Advanced Management Accounting is a subject, ‘Costingggg!’ is an emotion.

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If there was one subject I dreaded when I was a CA final student, it was most definitely this one. Advanced Management Accounting or Costing, as it was fondly called, had the dubious distinction of being that one exam paper that only superhumans could finish within the allotted 3 hours.

It was always the subject that could throw a curveball at you because there were not many formulae to memorise and apply.

On the very first lecture I attended on this subject, the professor started the class with this question:

"Do you all think Costing is a complicated subject?"

We all nodded murmuring a “Yes”.

He continued, “Your seniors must’ve told you that it’s a paper that can’t be cracked in 3 hours' time. And that the only way to write at least 80% of the paper is to double your writing speed?”

We all nodded wordlessly in class, slightly dejected.

He smiled and said, “I want you all to do an experiment for me …”, he said, “pick up the ‘suggested answer’ script from the latest Costing exam, and in neat handwriting, write down the suggested answer, working notes and all, from start to finish. 
Don’t solve the paper, simply copy the answers, including numbers. I don’t expect it to take more than an hour and a half. Or maybe 2 hours at the most. 

Increasing your writing speed might save you a few minutes but that’s really not going to help get a good score.

The only thing that’s going to help you ace your Costing paper is the speed of your thinking not the speed of your writing.”

He was right.

Costing required judgment and discernment. It demanded an unwavering focus that doesn’t come easy. It required taking into consideration all variables and deciding what to do with them appropriately to arrive at a solution to the problem statement.

Costing involved making a series of intelligent decisions.

In the arena of daily life, we are faced with too many decisions to count and understandably this can get a bit overwhelming. What I've learnt from being a student of Costing is that the best way to solve questions involving too many variables is to make the act of taking decisions easy.

There are 6 things that enable this for me in both Costing and in life:

  1. Undivided attention to the present moment — Whenever I sat down to solve a Costing question, I realised that I needed to give my full attention to reading the question, planning the approach to solve it, and writing down and the final solution. Even the smallest distraction could thwart my train of thought and I’d have to start solving the question all over again. Getting even one step wrong could have a waterfall effect leading to a wholly wrong answer! And I could not afford that. Interestingly when it comes to life and life decisions, I don’t always give each moment the full attention that it deserves. I’m guilty of thinking about work while I’m at home, about home while I’m at work and about fictional worlds on weekends. (I’m a bit of an anime and webtoon enthusiast, NGL). Realising that paying attention will ensure I make good decisions at every step has unlocked insights that I could have never seen with a foggy mind. But there’s still a lot of work I need to do to make sure I’m paying attention all the time, which leads me to the next point...
  2. Practice, practice and practice some more. Practice every day! — I’ve always been a nerd so I’ve been able to grasp concepts quickly and easily. This used to trick me into thinking that I don’t need to practice or revise my chapters on a regular basis. The thing with Costing was that no matter how good you were, you simply couldn’t get high scores by doing a surface level skim of the concepts. You had to practice various kinds of questions every day and even then, there was no guarantee that you’d be prepared for anything that the exam could throw at you. If you lost touch with being able to quickly analyse and solve questions, you’d have to spend days or even weeks building that ‘muscle’ back up. The only sensible option was to solve a question every single day. Even when you were studying other subjects, Costing was just too important to skip. It’s important to practice giving your full attention to whatever you are doing. That’s got to be non-negotiable. Setting aside time to work on yourself is the greatest gift you can give yourself. It doesn’t have to be much but it has to be done every single day. Practice may not make perfect, but it will give you safety and structure. Never underestimate the importance of getting the basics right.
  3. Automate certain functions or formulae — While it was largely concept-driven, there were a handful of rules and formulae in Costing. Things like sunk costs being irrelevant for decision making, the distinction between fixed and variable costs and all the formulae in the Standard Costing chapter were unchangeable principles. As soon as I identified elements relating to these principles on a question, I’d know how exactly how to chalk them up. I didn’t have to think about what to do with them. This freed up my mind to focus on making detailed working notes for other more judgemental aspects of the question, thus saving me some time. In life too there should be some decisions that will be the same no matter what the circumstances. These could be matters pertaining to your value system. For instance, if you designate integrity as an automated value, it means that no matter what happens you will chose to act with integrity. This means external pressure will not sway you and every time you are faced with questions relating to living by this value you already know what the choice is. There’s no need to rethink anything. This will enable you to make decisions faster as you’re operating with a set of carefully selected beliefs that you want to live by. The only warning here is to make sure that the beliefs you are choosing are truly your own and not something handed down to you by the ecosystem you live in.
  4. Understand why you’re doing what you’re doing — You couldn’t ‘mug’ costing. ‘Mug’ is an Indian expression that means ‘to learn by rote’. There were just no blind spots to hide in when it came to Costing. If you didn’t understand the subject, there was no chance in hell that you could pass the exam even if you memorised the solution to every Costing question that was ever created from the beginning of time to the present moment. The Costing paper was designed to test your understanding of the concepts and principles. In fact, even if you got the arithmetic wrong while computing the answers, you could still be awarded full marks if you’d demonstrated the application of the concepts accurately. When it comes to life, doing things without being sure why we’re doing it is like driving full speed in a car when you don’t know the destination or worse, when you don’t have a destination. Whenever you are unsure, take time to pause and consider why you’re doing what you’re doing. When Costing formulae or equations were taught to us, we were also taught the underlying proofs so that the concepts would stick. We knew ‘why’ the formulae functioned the way they did. In the previous point, we spoke of automating some decisions, but not without understanding the logic behind them. Being deliberate and clear about life decisions will make it easy for you to take better decisions when you’re faced with new situations you’ve never been in. You can never prepare for every situation that can happen, but you can sharpen your tools to deal with whatever comes at you.
  5. There’s more than one way to get to the best possible answer — The beauty of understanding the ‘why’ is that it unlocks so many possibilities in life. While the typical objective of a Costing problem was to compute the most cost effective way to finish a project, there weren’t any limitations as to how we should go about finding this optimal cost sheet. We would have to use our smarts and Costing principles to combine, ‘Material’, ‘Labour’, and ‘Overheads’ to make this happen. The study guide would arrive at the most ‘optimal’ combination using the Costing concepts discussed in the chapters preceeding the question. However, if one knew the entire syllabus, they could easily apply various other techniques to get to the same answer or even a better answer than the one that was suggested. Even with life experiences, we sometimes tend to think there’s only a handful of ways to go about something but the truth is it’s only a handful of ways that you know of from your current level of experience. You will discover better ways as you gain more experience. Don’t assume you’ll never figure something out just because you don’t know the answer today. Or because you know a very basic answer today and you’re not sure where to go from here. Remember, nothing is unsolvable and there is usually more than one way to get the same result. All you have to do is keep trying and keep moving on to better techniques and methods.
  6. No two scenarios are ever the same — I am fairly certain that I’ve solved at least a few hundred costing questions as a CA student, but one thing I’ve noticed is that no two questions were ever the same. Surely, there were some adjustments or variations that seemed to repeat but the combination of adjustments was never the same between any two questions. This was simply because of the sheer number of variables that could be introduced in a single question. There was no real chance of the same set of variables repeating in a single book. If the number of variables in a book is too vast to never repeat, imagine the number of variables in real life! No two moments are the same. It’s very unlikely that your past will repeat in the exact same way in the future, for better or worse. Consider each situation for its own merits before deciding the next steps. Don’t let the past hold you back.

Costing eventually became my favourite subject the more I worked on it. And five years since I actively stopped solving Costing questions, the lessons I’ve learnt continue to serve me.

That’s one hell of a benefit-cost ratio!

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