[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

[h0wdyus]

phew. you had me nervous. 🙂

FAR - 81 29th Aug 2013
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Using Yager

FROM NJ

[stoleway]

@h0wdyus….No need to worry, I think you're pretty much ready..lol

Which of the following definitions describes the concept of practical capacity as it relates to the application of overhead in a manufacturing operation?

A Output is produced efficiently 100% of the time

B Output produced 100% of the time less the output lost due to non-production time

C Long run product demand over a multiple year period

D Expected output for the current year only.

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[h0wdyus]

B

FAR - 81 29th Aug 2013
AUD - 84
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BEC - 89 29th Aug 2014
Using Yager

FROM NJ

[Portia]

Hi Everyone,

Can someone teach me how the units costs in the explanation were calculated?

Kimbeth Manufacturing uses a process cost system to manufacture Dust Density Sensors for the mining industry. The following information pertains to operations for the month of May:

Units

Beginning work-in-process inventory, May 1 16,000

Started in production during May 100,000

Completed production during May 92,000

Ending work-in-process inventory, May 31 24,000

The beginning inventory was 60 percent complete for materials and 20 percent complete for conversion costs. The ending inventory was 90 percent complete for materials and 40 percent complete for conversion costs.

Costs pertaining to the month of May are as follows:

Beginning inventory costs are: materials, $54,560; direct labor $20,320; and factory overhead, $15,240.

Costs incurred during May are: materials used, $468,000; direct labor, $182,880; and factory overhead, $391,160.

Using the weighted-average method, the total cost of the units in the ending work-in-process inventory at May 31, 1995, is:

a. $154,800

b. $156,960

c. $155,328

d. $153,960

Explanation

Ending Work-In-Process Inventory – Wtd. Avg.

Actual % Equiv. Total Unit

Units Compl. Units Cost Cost

Materials 24,000 90% 21,600 $ 99,360 $ 4.60 wtd-avg

Conversion Costs 24,000 40% 9,600 57,600 6.00 wtd-avg

24,000 156,960

Choice “b” is correct. $156,960 total cost of units in ending work-in-process inventory using the weighted-average method.

Choices “d”, “a”, and “c” are incorrect, per the above explanation.

[M.O.D.]

Start with a T account showing incoming units and exiting units.

Break them down further by type and percent:

left side

16

100

—

24 (M:90% c: 40%)

right side of T acct

16 (assume 100% complete for weighted avg.)

76 (100% complete always)

Try using these figures, then let me know.

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]

@h0wdyus……correct.

@Portia

You need to first solve the EUP for both DM and CC to be able to arrive at the Total Cost

EUP Weighted Direct Material

Completed production during May …………………………………………………………….92,000

Ending work-in-process inventory, May 31 24,000…….90% complete…………….21600

EUP Units……………………………………………………………………………………………………..113600

Cost of DM per EUP= Beg cost + current cost / EUP units

=$522560/113600

=$4.6

EUP Weighted Conversion Cost

Completed production during May …………………………………………………………….92,000

Ending work-in-process inventory, May 31 24,000…….40% complete…………….9600

EUP Units…………………………………………………………………………………………….101600

Cost of CC per EUP= Beg cost + current cost / EUP units

=$609600/609600

=$6

Therefore DM = $4.6 & CC=$6

Ending work-in-process inventory, May 31 24,000…….DM-90% complete…………….21600 X 4.6 = $99,360

Ending work-in-process inventory, May 31 24,000…….CC-40% complete………………….9600 X 6 = $57,600

Total cost for EWIP…………………………………………………………………………………………………………..=$156,960

Hope this helps!

REG -63│ 84!!
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Mass-CPA

[stoleway]

The Sarbanes-Oxley Act requires that all financial statements include:

A.

all material off-balance-sheet liabilities, obligations, or transactions.

B.

all immaterial off-balance-sheet liabilities, obligations, or transactions.

C.

only material off-balance-sheet liabilities.

D.

neither material nor immaterial off-balance-sheet liabilities, obligations, or transactions.

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

Mass-CPA

[WANNABE_CPA]

@stoleway… A

FAR : 68, 74, 83 Thank you God 🙂
BEC : 78 (8/27) 🙂
REG : 72 ,80 (2/25) 🙂
AUD : 69,67, 07/23

[Portia]

@ stoleway

Do audited f/s included the f/s notes? if yes, then would the answer be A?

Portia

[stoleway]

A is correct…..This is required to prevent one from issuing f/s that tends to be misleading

REG -63│ 84!!
BEC- 59│70│ 71 │78!
AUD- 75!
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Mass-CPA

[Portia]

@ stoleway and @M.O.D

Thank you all so much for your explanation. The explanation to the question I posted did not explain with your detail and I was totally lost. I was actually thinking about postponing my exam.

Yaeger notes state that a T account should be done as the last step –

Step 4- complete the WIP T account. Using the number of Ending Inventory EFUs from Step 2 and cost per EFU in step 3, calculate the $value of ending inventory and plug COGM.

So, I understand how to arrive at the 156,960, however, I am unsure about COGM. I see that @MOD has a total of 92k for the right side of the T account and I get that, but if I use the 156,960 for WIP ending inventory then I get 40,960 for COGM.

Can you all help me again?

Portia

[EYNewHire]

This might be odd but does anyone have a list of page numbers that are important in the Becker book? Like pages for need to know pass keys or formulas etc?

[M.O.D.]

Ok, I don't know how anyone else does it, but this works for me.

If you get the T account, now you have to allocate costs to equivalent units

for Material equivalent units

16 (100%)

76 (100%)

24×90% = 21.6

Total: 113.6

For Conversion EU

16

76

24×40% = 9.6

total: 101.6

Now you divide total material costs 468/113.6 = 4.6

conversion costs 609600/101600 = 6

Notice that I included beginning inventory costs because this is weighted avg. For FIFO, you exclude them but you also exclude the beginning inv percentages, and include only the difference, ie 100%-60% and 100-20%.

Now you can allocate the 4.6 and 6 to COGM or ending inventory as you wish.

4.6x 21.6 + 6×9.6 = 156960

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)

[Portia]

Hi All,

RE: Becker B.1 pages 54-55 Example (we got this for HW in the lecture)

Can anyone tell me if the computations below for equiv. units of production for FIFO and WA are incorrect?

The formulas that I have been using from Becker and Wiley do not tie to the computations below. Note, the WA formula includes beginning WIP units, FIFO includes the beg WIP for conversion only and does not back out beginning WIP units from completed WIP units

Below is the excerpt of the computations for FIFO and WA from page 55

FIFO WA

Materials % Conversion % Materials % Conversion %

Units in process May 1 – 100% 2,400.00 60% 4,000.00 100% 4,000.00 100%

units started and completed May 10,000.00 100% 10,000.00 100% 10,000.00 100% 10,000.00 100%

units in process, May 31 2,000.00 100% 1,600.00 80% 2,000.00 100% 1,600.00 80%

total units 12,000.00 14,000.00 16,000.00 15,600.00

Note: This example does not appear in the list of BEC errata on the Becker website. I put in a request for academic support but the turnaround time is 48 hours and my test date is Thursday.

Stressing out,

Portia

[M.O.D.]

@ Portia

If you do the T acct and the statement for allocation, you don't need to know any formulas.

The Becker example seems correct.

Weighted average BI is counted at 100% because the BI $ is included in the total allocation.

FIFO BI is not counted (only what is needed to complete is included)

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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