[jeff]

Welcome to the Q1 2017 CPA Exam Study Group for BEC. 🙂

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

[ksc168]

I take BEC tomorrow at 8 AM.

Becker Practice Exam 1: 77
Becker Practice Exam 2: 61
Average: 69

I have a question on Becker Practice Exam 2, Testlet 1, Question 8 and 9.
Both deal with capital budgeting. #8 asks for after-tax cash flows and #9 asks for payback period.
Both require calculating the depreciation on the investment to determine the after-tax cash flows.

HOWEVER, #8 does NOT include installation charge in the depreciation calculation AND #9 DOES include installation charge in the depreciation calculation.

Why is that? Please help, thanks!

[Trucker90]

hey @ksc168 , can you post the questions? (or is that illegal?)

[ksc168]

@Trucker90, I think I can since it's not the actual exam. But if I can't, someone please remove this post.

Question #8 I was referring to above:
Barclay Corporation invested $600,000 in a capital project, including $40,000 installation charges. The project had a useful life of 12 years with no salvage value and generated cash flows of $150,000 each year. Assuming a 30% tax rate and straight-line depreciation for tax purposes, Barclay's after-tax cash flows per year would have been equal to:
A) $150,000
B) $105,000
C) $140,000
D) $120,000

Question #9 I was referring to above:
Garter Company anticipates buying a $250,000 piece of equipment that will cost $20,000 to install, have a nine-year useful life, and generate $90,000 per year in pre tax cash flows. Assuming a 30 percent tax rate, what is the payback period for this investment in years?
A) 4.50
B) 3.00
C) 3.47
D) 3.75

Please see bolded parts that relate to my question above.

[tatorhead328]

Has anyone had luck with Ninja Review Notes for variances? I'm using Rogers and just not getting it. Is Ninja more thorough in their review, or for people who have done both, do you think the material covered is similar and I just need to keep working problems and supplement with Youtube and Google?

[Trucker90]

@ksc168

Ah I see. Are the answers to both questions D?

Read the question carefully again – installation costs are included in the depreciable base for both questions.

Question #8 ……. “invested $600,000,… INCLUDING …. INSTALLATION CHARGES” : meaning that installation cost is, well, already included in the 600k.

Question #9 “buying an equipment that WILL COST $200,000 TO INSTALL ” : meaning that the installation cost is not included in the 250k, therefore you must add the installation cost to arrive at the depreciable base.

Bonne Chance!

[Tarheel83]

Hey Ninjas! I was subscribed to the FAR and REG groups since the beginning of 2017, but now that I failed FAR again with a 71 and will probably get a fail score for REG, I am retaking BEC on 3/6. My first attempt back in the summer was a 74, then a quick back to back retake I made a 68 on BEC. So here I am trying to at least pass one more section before the new exams.

Just digging into the material again. I am pretty solid in Corporate Governance and Information Technology. I did all Wiley Test Bank questions for those segments (205 MCQs in total) and scored a 70% without reviewing any of the materials since my last attempt in the summer.

Now I am trying to get my head wrapped around Economics and Cost Accounting again. Man I forgot how hard I had to work at that stuff the first time around.

Anyhow, anyone have any topic specific areas that they think are incredibly important to know. I am trying to go through all of the written chapters in CPAExcel, but want to make sure I don't forget to hit important topics as I am going to be going pretty quick through this stuff again.

[Jsn3004]

A job order cost system uses a predetermined factory overhead rate based on expected volume and expected fixed cost. At the end of the year, underapplied overhead might be explained by which of the following situations?

A.
Actual volume, greater than expected; Actual fixed costs, greater than expected

B.
Actual volume, greater than expected; Actual fixed costs, less than expected

C.
Actual volume, less than expected; Actual fixed costs, greater than expected

D.
Actual volume, less than expected; Actual fixed costs, less than expected

Answer: C

What am I missing here, because I thought it was obvious that if OH was underapplied than actual volume would be greater than expected.

It says in the explanation, “Underapplied overhead means the actual overhead cost was more than the overhead applied to work-in-process”.

I'm sure if I get it, there will be that lightbulb moment where I realize how obvious the answer was, but so far not much luck lol.

[tatorhead328]

@jsn3004, say they started the year thinking that they would spend $400,000 on rent and produce 100,000 units. 400,000 / 100,000 is $4, so they were applying $4 to every unit throughout the year. But at the end of the year, they realized that they only produced 90,000 units. 90,000 x $4 (this is what they were applying all year long) is $360,000. So they had actual costs of $400,000 but only applied $360,000 and OH is underapplied.

[Fosterthedave]

Hey guys, BEC on March 9th.

How do you guys prepare on studying for the IT portion? Research tells me the subject is notorious for having questions on the exam on things not covered in study material. Gonna just hope for the best? is there a best practice.

[Tarheel83]

@Fosterthedave personally, I lucked out to have a decent understanding of IT since I started out in that major before switching to accounting.

However, I did really well on the IT section on my first BEC attempt (74) (it said I was stronger than most candidates in that section) by going over a ton of NINJA MCQs for IT.

NINJA provides a ton of IT related questions and I think that they will prepare anyone pretty well.

I feel like the IT section is memorizing a lot of terms and definitions, as well as the roles of key employees and IT controls and monotring of those controls.

[Subrata P]

Hello All, I am having trouble understanding this question from Becker. Maybe some one can help? Final Exam # 2. Testlet 3 question number 22. Company budgeted production at 6,000 units and charged $42,000 to its factory overhead account. Variable overhead is applied at $3 per hour and assumes each unit takes 1 direct labor hour. The company applied $40,000 of its overhead to work in progress based on 5,000 hours. If the company actually required 5,500 hours to produce 5,000 units what the total overhead variance?

[Jsn3004]

XYZ Lawn Care Services provides a variety of lawn care supplies such as seed and fertilizer. In addition, the firm provides lawn care services on a customer requested basis. Sales and services vary greatly by season and are affected by changes in weather conditions.

The financing method that would likely result in meeting XYZ's cash needs at the lowest cost is:

A.
factoring accounts receivable.

Correct B.
line of credit.

C.
long-term borrowing.

D.
using credit card debt.

You are correct, the answer is B.
XYZ should use the line of credit form of financing because of its flexibility and having interest charged only for funds actually being used. None of the other methods of financing listed provides this degree of flexibility.

Is the answer B because the interest paid against the funds taken out of the bank is less than the factoring fee? I know people choose to factor A/R because it is much quicker than obtaining a line of credit. I'm just confused because I don't understand why a line of credit would be cheaper than Factoring A/R. I don't recall going over anything that said which alternative was cheaper.

[Trucker90]

oops sorry for the double post

[Trucker90]

@tarheel83 just curious because of your username – did you go to Carolina by any chance? If so, YAY hello from a fellow TAR HEEL!

@SubrataP
Disclaimer: I have not yet fully reviewed the cost accounting section.
Here goes my attempt, and please verify if my answer is correct?

The Question asks total overhead variance, so that would be the difference between Applied Overhead and Actual overhead in producing 5,000 units.

1. OHD has two components – fixed and variable. You can get fixed overhead from the ‘budgeted production of 6000 units and charged $42,000 to its factory overhead account.’ The company charges $3/hr, and expects each unit to take 1 hr to produce each unit.
$42,000 – ($3 * 6,000hrs) = $24,000 <- this is Fixed OHD.

2. Let’s calculate actual overhead incurred. Actual # of hrs it took to produce 5000 units was 5,500 hrs.
so, FOHD + VOHD = Total OHD incurred.
$ 24,000 + $3 * 5,500 hrs = $40,500

3. The difference between Applied overhead and Actual OHD incurred is:
$40,000 – $40,500 = $ (500) = $500 unfavorable.

This is how I would do it.

[Trucker90]

@Jsn3004

I think the key here is ‘flexibility.' The question emphasizes that XYZ's ‘ales and services vary greatly' – implying that flexibility is an important factor when choosing financing sources. Credit card debt, LT Debt, and A/R factoring all have a rigid payment schedule.

[Author]

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