AAT Level 2 Principles of Costing study plan
AAT Level 2 Principles of Costing · Give each week a clear focus.
8 weeks · About 7 hours per week
Understand the cost recording system within an organisation (cost classification, cost centres, sources of cost data)
Classify 30 given cost items as direct or indirect, fixed, variable or semi-variable, and production or non-production, scoring at least 90% accuracy.
Define cost centre, cost unit and cost object, then map a sample organisation's departments and functions into an appropriate cost centre structure.
Identify at least four sources of cost data (purchase invoices, stores requisitions, timesheets, payroll records) and state the check or authorisation applied to each before it enters the costing system.
Design a simple numeric coding structure and apply it to 10 sample transactions, justifying each code chosen.
Your checkpoint
A one-page cost classification and coding reference sheet containing 20 worked classifications and a validated 4-digit coding structure.
Understand the cost recording system within an organisation (cost classification, cost centres, sources of cost data) & Use cost recording techniques (costing methods and the recording of costs to cost units and cost centres)
Distinguish allocation from apportionment and correctly allocate or apportion 12 overhead items across three cost centres, selecting a defensible basis for each.
Reapportion service cost centre costs to production cost centres using both the direct method and the step-down method.
Record 15 transactions from source documents into a cost centre ledger, balancing the totals at the end.
Match six short business scenarios to the most appropriate costing method (job, batch or service) and justify each choice in one sentence.
Your checkpoint
A completed cost centre overhead schedule for a three-department scenario, with allocated and reapportioned totals that balance back to total overhead.
Use cost recording techniques (costing methods and the recording of costs to cost units and cost centres)
Calculate predetermined overhead absorption rates per labour hour and per machine hour, then apply each rate to a given activity level.
Prepare job cost cards for two separate jobs showing direct materials, direct labour and absorbed production overhead, and derive the unit cost.
Calculate over-absorbed and under-absorbed overhead from given actual and absorbed figures and state how the balance is treated.
Calculate the unit cost of a batch, including correct rounding and treatment of rejections or normal loss where given.
Your checkpoint
Two fully worked job cost cards plus an under/over absorption statement, each with unit costs shown to two decimal places.
Use cost recording techniques (costing methods and the recording of costs to cost units and cost centres) & Understand the cost recording system within an organisation (cost classification, cost centres, sources of cost data)
Complete a timed set of 30 mixed multiple-choice questions covering cost classification, cost centres and costing methods in 45 minutes.
Reconcile total costs recorded against cost centres with total costs charged to cost units and explain any difference found.
Re-work every question answered incorrectly, writing the correct method beside each one.
Summarise the decision rules for choosing a costing method and applying absorption rates onto a single revision card.
Your checkpoint
A timed 30-question test scored at 80% or above, accompanied by an error log showing the corrected method for each mistake.
Calculate and record costs of materials, labour and other expenses
Value inventory over a six-transaction period using both FIFO and AVCO, showing the running balance after each movement.
Record goods received and goods issued on bin cards and a stores ledger, agreeing the closing balance to the physical count.
Calculate reorder levels and maximum and minimum stock levels from given usage, lead time and safety stock data.
Process a stores requisition and a returns note into the costing records, correctly identifying direct and indirect material usage.
Your checkpoint
A completed stores ledger for one material valued under both FIFO and AVCO, with closing inventory values reconciled and explained.
Calculate and record costs of materials, labour and other expenses
Calculate gross pay and net pay for four employees covering basic pay, overtime premium, a bonus scheme and standard deductions.
Split labour costs between direct and indirect, treating idle time and overtime premium according to the correct accounting treatment.
Accrue for three unpaid expenses and prepay for three expenses paid in advance, then post all six into the cost accounts.
Calculate the total labour and expenses cost charged to a cost centre and check it against the payroll and expense source totals.
Your checkpoint
A payroll and expense accrual worksheet for four employees showing correct direct/indirect allocation and totals that agree to source figures.
Prepare and present information and reports on actual costs
Prepare a cost statement for a single product showing prime cost, production overhead, total cost and unit cost in a correctly labelled table.
Compare actual costs with budgeted costs across at least six lines and identify the amount and direction of each difference with a plausible cause.
Draft a one-page written report for a non-financial manager explaining the main cost overruns and recommending at least three actions.
Present all figures with consistent rounding, units and headings so that the statement can be read without supporting notes.
Your checkpoint
A one-page actual-versus-budget cost report containing a cost statement, variance explanations and three recommendations.
Understand the cost recording system within an organisation (cost classification, cost centres, sources of cost data) & Use cost recording techniques (costing methods and the recording of costs to cost units and cost centres) & Calculate and record costs of materials, labour and other expenses & Prepare and present information and reports on actual costs
Sit two full-length timed mock exams under exam conditions with no notes or pauses.
Review the error log from both mocks and re-work every incorrect question using the correct method until it is reproduced unaided.
Produce a one-page method and formula summary card covering classification, absorption, inventory valuation, payroll and reporting.
Practise ten written explanation questions, structuring each answer as a definition, an application and a conclusion.
Your checkpoint
Two completed mock exams scored at 75% or above, plus a final one-page revision card covering all four domains.
Milestones
Week 2: Can classify any given cost on three bases and allocate or apportion overheads to cost centres without referring to notes.
Week 4: Scores 80% or above on a timed 30-question test spanning Domains 1 and 2, with an error log completed.
Week 6: Values inventory under FIFO and AVCO and computes net pay with overtime and deductions, both unaided and error-free on a second attempt.
Week 8: Scores 75% or above on two full-length timed mocks and can state the method for every question type in the syllabus.