[jeff]

Welcome to the Q1 2016 CPA Exam Study Group for BEC.

Some BLITZ videos to help your exams: https://www.another71.com/ninja-blitz

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

[Michael]

From Ninja MCQ #1071
Waldo Company, which produces only one product, provides its most current month's data as follows:

Selling price per unit $80
Variable costs per unit:

Direct materials 21
Direct labor 10
Variable manufacturing overhead 3
Variable selling and administrative 6

Fixed costs:
Manufacturing overhead $76,000
Selling and administrative 58,000
Units:

Beginning inventory 0
Month's production 5,000
Number sold 4,500
Ending inventory 500
Based upon the above information, what is the total contribution margin for the month under the variable costing approach?

A. $46,000

B. $180,000

C. $207,000

D. $226,000

Why is the answer C and not B (the difference of including variable selling and administrative?) I keep getting conflicting information, but can somebody please set the record straight for me? SHOULD VARIABLE SELLING AND ADMINISTRATIVE NOT BE INCLUDED IN THE CONTRIBUTION MARGIN FOR VARIABLE COSTING?

thanks, 🙂

FAR - 72, 69, 84
REG - 57, 75
AUD - 61, 70, 72, 89
BEC - 73, 77

[payaza2000]

@Michael

You're right in that Variable Selling & Administrative Cost are included in the calculation if Contribution Margin (NINJA Pg 39). I believe that since the problem identifies Selling and Administrative Cost as a fixed cost that would be the reason why we would exclude Variable Selling And Administrative Cost in the calculation of Total Variable Cost Per Unit, and Contribution Margin.

I just started studying for BEC so I may be completely wrong. Just my two cents.

FAR 5/6/2015- 84
REG 8/3/2015 - 87
AUD 10/25/2015- 69 1/20/2016 -75
BEC 2/26/2016- 80

Thank you God

[payaza2000]

@Michael

You're right in that Variable Selling & Administrative Cost are included in the calculation if Contribution Margin (NINJA Pg 39). I believe that since the problem identifies Selling and Administrative Cost as a fixed cost that would be the reason why we would exclude Variable Selling And Administrative Cost in the calculation of Total Variable Cost Per Unit, and Contribution Margin.

I just started studying for BEC so I may be completely wrong. Just my two cents.

FAR 5/6/2015- 84
REG 8/3/2015 - 87
AUD 10/25/2015- 69 1/20/2016 -75
BEC 2/26/2016- 80

Thank you God

[MaLoTu]

I dont know if this helps clarify:
Absorption Approach Formula
Revenue
Less: COGS (product cost)
Equals: Gross Margin
Less: Operating Expenses (Period expense – SGA Fixed & Variable)
Equals: NET INCOME

Contribution Approach Formula
Revenue
Less: Variable Costs (DL+DM+VMOH+Shipping+Variable SGA)
Equals: Contribution Margin
Less: Fixed Costs (Fixed OH; Fixed SGA)
Equals: NET INCOME

[monikernc]

Michael, the answer is B. (4500 * $80SP) – (4500 * $40VC) = (4500 * CM$40) or $360,000 – $180,000 = $180,000

all variable costs are used for variable costing and you calculate contribution margin based on the number of units sold.

farwars – i redid the variances examples in my managerial principles book to bring it all back to life – it really helped

FAR 7/25/15 76!
AUD 10/30/15 93
BEC 2/27/16 82
REG 5/23/16 88!
Ninja Book and MCQ and the forum - all the way!!!
and a little thing i like to call, time and effort!
if you want things to change, you have to do something different

[Michael]

The answer in the Ninja MCQ is C. Check it out for yourself, you can search by question number. It's question #1071

FAR - 72, 69, 84
REG - 57, 75
AUD - 61, 70, 72, 89
BEC - 73, 77

[monikernc]

Michael – i did ninja question 1071 before i responded earlier and again just now to confirm that B is the correct answer. $180,000. Please don't tell me we have different responses to same question. That would be bad. And impossible i would think.

FAR 7/25/15 76!
AUD 10/30/15 93
BEC 2/27/16 82
REG 5/23/16 88!
Ninja Book and MCQ and the forum - all the way!!!
and a little thing i like to call, time and effort!
if you want things to change, you have to do something different

[Michael]

My bad, I got them flipped around with my anxious state. The correct answer is B. But just to confirm, variable selling and administrative is included in the contribution margin right?

FAR - 72, 69, 84
REG - 57, 75
AUD - 61, 70, 72, 89
BEC - 73, 77

[monikernc]

Farwars – keep asking questions on variances – i am happy to help and they help me, too

FAR 7/25/15 76!
AUD 10/30/15 93
BEC 2/27/16 82
REG 5/23/16 88!
Ninja Book and MCQ and the forum - all the way!!!
and a little thing i like to call, time and effort!
if you want things to change, you have to do something different

[FAR_WARS]

Ok. what exactly is the “3 step” variance? or triple variance? Apparently this is the one to practice, b/c it is the hardest, and is cumulative of the others?

FAR- 80
BEC- 75
AUD- 78
REG- ?

[monikernc]

Before i start, do you mean Total DM, DL and OH Variances?
And Roger does a great video on variances on youtube if you think that will help. https://m.youtube.com/playlist?list=PLYrIr2-uY4ZW8oYsNjVwzQWui3cCPzFcb

FAR 7/25/15 76!
AUD 10/30/15 93
BEC 2/27/16 82
REG 5/23/16 88!
Ninja Book and MCQ and the forum - all the way!!!
and a little thing i like to call, time and effort!
if you want things to change, you have to do something different

[FAR_WARS]

looks like just within OH variance we have
1-way, 2-way, and 3-way. (the 3 things in 3-way are Spending Variance, Efficiency Variance, Volume Variance)

FAR- 80
BEC- 75
AUD- 78
REG- ?

[monikernc]

For variable oh, there is spending and efficiency. For fixed oh there is spending and volume.

For dm there is price, usage/efficiency and total

For dl there is rate, efficiency and total.

I did not include the dm and dl total variances in my count last night. So 12 variances in all.

FAR 7/25/15 76!
AUD 10/30/15 93
BEC 2/27/16 82
REG 5/23/16 88!
Ninja Book and MCQ and the forum - all the way!!!
and a little thing i like to call, time and effort!
if you want things to change, you have to do something different

[Anonymous]

@ FAR WARS, watch this video for help with variances, including the three way variance: https://www.youtube.com/watch?v=7oAM1A8nCHY.#sthash.o0Mmc6VI.dpuf. The video is long and painful but it is the BEST way to understand variance analysis (which is my biggest struggle area).

Question: when do we use three way variance? I can calculate it but have know idea when the question is asking for the three way variance.

[monikernc]

3way variance must be a becker term. I am still not clear on which variances those would be.

FAR 7/25/15 76!
AUD 10/30/15 93
BEC 2/27/16 82
REG 5/23/16 88!
Ninja Book and MCQ and the forum - all the way!!!
and a little thing i like to call, time and effort!
if you want things to change, you have to do something different

[Author]

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