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3.2 Management accounting

7 dot points across 7 inquiry questions. Click any dot point for a focused answer with worked past exam questions where available.

How are overheads charged to products, and when does activity based costing give a fairer cost than a single absorption rate?

Absorption and activity based costing: the allocation, apportionment and reapportionment of overheads, the calculation of overhead absorption rates and their use to cost a unit, the identification of cost pools and cost drivers in activity based costing, and the comparison of the two approaches.
A focused answer to AQA A-Level Accounting 3.12, covering the allocation, apportionment and reapportionment of overheads, the calculation and use of overhead absorption rates, the identification of cost pools and cost drivers in activity based costing, and the comparison of absorption costing with activity based costing.
12 min answer →

How many units must a business sell to cover its costs and make a target profit?

The calculation of the break-even point in units and revenue, the contribution per unit and contribution to sales ratio, the margin of safety, target-profit output, and the construction and limitations of break-even charts.
A focused answer to AQA A-Level Accounting 3.2, covering the calculation of the break-even point, contribution and the contribution to sales ratio, the margin of safety, target-profit output, and the construction and limitations of break-even charts.
11 min answer →

How do budgets help a business plan and control its activities?

The purpose and benefits of budgeting, the preparation of cash, sales and production budgets, budgetary control through comparison with actual results, and the behavioural effects of budgets.
A focused answer to AQA A-Level Accounting 3.2, covering the purpose and benefits of budgeting, the preparation of cash, sales and production budgets, budgetary control through comparison with actual results, and the behavioural effects of budgeting.
10 min answer →

How do businesses decide whether a long-term investment is worthwhile?

The methods of capital investment appraisal (payback period, accounting rate of return and net present value), how to calculate and interpret each, the time value of money, and the quantitative and qualitative factors in an investment decision.
A focused answer to AQA A-Level Accounting 3.2, covering the methods of capital investment appraisal (payback period, accounting rate of return and net present value), how to calculate and interpret each, the time value of money, and the factors in an investment decision.
12 min answer →

How does a business forecast its cash and avoid running out of money?

The purpose and preparation of a cash flow forecast, the difference between cash and profit, the identification of cash surpluses and deficits, and the methods of improving cash flow.
A focused answer to AQA A-Level Accounting 3.2, covering the purpose and preparation of a cash flow forecast, the difference between cash and profit, the identification of surpluses and deficits, and the methods of improving cash flow.
10 min answer →

How do marginal and absorption costing treat costs differently, and when does it matter?

The distinction between fixed and variable costs, the meaning of contribution, marginal costing and its use in short-term decisions, absorption costing and overhead absorption, and the difference in reported profit between the two methods.
A focused answer to AQA A-Level Accounting 3.2, covering fixed and variable costs, contribution, marginal costing for short-term decisions, absorption costing and overhead absorption, and why reported profit differs between the two methods.
11 min answer →

How do we set cost standards and explain why actual results differ from them?

The purpose of standard costing, the calculation and interpretation of material, labour and sales variances, the split into price and usage (or rate and efficiency) variances, and the investigation of variances.
A focused answer to AQA A-Level Accounting 3.2, covering the purpose of standard costing, the calculation and interpretation of material, labour and sales variances, their split into price and usage components, and the investigation of variances.
11 min answer →