Will Boardman: Exam Tips for AAT Level 2 Principles of Costing Techniques (PCTN)

The AAT Level 2 Principles of Costing Techniques exam will be a student’s first taste of management accounting.

There will be a lot of new principles to learn, including an introduction to spreadsheet-style software.

For the Principles of Costing Techniques exam, you’ll have 1 hour and 30 minutes to complete 7 tasks. There are 80 marks on offer and as usual, you’re required to achieve 70% or above, meaning you’ll need a minimum of 56 marks to achieve that all-important pass.

The Principles of Costing Techniques exam currently sits at a UK average of 77%.

Task Breakdown

Having a good idea of what could come up on each task can really help to settle your nerves. Let’s take a look at what you can expect to see on each task.

Task 1 – is worth 8 marks and is about classification and relationship of costs, here I’d expect to see questions on classifying costs by element, nature or function. It would also be worth reading up on the characteristics of management accounting and financial accounting.

Task 2 – is worth 10 marks and is about costing techniques. This task is one of the most varied on the exam. I would expect to see a question on any of the following aspects:
Labour methods and calculations based upon time rate, overtime, piecework and bonuses. Calculating overheads and overhead treatments when using overhead absorption.

Task 3 – is worth 8 marks and is about recording costs. This task generally has very high results. I would expect questions on coding and cost classifications similar to what you might see in task 1.

Task 4 – is worth 10 marks and is about calculating overhead absorption rates and looking at the behaviour of costs. I would expect to see questions on calculating budgeted overhead absorption rates and calculating costs at varying production levels based upon them being variable or fixed.

Task 5 – is worth 12 marks and is about calculating the costs of products and using tools and techniques to improve the presentation of information. This will be the first of two data entry tasks using the inbuilt spreadsheet-style software. Here you can expect to see a manufacturing account. Make sure you’re familiar with the format, and you shouldn’t have any problems on this task.

Task 6 – is worth 12 marks and is about labour and inventory calculations. This could consist of FIFO, LIFO and AVCO inventory valuations. It may also test your knowledge of wage calculations similar to task 2, where you have basic wages, overtime, and piecework.

Task 7 – is worth 20 marks and is about budget calculations and exception reporting using formulas. This is your final task and the second of the data entry tasks. Here, I would expect to see a question where you need to prepare a basic fixed budget. You’ll be required to use cell references to create basic formulas. Make sure you practice on the AAT mock exams in the lifelong learning portal to familiarise yourself with the software that you’ll be using for the exam.

Examiners Report

The examiner’s report is available to all students, and to access this, you can head over to the AAT lifelong learning portal and go to the Introduction to Bookkeeping unit, where you can find the PDF to download.

The report shows the performance on the exam by task and gives key strengths and weaknesses for each task.

Two points that jump out on this exam are, firstly, on task 4, students are still struggling to use FIFO, LIFO and AVCO to calculate inventory valuations. This is an area that students have always struggled with. Once you’ve got it, the questions are very much the same each time, so they shouldn’t cause many problems. As much practice on these as possible! The other point is on task 7, where students are finding it difficult to show variances as a percentage. This needs to be calculated as the variance / the original budgeted figure multiplied by 100. If you’re calculating this as a formula, remember that this would be written as “=the cell reference with the variance in / the cell reference for the original budgeted figure*100”.

Final Thoughts

The principles of costing techniques exam is different from the other 3 level accounting exams. It’s the only exam at level 2 which doesn’t focus on bookkeeping entries. This can be a blessing for some! It is one of the higher performing level 2 exams, and as long as you’ve covered a few mock exams in detail, the real exam shouldn’t differ significantly. If you’re feeling confident with the mocks, then the real exam should be a breeze!

Stay tuned for more updates, success stories, and insights from our community.

Together, let’s continue to strive for excellence and make a difference through hard work and dedication.

Will Boardman