hello in this video I'm going to do tasks one and two of the first aat sample assessment at level four for the applied management accounting unit otherwise known as AMAC okay so here we have the new way it will look um this is the mock on the aot sample assessment notice it will not take into account answers to task two four and seven these are the only tasks where you're going to get written um answers required in the live assessment and it's a three hour exam I think that's very generous to be honest um but see what you think uh eight tasks 140 marks all together right so task one 12 marks will be about budgetary processes responsibilities and uncertainties um largely sort of knowledge based questions around the budgeting process so let's have a quick look you are collecting budget information for the company for which you work identify who would be involved in each of the following tasks so overseeing budget preparation um well that's the job of the budget committee the budget accountant gets involved with the budget preparation the senior manager obviously has input and because they have like the the industry knowledge so that one will be budget committee overseeing it assisting in the budget preparation but that's kind of a a two-person job you would have the budget accountant doing the actual figures and the senior manager with some input as to what those figures should be identify the individual group that you will need to contact for information about each of the following tasks so drafting the direct materials budget and so you need to know what you need for the process so that would be the production manager but you also know how much you're going to spend so production and purchases manager agreeing planning assumptions is back to the budget committee as discussed previously Parts C identify the most appropriate treatment for each of the following costs um right so here's our drop down choices so some of these are fairly obvious of the office stationary for example must be admin overheads because it's the office production labor thick pay so we know that sick pay is not a direct cost because obviously when someone's sick they are not producing the items and we know it's an overhead um so we could either allocate it to production overheads or we could charge to production based on a labor overhead rate so the answer is that one charged to production based on a labor overhead rate and why is it not allocate to production overheads I think the only logic I can give there is because it's to do with labor which isn't really a satisfactory explanation but um we'll go with that production labor basic pay and that one's simple the Direct's a direct cost and then the stores Department um so the stores is where you you hold your raw materials Etc so it's it's linked to production um nothing to do with the laborers this time so that one will be allocated to production overheads but the complete the following statement about budgets detailed budgets prepared by production managers are referred to as so bottom up they're involved and usually have a so they are generally thought to be motivating because the managers um have some ownership over those budgets effect on the so that will be the budget holder the person that's got to meet the budget they are brought together to form the so it's like the overall budget so that's called the master budget right so from what I'm seeing there we need to have knowledge of bottom-up top-down incremental zero based and you know they're the options make sure you know what all of those are and sort of this this business of of how you treat the costs and as well the the different responsibilities so if you know your stuff fairly straightforward task one tossed to 24 marks so 24 marks all together um 16 of these marks are going to be for written responses so that leaves eight marks computational so um the task will be about budget preparation evaluation and revision so that tells me that there's going to be writing about this topic so obviously when you're doing your your revision be prepared to write on the topic of budget preparation I'll show you what I mean in a second so this task contains a to z i look fairly limited is preparing it's resource budgets for the next period and has the following data foreign units each unit produced requires 0.6 kilograms of materials closing inventory will be valued at the budgeted purchase price per kilo we've got some information about Labor production overheads I'm just skimming through that now and it says complete the two working schedules using the information above interestingly if you click on references here you can have it side and side by side and this will work like this in the real exam as well right so materials first of all so I'm going to start off with this box working out what's going to be used in production so I know that each unit needs 0.6 kilograms and I know that I'm making a hundred and seventy four thousand units so 0.6 times 174 000 gives me 103 700 kilos and then I come to this box to work out what my purchase using kilos needs to be so my purchases in kilos oh sorry I'll put the wrong figure in there 104 to 400 that one should be but so then to work out the purchases I'm going to say right I need 104 400 to use in production I need to add on what I want to finish with my 3700 kilos of closing inventory and then subtract The 4400 kilos of opening inventory because obviously I don't need to buy them because they're already there so that gives me 103 700 to be purchased I can then multiply by the one pound 25 per kilo which gives me one two nine six two five and then the used in production figure um is going to be so basically the opening inventory plus the purchases it's got to be equal to what's used plus the closing so if I do 5280 plus one two nine six two five and then subtract the four six two five then I get 1 3 0 2 8 0 used in production for the labor and the key here is to start by working out the total hours so the total hours I'm going to need for labor to get the labor of information so five minutes I'm in hours so I would start by doing five divided by 60. to convert that to hours and then multiply it by the hundred and seventy four thousand units that I'm making so from there I calculate that I need 14 500 hours altogether how many have I got I've got 82 working 120 so 82 times 120 is my basic hours so nine eight four oh times that by nine pounds and as I said I've calculated that I need 14 500 hours so therefore I need four six six so overtime hours over time is paid at 50 above the basic rate so 50 of nine is another four pound fifty so that gives me 13 pounds fifty an hour times by the four six six oh which comes to sixty two thousand nine hundred and ten press the references button again it gets rid of that and I'm on to my written part of the question so Part B Oak Fair limited is looking to complete the sales budget for the next year it says identify four factors that could limit the total sales in the sales budget four marks identify four so it's literally a list of four factors and don't have to explain them there's only one mark for each one that I state so what's going to limit the sales well it could be um shortage of rather than saying shortage let's say availability of raw materials it could be availability of labor hours it could be availability of machine time could be availability of capacity and it could be available I'm going on I've gone for now availability of um Finance but that's that's the only level of detail you need now incidentally if you put more than um if you put more than four it's a light clay that they will just Mark the first four you can't sort of hedge your bets just keep putting loads of answers and hope they'll pick out the four correct ones for you all right so it says Identify for probably just put four so that should be quite straightforward then Oak Fair limited has now completed the sales budget which shows a 15 volume increase in sales for the next year so 15 volume increase in sales Oak Fair has produced The Following draft over his budget so you can see here here's all our overheads and we've got the previous period and then we've got the budget and together with the budgetary assumptions used and we have to evaluate the draft over his budget taking into consideration the assumptions used in its preparation right now I would say that you can be almost certain that you're going to get a question in your real exam where you have to challenge budget assumptions like this so I think it's quite straightforward so it's basically saying that we've got a 15 volume increase in sales we basically have to discuss whether the budgeted figure looks reasonable or not and it gives quite a nice structure because you can just um sort of speak about each one and as I said as a paragraph but remember it's evaluate so you're basically got to discuss whether you know what's good about the figures I've put in what's perhaps not quite right about the figure they've put in and don't be afraid to say you know where's the back where's the backing information here right so starting with Factory rent I would personally have a little mini heading um and then let's have a look at what they've done so they've said due to the increased sales for Next Period an additional 10 of factory space will need to be rented so we know that factory rents usually a fixed cost our sales are going up by 15 but we're saying we need an extra 10 of factory space so my first question is well why is it not an extra 15 of factory space that we need my second question is does rent really work like that are we able to just get another 10 percent it's not like a variable cost you either renting a place or you're not so you know maybe that's a little bit questionable um so what I have written I've actually written this out and on a piece of paper which I will attach but um I'll just do the one for the rent so I've said here the budget has increased by 10 in recognition of the additional space needed to accommodate the increase of 15 in sales volume it is unclear whether a 10 percent increase in space will be sufficient to House of 15 percent increase in sales volume why is it not a 15 increase right so I've put a question within my answer we don't know um the other issue with this budgeted figure is that right is a fixed cost so is it actually possible to just increase it by 10 percent at the same rate as the existing space right so I would type it like that then I would come on and then the next one is Factory insurance and I reduce headings like this in my answer space out my comments so that the examiner can go yes and Mark I Mark a mark really easily so I won't type the rest but Factory Insurance it says no increase in premium anticipated from the insurance company so my question here would be well do the insurance company know that we are looking to rent more space have a bigger factory have more in it might be you know they say no increase in premium anticipated but that seems a bit unlikely if the insurance company were aware of all the facts so just to read you what I've put um I said no increase has been included in the budget despite the assumption that the business will be renting a larger space this seems unlikely a surely greater space comes with increased risk and hence increased insurance premium moving on to Administration it says half of all Administration costs are fixed with the remainder variable right so if last year's um figure was 42 000 that means that we've got 21 000 that was fixed and 21 000 that was variable so I did a little calculation here and worked out that 21 000 which was the variable bet from from last last year's figures with an uplift of 15 percent um let me just work that out again so there's my calculator 21 000 uplifted by 15 gives me twenty four thousand one hundred and fifty and then if I add on the fixed bit the 21 000 then that comes to 45 150. they've put in 48 000. so that suggests that they think there's going to be some sort of increase in the fixed element of the admin overhead so to get that across I have written as I say I will put a copy of the writing and with the video as well but um I've written following the given assumption that half of the admin costs are fixed and the other half variable the new budgeted admin cost is expected to be 45 150 and I've shown that calculation that I just explained in Brackets the figure included in the budget is 2830 pounds higher they're putting 48 000. so presumably there is an increase in the fixed cost that has also been factored in right then I'd come to my next headache sales and marketing so I'm told here a new marketing manager is to be employed at a cost of 27 000 pounds per year right so if I take last year's sales and marketing figure 63 and I add on the 27th for the new Marketing Manager actually gives me 90 000. they've only put 80 in the budget so they brought in the cost of this new marketing manager but then they've docked what was previously spent by ten thousand now bearing in mind we're in a 15 we've got a 15 volume increase in sales for next year doesn't really make sense that we're cutting back on some of our marketing expense but maybe the new marketing manager is I don't know maybe going to be super efficient so we maybe we've wasted some money last year that wasn't effective um we don't know so we we kind of need to discuss that so um I have written this figure would have been expected to be 90 000 pounds assuming sales and marketing costs stayed the same and then add the 27 000 for the new Marketing Manager however the total cost is in fact ten thousand pounds less than this which suggests a reduction in the budget for other marketing activities somewhat surprising given the planned 15 increase in sales volume then on to distribution costs so we're told that they are variable so if we work out what 22 000 with a 15 uplift is that would come to 25 300. so again they've whacked in a bit extra here so again not sure why but I mean I suppose just thinking about distribution course maybe there's been unexpected increases in fuel for example to do deliveries or cost of living increases so distribution companies have put up their rates so what I wrote here was these costs are stated as being variable so a 15 uplift we would work out as 25 300. it is unclear why extra expense has been included maybe it reflects higher fuel prices for example and then finally head office costs so we're told um we probably assume that these are fixed but then it says head office will relocate during the year to a larger site well that sounds pretty expensive to me you know a big move reorganization and that comes with a cost unless of course the larger site is in a cheaper location which I didn't actually think of when I wrote my answer um so what I did write was an increase of 3 000 pounds brackets which is under three percent seems unlikely given the planned relocation to a larger site I think I would now add to that however it could be that the new site is in a cheaper location which has counteracted the the additional costs probably add that as an extra sentence right so I think that's a pretty fair question if you get something like that fairly easy to go through methodically and as long as you've got good knowledge of course behaviors because it'll work out what you think it should be and then discuss why they may be put in a different figure okay so that's the end of task two