[jeff]

I’ve had a few requests for April/May Study Groups…March will be here before you know it.

In order to take an early April exam, you should begin studying…now. 🙂

Jeff Elliott, CPA (KS) | Another71 | NINJA CPA | NINJA CMA | NINJA CPE

[Determined CPA]

BCA Corp. had an inventory at the beginning of the period consisting of 1,000 radios with a total value of $40,000. During the period, BCA produced an additional 40,000 radios. The direct cost of direct materials, direct labor, and variable overhead was $1.28 million. The fixed overhead was $750,000. During the period, BCA sold 37,000 radios for a total of $2,479,000. What is BCA’s operating income if the variable cost method is used to assign costs to products?

Answer: $537,780

Sales $ 2,479,000

Units Cost

Beginning Inventory 1,000 40,000

Variable Costs 40,000 1,280,000

Total Variable Costs 41,000 1,320,000

Ending Inventory* (4,000) (128,780)

Cost of Goods Sold (1,191,220)

Fixed Overhead (750,000)

Operating Income $ 537,780

* 4,000 (EI) = 1,000 (BI) + 40,000 (produced) − 37,000 (sales)

Can someone please explain why we are finding the cogs? I thought variable costing was Sales – VC = CM – FC = OI? I thought absorption costing was Sales – COGS = GP – F&V SG&A = OI? Please help =(

A - 75
B - 78 God is good.
F - 77 Answered prayers.
R - 84! Done!!

Paperwork sent - waiting for license!!
Still on a cloud and in shock. Through God, all things will happen.

[Determined CPA]

And also, can someone please explain how you would solve this:

The Carters signed an agreement with an effective annual interest rate of 7.74%. Interest is payable semi-annually. What was the stated rate?

Answer: 7.6%

I would post the response as to how becker gets this but it doesn't post right. Regardless, I don't understand becker so was hoping someone could share their thinking process. test #2 was miserable.

A - 75
B - 78 God is good.
F - 77 Answered prayers.
R - 84! Done!!

Paperwork sent - waiting for license!!
Still on a cloud and in shock. Through God, all things will happen.

[TNCPA101]

Not sure if this will help, but you still have product (inventoriable) costs and period costs in variable costing. The calculation of your inventory value and the calculation of your CM are totally separate.

For example, Fixed OH is a period cost in variable, meaning you wouldn't include it in the inventory/COGS calculation. Also, you wouldn't include it in the calculation of CM.

[Anonymous]

@Determined CPA

For the Variable Costing problem, the same formula is used as per you have mentioned, but the variable cost includes Variable COGS as well as Variable SG&A.

Sales

(Variable COGS = DM + DL + V OH)

(Variable SG&A)

---

Contribution Margin

(Fixed COGS = Fixed Overheads)

(Fixed SG&A)

---

Operating Income

[taxman89]

@ illoho1

“D. An EBIT of $27,000 would result in EPS of $10.80 for both.”

ok so at 27K EBIT with 1000 shares outstanding.

If you went the debt route you would have 9k additional interest to make your earning 18k. 18lk/1000 shares outstanding = $18EPS before tax. 18*.6 (taking out the 40% taxes) gets you 10.80 eps

If you went the 500 additional shares you would have 27,000 EBIT / 1500 outstanding shares = $18EPS. 18*.6 (taking out the 40% taxes) gets you 10.80 eps

.

Aud-75 3x I knew i never liked you
Bec-77 1x being in the bubble is stressful
Reg-82 4x its not me its you...and no we cant be friends
Far-78 1x easiest section

[taxman89]

@ determinedCPA

The Carters signed an agreement with an effective annual interest rate of 7.74%. Interest is payable semi-annually. What was the stated rate?

Answer: 7.6%

I would post the response as to how becker gets this but it doesn't post right. Regardless, I don't understand becker so was hoping someone could share their thinking process. test #2 was miserable.

I am sure there is some algebraic equation you could write to solve for X (stated rate). but if you get this on a test just use 100 as your principle and calc out every answer given. it will take almost not time at all (100*1.038=103.8 and then 103.8*1.038 =107.74) espescially since it only compounds twice and you can guarantee yourself a correct answer

Aud-75 3x I knew i never liked you
Bec-77 1x being in the bubble is stressful
Reg-82 4x its not me its you...and no we cant be friends
Far-78 1x easiest section

[Anonymous]

2 more days!!!!

[taxman89]

I am also taking it on the 29th. are you guys at all worried about the WC? I am decent at writing but i am concerned ill get some weirdo topic that i know nothing about.

Aud-75 3x I knew i never liked you
Bec-77 1x being in the bubble is stressful
Reg-82 4x its not me its you...and no we cant be friends
Far-78 1x easiest section

[Determined CPA]

Thank you guys for your help with the variable costing question – makes me feel a little uneasy 4 days before my test and I didn't know that ….

taxman89 – I understand using the answer as a way to back into the right response but im not following what you're doing. where did you get the 1.038 from? and how do you get to the 7.6%?

A - 75
B - 78 God is good.
F - 77 Answered prayers.
R - 84! Done!!

Paperwork sent - waiting for license!!
Still on a cloud and in shock. Through God, all things will happen.

[taxman89]

since the 7.6% is one of the answers i would take the 7.6 and divide that by 2 (3.8%)since its compounded semi-annually. so you take your principle times 1.038 to get your first compounded principle amount (103.80) and then your new principle (103.80) times the 1.038 again which gives you the 107.74

Aud-75 3x I knew i never liked you
Bec-77 1x being in the bubble is stressful
Reg-82 4x its not me its you...and no we cant be friends
Far-78 1x easiest section

[scarletknight91]

the effective annual interest rate formula along with the eps question are both algebraic formulas.

___________________________

EAPR: (1+r/2)^2 – 1 = .0774 …….. r= .0759

______________

EPS question:

Afer tax Earnings BEFORE Interest would be the same amount in both scenarios (which ill call “E”)

E/1500 = (E – 5400) / 1000 …..the 5400 is after tax interest expense that is a result of the bond issuance

1000 E = 1500E – 8100000

E = 16200

since its after tax divide by .6 to get 27000 which is before tax AND before interest

ALSO just to remind ppl the variance costing method includes all variance costs in the cm calculation HOWEVER it does not include variable sg&a in its I/S calculation, that cost is a period expense just like in absorption costing

FAR: PASSED
REG: PASSED
AUD: PASSED
BEC: PASSED

DONE

[Determined CPA]

taxman89 – Thank you!!!

A - 75
B - 78 God is good.
F - 77 Answered prayers.
R - 84! Done!!

Paperwork sent - waiting for license!!
Still on a cloud and in shock. Through God, all things will happen.

[Determined CPA]

scarletknight91 – I just read what you wrote – I guess the formula isn't that bad when you put it like that – thanks!

A - 75
B - 78 God is good.
F - 77 Answered prayers.
R - 84! Done!!

Paperwork sent - waiting for license!!
Still on a cloud and in shock. Through God, all things will happen.

[scarletknight91]

no prob… time to rewrite formulas for the next 10 mintues lol

FAR: PASSED
REG: PASSED
AUD: PASSED
BEC: PASSED

DONE

[scarletknight91]

posted this on another thread but ill repeat it here:

am i missing something but isnt coso internal controls nothing more than CRIME and the Enterprise Risk Mgt nothing more than I(eboca hr) S(orc) EAR(essentially Risk Assessment) (control)A I(nfo/comm) M(onitoring, evals, report def) ??

or is there more to it that im missing?

FAR: PASSED
REG: PASSED
AUD: PASSED
BEC: PASSED

DONE

[Author]

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