan pocket notes are designed to help you quickly revise a topic area; however you then need to practise questions. There is a need to progress to exam style questions as soon as possible, and to tie your exam technique and technical knowledge together.
The importance of question practice cannot be over-emphasised.
The recommended approach below is designed by expert tutors in the field, in conjunction with their knowledge of the examiner and the specimen assessment.
You need to practise as many questions as possible in the time you have left.
OUR AIM Our aim is to get you to the stage where you can attempt exam questions confidently, to time, in a closed book environment, with no supplementary help (i.e. to simulate the real examination experience).
Practising your exam technique is also vitally important for you to assess your progress and identify areas of weakness that may need more attention in the final run up to the examination.
In order to achieve this we recognise that initially you may feel the need to practice some questions with open book help.
Good exam technique is vital.
AAT: FINANCIAL PERFORMANCE (FPFM)
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THE KAPLAN FPFM REVISION PLAN
Stage 1: Assess areas of strengths and weaknesses
Stage 2: Practise questions Follow the order of revision of topics as presented in this kit and attempt the questions in the order suggested.
Try to avoid referring to text books and notes and the model answer until you have completed your attempt.
Review your attempt with the model answer and assess how much of the answer you achieved.
Comfortable with the technical content
Not comfortable with the technical content
Read the relevant chapter(s) in
Kaplan’s Textbook
Attempt the Activities if unsure of an area
Review the pocket notes on this area
Determine whether or not the area is one with which you are comfortable
Review the key topic listings for this paper
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Stage 3: Final pre-exam revision We recommend that you attempt at least one mock examination containing a set of previously unseen exam standard questions.
Attempt the mock CBA online in timed, closed book conditions to simulate the real exam experience
Comfortable with question attempt Not comfortable with question attempts
Only revisit when comfortable with questions on all topic areas
Focus on these areas by: • Reworking Activities in Kaplan’s
Textbook/workbook
• Revisiting the technical content from Kaplan’s pocket notes
• Working any remaining questions on that area in the revision kit
AAT: FINANCIAL PERFORMANCE (FPFM)
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Section 1
PRACTICE QUESTIONS
THE BUSINESS ENVIRONMENT
1 MANAGEMENT ACCOUNTING V FINANCIAL ACCOUNTING
Tick the appropriate column to match the type of accounts to the criteria listed.
Management accounts Financial accounts
Prepared yearly
For internal use
Contains future information
2 FUNCTIONS OF A MANAGEMENT ACCOUNTANT
The management accountant helps managers to:
YES NO
Control
Plan
Co-ordinate
Make decisions
Motivate
3 SWOT
Tick the boxes that identify internal factors that would be found in a SWOT analysis.
A poorly-trained workforce
A positive cash balance
New advances in information technology become available
Interest rate changes
AAT: FINANCIAL PERFORMANCE (FPFM)
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4 PEST
Tick the boxes that identify social factors that would be found in a PEST analysis.
A change in government
Increased use of social networking sites
A positive cash balance
Interest rate changes
COLLECTION OF COST INFORMATION
5 HIGH – LOW
X has recorded their units of production and their total costs for the past six months.
Production units Total costs
Jan 11,150 £60,000
Feb 12,345 £66,000
Mar 11,766 £63,080
Apr 13,055 £69,500
May 12,678 £67,500
Jun 13,100 £69,750
The management of X wish to know the total fixed cost and variable cost per unit.
Variable cost per unit is £
Fixed costs in total are £
6 HILOW
Y has recorded their units of production and their total costs for the past six months.
Production units Total costs £
Jan 420 4,600
Feb 450 4,965
Mar 430 4,750
Apr 460 5,000
May 440 4,900
Jun 410 4,500
The management of Y wish to know the total fixed cost and variable cost per unit.
Variable cost per unit is £
Fixed costs in total are £
PRACTICE QUESTIONS: SECTION 1
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7 STEPPED
A company has achieved the following output levels and total costs:
Volume of production (units) 25,000 29,000
Total cost £418,750 £458,750
Total cost includes a fixed element which steps up by £25,000 at an activity level of 27,000 units.
The variable cost per unit is constant.
The variable cost per unit is £
8 STEEPLE
A company has achieved the following output levels and total costs:
Volume of production (units) 2,000 2,400
Total cost £15,000 £21,000
Total cost includes a fixed element which steps up by £5,000 at an activity level of 2,100 units.
The variable cost per unit is constant.
The variable cost per unit is £
9 PEN
A company has achieved the following output levels and total costs:
Volume of production (units) 20,000 23,400 Total cost £150,000 £192,000
Total cost includes a fixed element which steps up by £25,000 at an activity level of 21,100 units.
The variable cost per unit is constant.
The variable cost per unit is £
10 POPPY
A company has achieved the following output levels and total costs:
Volume of production (units) 28,000 34,000 Total cost £38,750 £48,750
Total cost includes a fixed element which steps up by £2,500 at an activity level of 30,000 units.
The variable cost per unit is constant.
The variable cost per unit is £
