Cost and revenues (Level 3)
Study and assessment guide

OFQUAL unit code: D/504/3912
SQA unit code: UD58 04
Version date: April 2013 (version 2)

Introduction
Please note that this document is subject to annual review and revision to ensure that it accurately reflects the assessment criteria.
This guidance note is written for the QCF Unit Cost and revenues (2013 standards). The AAT unit for this will be assessed by one 150 minute computer based examination. Please read this document in conjunction with the standards for the unit. Some of the knowledge will be assessed indirectly through the demonstration of skills. Other aspects will be assessed by discursive testing.
The purpose of this unit is to ensure that students know and understand the role of costing in an organisation, and how organisations use cost and revenue information to aid management decisionmaking.
This unit builds on the knowledge and skills that students develop at Level 2 in the Basic costing unit
(BCST) and prepares them for the Level 4 Budgeting unit (BDGT). Together, these three units develop students with an underpinning understanding of cost and management accounting principles and the ability to apply relevant techniques.
Costs and revenues also links into the wider development of students, by linking their growing knowledge and skills of cost and management accounting to those being developed in finanacial accounting. This is primarily through the connections to the Level 2 units Processing bookkeeping transactions (PBKT); Control accounts, journals and the banking system (CJBS); Computerised accounting (CPAG); and Work effectively in accounting and finance (WKAF). The unit also links to the
Level 3 unit Accounts preparation (ACPR) and to the Level 4 units Financial performance (FPFM) and
Internal control and accounting systems (ISYS).
There are tangental links to the remaining units in the AAT Accounting Qualification.
The first five tasks are concerned with the knowledge and techniques required for dealing with direct costs and revenues; and with the treatment of overhead costs in the short term. This includes calculations and/or explanations relating to inventory control methods; direct labour costs, including overtime and bonuses; allocation and apportionment of indirect costs to responsibility centres; overhead absorption rates including under and over absorptions; and explanations and calculations for prime, marginal and absorption costs.
The second five tasks are concerned with the knowledge and techniques required for decisionmaking, using both short term and long term estimates of costs and revenues. This includes calculations and/or explanations relating to changes in unit costs/profit as activity levels change; segmented profit/loss by product; break-even (C-V-P) analysis; limiting factor decision making; job, batch, unit, process and service costing; reconciling budgeted and actual costs and revenues by means of flexible or fixed budgets; and capital investment appraisal techniques.

Learning objectives
The Cost and revenues unit involves students understanding the fundamental principles that underpin costing methodology and techniques. Students will develop an understanding of how costs are handled in organisations, and why different organisations treat costs in different ways. They will be able to recognise different approaches to cost accounting and make informed and reasoned judgements to guide management.
It also involves applying the principles of costing. Students will learn to identify why cost accounting is an important tool to an organisation and be able to recognise different approaches and make informed reasoned judgements to inform management on the most effective costing techniques to aid decision making.

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Learning outcomes
In total there are five learning outcomes that are assessed together.
• Understand the nature and role of costing systems within an organisation.
• Record and analyse cost information.
• Apportion