[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

[monikernc]

Cortes, if potential customers lost, they must be at capacity. they would not sell for less than current sales price in order to maintain the contribution margin unless the lost amount was at least equal to the savings for the other division.
(Don't forget farwars' mcq from last night though where the two divisions were profit centers who could sell to whomever they choose and that division wouldn't sell to the other at a lower price even though it was better for company as a whole)

If fixed costs increase but the contribution margin holds they would sell to div b because the positive contribution margin helps cover fixed costs. I think. 🙂

If fixed costs change and potential customers were lost, well, God save us all, because this is just the CPA Exam not the MacArthur Genius Award.

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

[monikernc]

I just solved cortes' before dinner. Clue… if production > sales, absorption costing profit > variable costing profit. Remember that and you will know whether to add or subtract the difference. You have to come up with difference, though.

Cortes, as for the stockout cost question. I am too tired but will revisit in morning.

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]

I actually kind of like absortion vs variable cost questions (shh do not tell anyone I HATE BEC)

Here we have to convert to months the key amounts
600,000/12 = 50,000 (bc absortion takes those 50,000 into inventory we have to find out how much the inventory absorbed)

Then we have to find out how much inventory there was:
300,000/12= 25,000 manufactured

50,000 / 25.000 = 2cost per unit absorbed

Absortion takes (absorbs) the fixed costs and recognized them for I.S purposes when they are sold.

Beg incc 5,000
+ 25,000 added
30,000
– 7,000 ending
23.000 COGS

23,000*2 = 46,000 cost recognized under absortion

50,000 cost under variable
-46,000 under absortion
4.000 more cost under variable

40,000
4,000
36,000 NI under variable

[monikernc]

Cortes, the shortcut for that one is just use the change in inventory = 2000 * fixed overhead per unit (600,000/300,000) = 4000. Since inventory increased over the period production > sales, hence, absorp profit > var costing profit, so you subtract. 40,000-4000=36,000

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]

Wow that is way more efficient and it totally makes sense to do it that way

[FAR_WARS]

So economic order quantity (EOQ) = sq root (2so/c)

where
s= annual sales in units
o= cost per purch order
c= carrying cost/unit

But if I remember correctly, there is no square root function on the exam calculator. So my guess is that if asked to calculate this, it will be something simple like the root of 9=3?

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

[Anonymous]

Sorry for my english on this one bc I cant seem to find a way to explain this in a simple way:

I would go ahead and do the calculation without the square root and then take the options given in the mcq and try to find out what options multiplied by the same option equals the result of the calculation of the formula without the sqaure root.Example

Lets say that without the square root function I arrived at 100(for simpleness sake). If I see a 10 on the options given then I know that would be the answer (10*10=100)

[Anonymous]

Practicing over lunch found this one

Go to Next QuestionGuess and Mark WrongOpen CalculatorPrint QuestionEnd Session
Moss Converters, Inc., uses 100,000 pounds of raw material annually in its production process. Material cost is $12 per pound. The cost to process a purchase order is $45, which includes variable costs of $35 and allocated fixed costs of $10. Out-of-pocket handling and storage costs amount to 20% of the per pound cost. The company's cost of capital is 15%.

The formula to determine the economic order quantity is:

EOQ = Square root of 2AD/K
Where:

A = Annual unit demand
D = Cost per order
K = Cost of carrying one unit per year
Moss' economic order quantity is:

A. 1,291 units.

B. 1,464 units.

C. 1,708 units.

D. 1,936 units.

[monikernc]

if the square root function is not on exam calculator can't we multiply each answer choice by itself to see if it equals the squared amount we get to with EOQ equation to find the right answer?
that is an option but without square root function on calculator i think they will ask conceptual questions about both EOQ and Optimal Cash.

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]

monikernc that is what I was trying to explain to Farwars in my english. That is what I have allways done and has worked. It is a little exhausting but we are dealing with BEC so…

[FAR_WARS]

thank you both.

Took me awhile but I got A

root 2 (100*35)/4.2
=
root 1.667

1.291*1.291= 1.667

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

[Anonymous]

Yep that is it.

[FAR_WARS]

EDIT- nevermind, I got it. Thanks again, this is way easier.

125 AR/mo *.8 advanced *.1 rate = 10 annual Factoring Fee
125 AR/mo * .02 fee * 12 months = 30 additional annual fee

=40 total fee
-24 savings
=16 net cost
/100 AR advanced
=
16%

@Cortes:

Can you solve this using your way of converting everything to annual? I tried and got stuck.

The Frame Supply Company has just acquired a large account and needs to increase its working capital by $100,000. The controller of the company has identified a source of funds which is given below:

Pay a factor to buy the company's receivables, which average $125,000 per month and have an average collection period of 30 days. The factor will advance up to 80 percent of the face value of receivables at 10 percent and charge a fee of 2 percent on all receivables purchased. The controller estimates that the firm would save $24,000 in collection expenses over the year. Assume the fee and interest are not deductible in advance. Assume a 360-day year in all of your calculations.

The cost of factoring is:

a. 12.0 percent.
b. 14.8 percent.
c. 16.0 percent.
d. 20.0 percent.

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

[Anonymous]

Sure. You just need to convert the amount of fees to an annual amount.

Interest on average balance
($100,000 x .10 rate) $10,000
Fee payable to factor
(2% of purchased receivables) 30,000
(.02 x $125,000 x 12 mo.) ——-

$40,000
Less savings on collection expense (24,000)
——-
Net Cost $16,000
Cost as a % = $16,000 / $100,000 = 16%

[FAR_WARS]

So the first component is interest on AR advanced>>>>> does this go to the bank?

and the second component is a fee payable to factor for AR purchased?

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

[Author]

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