[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.]

@ Amanda,

yes, it is called a supply shock (or stagflation): increase in prices while a decrease in GDP is cause by increases in commodity prices, such as oil

@ stoleway

Audit dept reports to CFO/CEO administratively and the BOD (audit committee) functionally

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]

@stoleway, IA reports to BoD functionally, and management administratively (ie: need a day off, tell mgt, not the BoD).

[M.O.D.]

How is money created?

I think you only have half the answer above on open market operations.

Hint: Fed does not buy in the open market. It only buys from banks, it buys govt bonds and does not give them cash back.

What does it give the banks? And how does that create money?

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)

[stoleway]

MOD and bpk, you're all correct

REG -63│ 84!!
BEC- 59│70│ 71 │78!
AUD- 75!
FAR- 87!

Mass-CPA

[Anonymous]

@ MOD It essentially adds/removes reserves from the system no? This makes more/less loanable funds available?

I could be completely wrong as I never really looked that into depth about it.

[M.O.D.]

@bkp

Yes, the banks get credit (not money) at the Fed. This counts as a reserve (equal to cash) for the purposes of lending out.

Since banks require reserves prior to lending, this increases the amount they can lend. Money lent out then is deposited in other banks. This cycle increases the money supply.

If the reserve ratio required of banks is 20%, and the Fed buys $800 bil. form the banks, how much is the potential money supply increase?

The “creation of money” is a chapter in Gleim with associated MCQs.

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)

[stoleway]

4000billion?

REG -63│ 84!!
BEC- 59│70│ 71 │78!
AUD- 75!
FAR- 87!

Mass-CPA

[M.O.D.]

Yes, 800/.2 = 4000

monetary multiplier = 1/required reserve ratio

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]

Reminds me of the 1/(1-MPC) multiplier for govt spending.

[stoleway]

Company A shows a current ratio of 2:1 and Quick ratio of .5:1, what impact will the following scenarios have on these ratios?

i) equal decrease in both numerator and denominator

ii) equal increase in both numerator and denominator

REG -63│ 84!!
BEC- 59│70│ 71 │78!
AUD- 75!
FAR- 87!

Mass-CPA

[M.O.D.]

20/10 = 2/1 = 2

19/9 = 2.11 (increase)

21/11 = 1.91 (decrease)

5/10 = .5/1 = 0.5

4/9 = .44 (decrease)

6/11 = .6 (increase)

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)

[stoleway]

MOD, correct!

REG -63│ 84!!
BEC- 59│70│ 71 │78!
AUD- 75!
FAR- 87!

Mass-CPA

[M.O.D.]

Kode Co. manufactures a major product that gives rise to a by-product called May. May’s only separable cost is a $1 selling cost when a unit is sold for $4. Kode accounts for May’s sales by deducting the $3 net amount from the cost of goods sold of the major product. There are no inventories. If Kode were to change its method of accounting for May from a by-product to a joint product, what would be the effect on Kode’s overall gross margin?

A. Gross margin increases by $1 for each unit of May sold.

B. Gross margin increases by $4 for each unit of May sold.

C. Gross margin increases by $3 for each unit of May sold.

D. No effect.

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)

[M.O.D.]

Mig Co., which began operations in the month just ended, produces gasoline and a gasoline by-product. The following information is available pertaining to sales and production for the month:

Total production costs to split-off point

$120,000 Gasoline sales

270,000 By-product sales

30,000 Gasoline ending inventory

15,000 Additional by-product costs:

Marketing 10,000

Production15,000

Mig accounts for the by-product at the time of production. What was Mig’s cost of sales for gasoline and the by-product?

Gasoline

By-Product

A.

$115,000

$15,000

B.

$108,000

$37,000

C.

$105,000

$25,000

D.

$100,000

$0

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]

@ MOD, answer is A. Treatment of selling cost makes up the difference between the two methods in the determination of gross margin.

What are the elements/components of the Internal Environment within the ERM framework?

[Author]

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