Management Accounting: Decision and ControlJennifer Nyland
After so much controversy surrounding the dreaded AAT Level 4 Management Accounting: Decision and Control (MDCL) exam, pass rates are still low, with a concerning number of students on their fourth and fifth attempts of this exam.
The exam was suspended in January 2017 with immediate effect after complaints from students and training providers stating that the exam was not in line with the syllabus. Students were described as ‘shell shocked’ when leaving the exam room and AAT took down the exam for a formal review.
It was evident that there were still problems and the exam was suspended again in February 2018 with further new assessments made live in March 2018. AAT stated that the content had not changed however the exam was restructured and shortened to eight tasks, instead of ten. Since changing the exam in March, pass rates have only risen from 50.7% to 54.3% as of October 2018.
Due to the amount of apprehension and scare mongering found all over social media sites and forums about this exam, students are left feeling anxious and fearful of this exam before they have even attempted it.
How To Tackle The MDCL Exam
Be under no illusion, this exam is tough, but if you are prepared, it is possible to pass. Many students do pass first time and some actually preferred this exam in comparison to financial statements of limited companies.
So, there is light at the end of the tunnel. In this article, I intend to give students some helpful insight on how to prepare and tackle this exam tactically to achieve that most desired pass. So here are some AAT level 4 decision and control exam tips.
Preparation is the key and students must remember the saying: Fail to prepare – Prepare to fail.
The exam looks for students to understand the concepts and techniques of planning, decision making processes and analysis of the results for the control aspect. Students are also expected to have a good understanding of the key performance indicators to aid performance monitoring and assess changes.
Variance analysis, backwards variances and the causes of the variances are all covered in Task 2 and Task 5 of this exam and students need to ensure they are confident with them. Task 5 is an extended written task and is likely to contain written answers based on the standards and/or the possible causes of the variances stated or calculated. These two tasks carry a total of 33 marks out of the 120 available, meaning that these two questions are worth 27.5% of the total exam. So, if a student fails these questions miserably then effectively the student will have to answer almost all of the other tasks almost perfectly to achieve a pass. Therefore, it is imperative to have a full understanding of variances and their causes to make a pass achievable.
Many students struggle with the written tasks. There are written elements also included in Task 7 and 8 meaning, if a student does not do particularly well on the variance tasks and then does not achieve good marks on the other written elements in Task 7 and 8, then a pass is now completely out of reach regardless of how well they answer the other tasks. Practice is of the upmost importance to the written elements and students need to practice these as much as they practice the short computations. Students should refer to the question as much as possible to gain the full marks available. Examiners do not like generic answers because this does not show the students ability to understand, interpret and explain the key management topics. Students should be comfortable with explaining their calculations and the concepts of limiting factors, target profit, product lifecycle and costing and the advantages and disadvantages of ABC.
Many students struggle with calculating the contribution per limiting factor and to understand that this calculation is needed to be able to rank. The question may not have answer boxes to rank the products to calculate the optimum production plan but if the student understood the concept, then they would know this should still be done. Students also struggle with the written part of this task and fail to make recommendations and explain their workings.
Key performance indicators
These appear through-out Level 4 studies and they do need to be memorised. Make flash cards, create them on the Quizlet app, do whatever is necessary to get these firmly in your mind. In Task 6 students will be expected to have a full understanding of KPIs in so far that they can calculate them backwards to arrive at other figures to then calculate a profit or loss account. Another weak area is calculating RONA. RONA = Net income or profit from operations / net assets x 100%. Net income will be the same as net profit in the statement of profit or loss (income statement)
Break even, margin of safety, contribution, absorption and marginal costing
All of these were covered in Level 3, yet some students are still struggling to calculate these, explain what they mean and fail to value closing inventory at the marginal or absorption cost.
Double check your workings and read the question carefully
Some students constantly lose out on easy marks by not double checking their workings. Students are also making silly mistakes by not reading the question and stating their answer based on total costs and not ‘per unit’ by simply not reading the question. This can also include not answering the question to the specified decimal places and things as trivial as not identifying whether the answer is required in £000s or £s.
There is a lot of material to remember for this exam so my advice is to take your time and do not attempt the exam until you feel ready. Remember that it aims to builds on concepts and techniques already introduced at Level 3. Identify your weak areas and plan your approach to the exam to gain the maximum marks you can. Practice, practice, practice and ensure you understand the key concepts and their meanings, not just how to do the calculations. Read the question carefully and do not lose valuable marks for the silly mistakes noted above. Those few marks could be the difference between a pass or a fail!
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A version of this article was originally contributed to PQ Magazine