[Anonymous]

For anyone who’s interested or is taking BEC soon and wants to practice. We did this in the Q2 FAR group and it was really helpful, especially for memorizing formulas, which as we all know, BEC is heavy with. Answer or ask your own question! Just be sure to come back on here and let the person who answered know if they were right or wrong 🙂

I’ll start it off:

What is the formula to calculate Marginal Propensity to Consume (MPC)?

[M.O.D.]

Net profit margin = net profit/sales

Gross profit margin = Gross profit/sales

Operating profit margin = operating profit/sales

See:

https://www.imanet.org/PDFs/Ratio%20Definitions.pdf

Material price variance = (bought price – standard price) x actual qty bought

material usage (usage efficiency variance) = (used qty – standard qty to output) x standard price

labor rate variance = (amount spent on labor – standard rate) x actual hours

labor efficiency = (actual hours worked – standard hours for output) x standard hourly rate

BA Mathematics, UC Berkeley
Certificates in CPA and EA preparation, College of San Mateo
CMA I 420, II 470
FAR 91, AUD Feb 2015 (Gleim self-study)

[Anonymous]

I just went back and double checked in Wiley and it specifically says that the profit margin ratio is net income divided by net sales. I don't think that the CPA Exam will have as many variations of this ratio as the CMA Exam does.

[Anonymous]

Even if they do ask about the other profitability margins, all that's changing is the numerator (be it net income, gross profit, or operating profit). I wouldn't worry about it much, because if they want something other than net profit margin, the question will have to say operating, or gross margin in it.

[Anonymous]

MOD it's your turn to ask.

[M.O.D.]

In times of rising sales, would a manger want to be evaluated on an absorption costing statement or variable costing statement?

Ie. what are the effects on a division operating income when sales exceed production, under both reporting methods.

BA Mathematics, UC Berkeley
Certificates in CPA and EA preparation, College of San Mateo
CMA I 420, II 470
FAR 91, AUD Feb 2015 (Gleim self-study)

[Anonymous]

If Sales > Production, inventory levels are decreasing, and income would be higher under variable costing then absorption costing. Therefore they would want to be evaluated on variable costing rather than absorption costing.

[Anonymous]

What are the differences between weighted average and FIFO for equivalent unit calculations, and what costs (current, beginning, or both) are used for each method?

[Peterman25]

If production exceeds sales then more costs are in inventory ( on the B/S and not expensed through CoGS) under absorption costing. Absorption net income > variable net income.

When sales exceed production then costs from previous periods that are in inventory will be expensed through CoGS under the absorption costing method. Absorption net income < variable net income.

BEC 7/14 - PASS
FAR 10/14 - PASS
AUD 1/15 - PASS
REG 4/15 - PASS

AZ license - Official 8/20/2015

[Peterman25]

Spar Co. calculated the following ratios for one of its profit centers:

Gross margin percentage 30%

Return on sales 25%

Capital turnover 0.5 times

What is Spar's return on investment for this profit center?

A.

7.5%

B.

12.5%

C.

15.0%

D.

25.0%

BEC 7/14 - PASS
FAR 10/14 - PASS
AUD 1/15 - PASS
REG 4/15 - PASS

AZ license - Official 8/20/2015

[Anonymous]

I'm going with B

[Peterman25]

Why? Where is your math? 🙂

BEC 7/14 - PASS
FAR 10/14 - PASS
AUD 1/15 - PASS
REG 4/15 - PASS

AZ license - Official 8/20/2015

[Anonymous]

It is B.

I plugged in an easy number for the sales figure (100k) and did the following:

100,000 x .25 = 25,000 Return

then you have to find the investment, so do the following:

100,000 / “x” = .5 –> x = 200,000

then ROI:

25,000 / 200,000 = 12.5%

I'm not sure if this is the proper approach as per Becker though.

[Anonymous]

Haha just multiply the return on sales and capital turnover 🙂

[Anonymous]

That works too -__- lol

[Peterman25]

B is correct…who cares what the proper approach is as long as you do what you know and works. I end up doing most of these calculations the long way anyway…

Another way to answer this question or remember it is the DuPont ROI. ROS x Capital turnover.

BEC 7/14 - PASS
FAR 10/14 - PASS
AUD 1/15 - PASS
REG 4/15 - PASS

AZ license - Official 8/20/2015

[Author]

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