Socrates was once asked ..."What is the cure for love at first sight??"
The philosopher replied ..."Take a close second look. It helps."
This precisely should be one's approach to the Costing paper . You don't have to Lose Your Hair trying to flirt with Seema....I mean ..CIMA....
She is simply not worth it...Would throw attitude and I reiterate, tons of it......At the end you will feel frustrated ,ruing the time you have been wasting on her.I feel, one should spend precious time only on those type of sums that he would be able to solve confidently, if asked in the examination. Generally, we have a tendency to get overawed by certain hi-fi sums ....(refer those 1.5 page CIMA(Chartered Institute of Management Accountants, London) sums in the study mats of reputed teachers.In our desperation, we make an attempt to commit them to memory with the faint hope that we will be able to vommit them on the paper. But what is the point dude ? I can assure you that in the examination hall; amidst all the tension, you will not feel like even having a look at them...
If you are able to solve a particular sum applying your logic spontaneously,only then would it be worth putting in the effort ..But if not...Chak De ......Be practical and remember that there are smarter strategies in store for swimming against the tide.
Usually, they set up a difficult Question No 1, which is compulsory in nature ..A student who falls into this devious trap at the very outset of the three hours, may end up screwing up his results.They need to be attempted at the fag end.
What would be the ideal way out of this predicament ???
The underlying approach, on a macro level, should be as follows:
Full marks on the minnows .....there will certainly be plenty of them in any paper..you simply have to patiently search for them in the question paper.
Besides you can always score some part marks on the teasers....the CIMA sums
BELIEVE ME IT'S IMPORTANT NOT TO GET BOGGED DOWN BY THE HYPE AND HOOPLA SURROUNDING THE COSTING PAPER !!B COZ THIS MAY EVENTUALLY PROVE TO BE VERY COSTLY IN TERMS OF THE DAMAGE INFLICTED ON YOUR SELF-CONFIDENCE.
QT is your best friend.Assigment and Simulation are a cakewalk. But you need to be wary of committing silly mistakes while applying the mechanical rules. Plus there are certain typical sums who's basic logic needs to remembered e.g.the travelling salesman problem on Assignment asked in Nov'07.
Transporation is a bit difficult as regards the kind of problems which test your understanding of the concept of
a)solution feasibility (Number of occupied cells in relation to the number of rows and columns in the matrix)
b)profit maximisation objective problems to be solved via minimising the opportunity cost.
PERT/CPM is a teaser, especially the Crashing part..your self-confidence would also crash for a moment. But over a period of time, repeated practice would help you get out of that initial shock. Please remember that in the exams, a very comprehensive problem on Crashing is rarely asked.You can comfortably sail through even if you can solve the simpler ones...like merely identifying the alternative possibilities to reduce project duration.The intricacies which are ofetn tested include among others the folowing:
a)While Latest Finish Time(LFT)is Earliest Finish Time(EFT)+Path Duration(t) ....Earliest Start Time(EST) = Latest Start Time(LST)-t.These formulaes may be a bit confusing,especially if you don't understand their logic..even i am not very sure whether i have jotted down the right ones here.
b)The practical application of the Float concept.
Also prepare for some 2-3 marks theory on say Resource Levelling, Resource Smoothing and stuff.
Learning Curve again is an easy battle.All the sums are simply formulae based. Some fineprints are required to be understood,say,the observation that learning curve would apply to even the trial production of samples ..
Plus some smart shortcuts .....these are nothing but slight mutations of the basic formulae to enable a student to arrive at quicker solutions.
Linear Programming(LP) is another scoring portion, especially if you get a sum based on the Graphical Method. Simplex Method is also the examiner's favourite. But the problem with Simplex Method is that expect its name, nothing is simple about it. Although quite a lot of intellectuals argue that it is a very easy technique, I had to attend my tuition classes twice to understand it properly. The horseshoe rule is a sure shot winner.If you understand it, Simplex Method may actually be a simpler, much simpler affair.
Remember that it is not necessary that you stick to your tuitions teacher's approach for all problems. There could be other teachers in tinsel town who could be specialising in a particular segment, say QT, and offer techniques which are much simpler and time-effective.
Costing Theory coupled with QT will be your saviour in those papers meant to dodge students. Once you solve the QT sums correctly and then move on to attempt 35-40 marks of theory,it would would boost your confidence by leaps and bounds in the examination hall.And for certainty, you will scrape through this paper if you are not able to attempt a major chunk of the remaining portion.
The only problem with Costing theory is that it is difficult to remember. For retention, repetition is the key.
As regards the study material: try Mr. Anil Shah's Mat which encapsulates the whole thing in 50 odd pages. The best part about it is that the content is very well drafted, the thought process applied does not intimidate and you will not have to glean tits and bits of questions scattered across the dozens of pages in other available options for Theory .
Some theory stuff ,like Transfer Pricing, is very logical and appeals instantly to your senses whereas the ilk of Value Chain Analysis are not exactly friendly.
Can't help it dude..Simply mug up the points,although I do agree that it is easier said than done. For this segment, you can adopt an interesting approach for rattofying which I've explained in the section on MICS.
Now coming to the segment that hits students below the belt.
Let's start with Standard Costing. This chapter is often taught in a manner so as to create a fear psychosis in the minds of students, so as to kill their enthusiasm and pride regarding their hitherto acquired knowledge of costing.The impression one gets is that Costing is a spiralling web.
I believe that the mechanical approach is rather unnecessary. Before you embark on this potentially tumultous journey, fasten your seat belts.A sea of formulae is going to catch you unawares.
Try this to mitigate the phobia
Material Cost Variance(MCV) = Budgeted Cost for Actual Output-Actual Cost
Now if I want to split my analysis of this variance into the pricing and the consumption efficiency components, I need to keep rates unchanged for a part of the story.
So I introduce ..let's say an absurd expression ..Actual Input*Budgeted Rate into my computation
So my original formula becomes
MCV = Budgeted Cost for Actual Output-[Actual Input*Budgeted Rate ]+[Actual Input*Budgeted Rate] -Actual Cost
Clubbing the first part, I get ;
Material Usage Variance(MUV)= Budgeted Cost for Actual Output-Actual Input*Budgeted Rate
and the remaining fragment is :-
Material Price Variance(MPV)=Actual Input*Budgeted Rate -Actual Cost
So isn't is so easy to understand ????MCV=MUV+MPV ....
To generate the order of the variances , please remember the acroynm CUP Cost Usage Price
Similarly you can prepare logical approaches for all the formulaes....at least for a superficial working knowledge.
If you want to remember all the formulaes like Calendar Variance and stuff ; my heartiest wishes are with you..you are a stud, a gem, God's gift to Mankind etc etc.
The next part of Std Costing is also taught very mechanically...
I am talking about the methods of accounting, namely,Single Plan,Partial Plan and Integrated Plan.
Sadly no memory aids were offered to us by our teachers ...So I had to devise some of them on my own to dispel the confusion that arises as regards the manner in which the variances are to be disposed off ..Don't you get pyched up!!!!!!!
Partial Method is where we are lazy to think and apply our brains partially ..so all the variances are dumped in one place .
In contrast, in the Singular Method, each individual in the organisation is singularly held responsible for his failures. Since Material Price Variance(MPV) arises because of the Purchase Manager's fault, so this anomaly ideally should not affect the Store Ledger Control(SLC) a/c .
Therefore, all units purchased enter SLC at standard rates.
Plus the organisation suffered on the entire quantity purchased in the period and not just that consumed. So Quantity to be considered is to be correctly chosen while calculating MPV under this plan.
Similar will be the approach as regards the opening as well as the closing stock...Just remember mechanically that they appear at standard rates in the SLC a/c.
The bottomline is that you just need to devise some stupid/intelligent ways to remember .The ends are important and not the means!!!!Also it will be useful if you simply prepare a proforma format for all the above mentioned accounting methods ...and go through it continuously.
Reconciliation sums are not easy but at least they appeal to your IQ. Some golden rules on this are to be kept in one place just like Valuation of Goodwill & Shares in Accountancy. Then life will be a smooth sailing.
Decision Making is my favourite ......I really love those Relevant Costing sums although you may not agree with me on this ..The chapter simply demands a Marwaari approach to taking business decisions . What is gone is bygone...i.e. its a sunk cost Life's future decisions cannot be affected by poor decisions taken by the organisation in the past (of spending exorbitant sums as Overheads).So in the present moment while you evaluate future strategies, say Make or Buy; you simply have to ignore overheads if they are charged/absorbed/added/recovered/applied etc. In Decision Making, we keep on making mistakes on the Overheads front and beware of them.Any cost that is fixed in nature, even if it is expressed in relation to a variable cost ..say Overheads as 200% of Direct Wages is irrelevant..They are to are to be simply ignored while attempting Relevant Costing sums and a note needs to be attcahed at the end of the solution.
ABC Analysis has the privilege of being considered the most notorious topic, although I find the rationale cited by most doomsayers to be quite absurd. Once just the two concepts of cost pools and cost drivers are crystal clear to you, trust me you will be able to solve a majority of the sums.Waise; Seema nahi patne wali...koshish bhi mat karna
Transfer Pricing again goes on similar lines.Sounds complicated but is actually not.
Problems on the Service Sector Costing are easy enough and you will be very lucky to get these types in your question paper.
Random topics like JIT,MRP, LIfe Cycle Costing don't merit much of a botheration.They are rather simple and scoring,especially when you compare them with the monsters.
Just keep one thing in mind. Costing demands a lot of your mental presence. You need to have an eye for detail and be alive to the possibilites of simple follies playing spoilsport
All the best!!