[jeff]

@h0wdyus

Incorrect

The answer is B. Comparable sales.

“The use of comparable sales is not an income approach to valuation of a business, it is a market approach. Under the comparable sales approach, the value of a business is determined by comparing it to other entities with comparable characteristics for which the value is more readily determinable.”

This was a tricky one

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

[Anonymous]

Alright guys…unfortunately I am back with you. Ready to tackle this beast once and for all!!

[Zackrampage]

@Casa yeah man I saw that sorry to here. You will get it this time. When does your FAR expire?

FAR - 62 , End of aug 2015
BEC - 67, 67
AUD - TBD
REG - TBD

[M.O.D.]

@ berrygoose

You are partially right. Excess capacity is a different issue which does not apply to this problem.

Excess capacity means the factory is working under its potential. Then there is no loss if it adds another job since it has capacity. However if it is working at capacity, adding another job means having to displace an existing profitable job, and that is the opportunity cost.

In this problem, excess capacity does not exist, but the plant would be idled if it did not make the product. So the result is similar as to having extra capacity, because there is no additional (opportunity) cost to putting the plant to use.

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.]

Trick question?

In a traditional job-order cost system, the issuance of indirect materials to a production department increases

A. Factory overhead control.

B. Work-in-process control.

C. Factory overhead applied.

D. Stores control.

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……Is it Factory overhead control?

I think indirect material will increase the cost of factory overhead but then factory overhead are transferred to WIP along with DM AND DL, which will cause WIP to increase. I will rather choose the element that increases first…ha

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

Mass-CPA

[M.O.D.]

@ stoleway

Yes, your reasoning is correct.

But one further caveat is that indirect materials are never applied directly to production, like direct materials. They are applied to production via Factory oh. applied, at a standard rate (an average for the year).

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)

[GoVPI]

American Coat Company estimates that 60,000 special zippers will be used in the manufacture of men's jackets during the next year. Reese Zipper Company has quoted a price of $.60 per zipper. American would prefer to purchase 5,000 units per month, but Reese is unable to guarantee this delivery schedule. In order to ensure availability of these zippers, American is considering the purchase of all 60,000 units at the beginning of the year. Assuming American can invest cash at eight percent, the company's opportunity cost of purchasing the 60,000 units at the beginning of the year is?

2640

1320

1100

1200

I chose 2640.

I want to show everyone how I arrived

60,000*.60=36,000 total cost of zippers

5000*.60=3000 a month

The first month they have to pay the $3000 OR the entire 36000

Therefore, 33,000 is how much they would get .08 on (11 months x 3000) . 33,000*.08= 2640

The answer is 1320. I have no clue why.. I feel like I am so close on all my calculation questions.

BEC 8/14/14 - Passed
Graduated from college 12/13/14
AUD 8/31/15 - 74. Retake - Passed
REG
FAR

[M.O.D.]

@14

you are comparing the initial outlay 36000 vs 3000

But the monthly inventory is calculated by dividing by 2. This because it starts with 36000 but ends with 0 at the end of the year. So the average over the year is $18000

Likewise, the average per month is 3000/2 = 1500. It begins with 3000 and ends with 0, every month.

So 18000-1500 = 16500

16500 *.08 = 1320

If Becker does not explain this to you, you need to find another study guide.

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]

@CPAin14

I did the same calculation as yours, I guess we are all wrong or maybe the solution to the question is full of crap.

EDIT: Thanks for the explanation MOD…you know these stuff really well

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

Mass-CPA

[GoVPI]

@stole.. I looked it up on google, looks like tons of people chose 2640.

@MOD, I am jealous, you know this stuff like the back of your hand. You will pass without a doubt!

BEC 8/14/14 - Passed
Graduated from college 12/13/14
AUD 8/31/15 - 74. Retake - Passed
REG
FAR

[M.O.D.]

Thanks guys. Stick with it.

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)

[GoVPI]

Im going back to relisten to the end of Chapter 1 becker (operations management) and then going back to rewatch all B2 cost accounting.

Im 10 days away. At work or at home, any free time, Im doing becker progress tests. I do 24 questions at a time, 3 tests. Then take a break. Then go to Wiley Test bank and do CPA practice test that has 3 testlets of 24. Then I will go to CPAreview for free and do some. Im trying to mix it up so I don't memorize things. I study from 6pm-11pm at night and all day on the weekends.

BEC 8/14/14 - Passed
Graduated from college 12/13/14
AUD 8/31/15 - 74. Retake - Passed
REG
FAR

[M.O.D.]

I think this is a misleading question. What do you think?

A company headquartered in Vancouver, British Columbia, is building a pipeline in Russia. The invoice amount is due in 90 days and is denominated at 28 million rubles. The Canadian dollar is trading for 28 rubles currently and 29 rubles 90 days forward. Which of the following strategies will the Canadian firm most likely pursue in the 90-day forward market to hedge the transaction exposure inherent in this situation?

A. Purchase 28,000,000 rubles.

B. Purchase 29,000,000 rubles.

C. Sell 28,000,000 rubles.

D. Sell 29,000,000 rubles.

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]

This question is actually straight forward, the Canadian firm is on the Receivable end of this transaction and the underlying amount is 28million rubbles, forget about any other information, they have been introduced to distract you.

In summary, the Canadian company can hedge against this transaction by Selling 28M rubbles 90 day forward PUT OPTION

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

Mass-CPA

[M.O.D.]

Yes, if they said that the company was on the receiving end.

But if the company is building a pipeline in Russia, does it not also have to buy materials locally in Russia? And would it not receive an invoice for such materials in rubles too?

The problem should clarify whose invoice it is and who needs to pay it. It says “the” invoice but I think it should say, the company's invoice.

Because if it has to pay an invoice in rubles, it should buy rubles on the forward market. That is what I thought anyway.

Thanks for the explanation.

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)

[Author]

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