[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

[TigerWoods]

For variable vs absorption costing methods, I understand that variable costing expenses all fixed cost upon production and absorption expenses FMOH upon sale of the product. I'm getting confused with becker and their explanation. I know SG&A doesn't factor into the computation of product cost, but VSG&A would be a part of the contribution margin computation for variable costing, but not part of the product cost for variable costing? Hopefully someone can explain this to me more clearly.

[h0wdyus]

Variable selling and Administrative expense AND fixed Selling and Administrative expense both are treated as PERIOD cost.

The other thing treated as PERIOD cost is Fixed Manufacturing overhead.

Selling and Admin expenses ( fixed and variable) are treated as period cost in both Direct costing and Absorption costing.

Think about it, is selling and admin expense part of cost of good sold to calculate gross profit? No. They are deducted later on in the Income statment under the heading operating expenses to arrive at the Operating Income of EBIT. So Selling and Admin expense along with Pre opening costs and R&D will not be part of costing of product under both absorption and direct costing.

I hope this helps.

FAR - 81 29th Aug 2013
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Using Yager

FROM NJ

[TigerWoods]

I follow that, and I understand that from the Becker book. What I'm confused about is they present a formula to calculate “Contribution Margin” using the variable (contribution) costing approach. Do you not compute a contribution margin under the absorption costing approach?

I understand the differences in the net income; I'm more focused on the contribution margin.

I'm not doing the best job at putting what I'm thinking in writing. It's difficult for me to be conscience without the book in front of you.

[h0wdyus]

Contribution margin is a managerial accounting concept. Costing a product is a Cost accounting concept. Costing is covered under GAAP. Managerial accounting uses both costing and non costing techniques.

Contribution margin is SP – all VC. While costing the inventory under absorption costing is GAAP requirement.

so for calculating contribution margin we can use all variable costs including selling and G&A variable cost.

I am using Wiley/Yaeger, don't have the beckers book.

FAR - 81 29th Aug 2013
AUD - 84
REG - 82
BEC - 89 29th Aug 2014
Using Yager

FROM NJ

[TigerWoods]

Thanks. I think I'm trying to connect things that shouldn't be connected.

[h0wdyus]

Its confusing. CVP analysis is not GAAP. Absorption costing is GAAP. Costing is used to value product. CVP/ contribution margin are used to make decision by management, and they( managment) can use the variable selling cost to find out Contribution margin to MAKE decision, but this cannot be reflected anywhere in the Income Statment ( GAAP), where selling cost is opertaing expense and does not figure in calculation of COGS.

FAR - 81 29th Aug 2013
AUD - 84
REG - 82
BEC - 89 29th Aug 2014
Using Yager

FROM NJ

[TigerWoods]

So, all in all, I know which cost are inventoriable under each/which cost are attached to the piece of inventory. By knowing that, I know how income would be changed depending on which costing method and whether production > sales or vice versa.

Also, contribution margin is an easy computation of “Sales – VC”. Contribution margin is used to find break even points, target profits, safety margins, and used in some operational decision (Special order,keep or drop segments).

I just want to make sure I'm not missing something here. I think I'm trying to over analyze this topic.

[h0wdyus]

I guess that is all to it. Just keep it simple. know that selling and G&A under absorption costing and direct costing are treated as period cost. 🙂

CVP uses all Variable costs

FAR - 81 29th Aug 2013
AUD - 84
REG - 82
BEC - 89 29th Aug 2014
Using Yager

FROM NJ

[TigerWoods]

Thanks for the help

[stoleway]

Information systems process data and transactions within a business organization. These actions include all but which of the following?

A Collecting and entering transactions and data

B Processing data and providing users with the information that they need to run the business

C Validation and comparison of system generated reports to input data

D Controlling the process and data

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

Mass-CPA

[h0wdyus]

C. ??

FAR - 81 29th Aug 2013
AUD - 84
REG - 82
BEC - 89 29th Aug 2014
Using Yager

FROM NJ

[stoleway]

correct

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

Mass-CPA

[stoleway]

A provision in a bond contract that requires the issuer to retire a set percentage of the bond issue each year is referred to as a

A Bond indenture

B Sinking fund

C Call provision

D Warrant

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

Mass-CPA

[h0wdyus]

C.

FAR - 81 29th Aug 2013
AUD - 84
REG - 82
BEC - 89 29th Aug 2014
Using Yager

FROM NJ

[h0wdyus]

Bond indenture is just the bond contract

FAR - 81 29th Aug 2013
AUD - 84
REG - 82
BEC - 89 29th Aug 2014
Using Yager

FROM NJ

[Author]

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