[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

[cpagal]

Now I'm confused. I really don't care though. I don't expect to see ANY questions with salvage value of the old machine simply because I haven't seen one yet even though we are kinda told how to do it. I don't have Becker though, so if anyone runs across an actual problem, I would be curious to see it.

FAR - 08/30/15 - 90
AUD - 11/12/15 - 92
REG - 01/19/16 - 82
BEC - 02/29/16 - 83

Passed all on 1st attempt using GLEIM (full program) and NINJA (MCQ only)!!!

Louisiana Licensed CPA

[Moeshow]

I'm pretty positive that the salvage value of an old machine is taken out the new equipment, thus making it cheaper. I looked this up in my text book as well as questions stating this. You probably won't see this question but I just wanted to make sure I had all my bases covered. Sorry to confuse anyone.

If you have a salvage value of old equipment you subtract it off the new equipment to lessen the cost. So, salvage value of 5,000 of the old equipment, you'd take it off the new equipment to lessen the cost. You probably won't see it as a calculation question but most likely as a word problem.

Question from rogers saying this:
Management at MDK Corp. is deciding whether to replace a delivery van. A new delivery van costing $40,000 can be purchased to replace the existing delivery van, which cost the company $30,000 and has accumulated depreciation of $20,000. An employee of MDK has offered $12,000 for the old delivery van. Ignoring income taxes, which of the following correctly states relevant costs when making the decision whether to replace the delivery vehicle?

Answer C: Purchase price of new van, disposal price of old van.

Why: Relevant cost are those that are affected depending on hat decisions alternative is selected.****** If management decides to replace a delivery van, MDK will pay the purchase price for the new delivery van, and receive the disposal price for the old delivery van.****** Since income taxes are ignored, neither the book value of the old van, the basis of the old van, nor the gain on the sale are relevant.

BEC 2/26/2016 81
FAR 05/2016

Purely Roger CPA Review, for now!

[Moeshow]

@ cpagal:

I saw you answered my question a couple posts ago, thanks!!!!! Big help! I thought so! I just wanted some clarity. So for all techniques (IRR, Payback method, AAR and NPV) you'd subtract the salvage value of the old equipment from the cost of the new equipment or initial investment, correct?

May I ask you one more question in regards to salvage value (of new equipment) on accounting rate of return, CPAGAL?

BEC 2/26/2016 81
FAR 05/2016

Purely Roger CPA Review, for now!

[Zyx]

Moeshow & cpagal thanks for clarifying that.

REG: 77 x2
BEC: 81 x3
FAR: 68 retake 10/1
AUD: 8/27

[monikernc]

Can someone please explain this to me? I understand why I is true. But not why II is false.

Given that demand exceeds capacity, that there is no spoilage or waste, and that there is full utilization of a constant number of assembly hours, the number of components needed for an assembly operation with an 80% learning curve should:

I. increase for successive periods.
II.decrease per unit of output.

A.I only

B. II only

Incorrect C.
Both I and II

D.Neither I nor II

You answered C. The correct answer is A.

The learning curve is a graphical description of the learning process that shows the impacts of learning over a number of practice opportunities on work behaviors. The learning curve usually shows increases in work performance as an employee integrates learning experiences (classes, on-the-job training, etc.) into work practices. A basic assumption of the learning curve model is that the direct labor required for the n + 1st unit will always be less than the labor required for the n unit.

Since demand exceeds supply, the company will keep increasing production with a constant number of assembly hours. Increased production requires more units of raw material (components).

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

[payaza2000]

@monikernc

My guess would be that since the workers are more capable as a result of the learning curve, they would be able to produce more components in an assembly operation, however the number of components needed per unit of output would decrease as a result of their increased capablity, more with less, less damaged units.

Again this my best educated guess. I also had this question, and got it wrong.

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]

Moniker- I think The out put is initially reduced within the learning curve, but once the learning curve is achieved it increases efficiency. While learning is taking place efficiency will be decreased, basically.

[monikernc]

Thank you both but still confused. What payaza said is why I thought I and II would be true.
MaLoTu, is this question asking about the first run of production or over time? I read it as over time.
BEC, ugh.

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

[SaveBandit]

@monikernc

Can someone please explain this to me? I understand why I is true. But not why II is false.

Given that demand exceeds capacity, that there is no spoilage or waste, and that there is full utilization of a constant number of assembly hours, the number of components needed for an assembly operation with an 80% learning curve should:

I. increase for successive periods.
II.decrease per unit of output.

Let's say you work at the iphone factory. You are a brand new employee. The iphone needs 5 components to be complete and you are able to make 10 iphones your first day. That means you needed 50 components to make all 10 iphones.

You learned a ton on your first day so by the time day 2 rolls around, you've figured out how to do things more quickly. On day 2, you make 20 iphones needing the same 5 components per iphone. That means on day 2 you used 100 components for 20 iphones.

So you used 100 components on day 2 and 50 on day 1. You used more components as you got better at your job. Keep in mind you worked the same number of hours on both days, you just got better by day 2.

4 for 4

FAR 85
AUD 94
BEC 86
REG 90

[Anonymous]

Ugh BEC sucks…I understand that there is an excess of demand over production and because of that there would be more total components used as the workers are more efficient. In other words production will increase with the same constant hours in the assembly. But components PER UNIT? How the heck the learning curve increases components needed per unit on the long run? I saw that q before and it made me threw a water bottle cap accross the room… My wife kindly and nicely asked me to picked it up later, thank God she is used to this…

[SaveBandit]

Baby Frames, Inc. evaluates manufacturing overhead by using variance analysis. The following information applies to the month of May:

Actual Budgeted

Number of frames manufactured 19,000 20,000

Variable Overhead costs $ 4,100 $2 per direct labor hr

Fixed Overhead costs $22,000 ; $20,000; $1 per unit

Direct labor hours 2,100 hrs 0.1 hour per frame

What is the production volume variance?
a. $2000 favorable.
b. $1000 favorable.
c. $2000 unfavorable.
d. $1000 unfavorable.

Applied OH:
(Standard variable OH rate x Standard direct labor hours allowed) + (Standard fixed OH rate x Actual Production)
($2.00 x .1 x 19,000) + ($1.00 x $19,000 ) = 22,800

Budgeted OH based on standard hours:
(Standard var OH rate x Standard DL hours allows) + (Standard fixed OH rate x Standard Production)
($2.00 x .1 x 19,000) + ($1.00 x 20,000) – 23,800

Can someone explain production volume variances to me? I don't get why variable OH is factored into a question about fixed OH. Becker doesn't say anything about variable OH when they explain the production volume variance.

4 for 4

FAR 85
AUD 94
BEC 86
REG 90

[MaLoTu]

@savebandit- that is what I was trying to convey… Thanks for the example.

@moniker- I interpreted the question as the whole process from initiation to the desired result.

[Anonymous]

In savebandits example the total components increased (from 50 to 100) and I totally get that but the components PER UNIT remained the same (5 per unit) That is why I agree with monikernc in that the q is confusing and the explanation does not help much either… :/

[monikernc]

Savebandit – is that the solution becker gave? I would have done budgeted fixed overhead- applied. Where budgeted = 20,000 and applied = $1*19,000=$19,000, to get $20,000-19,000= $1,000 unfavorable

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]

Going back to my learning curve question I guess the takeaway is that only hours decrease – I was thinking there would be waste that would be reduced as employees learned to do their job better.

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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