[jeff]

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

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

[wowwow93]

Whitehall Corporation produces chemicals used in the cleaning industry. During the previous month Whitehall incurred $300,000 of joint costs in producing 60,000 units of AM-12 and 40,000 units of BM-36. Whitehall uses the units-of-production method to allocate joint costs. Currently, AM-12 is sold at split-off for $3.50 per unit. Flank Corporation has approached Whitehall to purchase all of the production of AM-12 after further processing. The further processing will cost Whitehall $90,000.
Concerning AM-12, which one of the following alternatives is most advantageous?
a.
Whitehall should process further and sell to Flank if the total selling price per unit after further processing is greater than $3.00, which covers the joint costs.
b.
Whitehall should process further and sell to Flank if the total selling price per unit after further processing is greater than $5.00.
c.
Whitehall should process further and sell to Flank if the total selling price per unit after further processing is greater than $1.50, which covers the incremental costs.
d.
Whitehall should continue to sell at split-off unless Flank offers at least $4.50 per unit after further processing, which covers Whitehall's total costs.
Explanation
Choice “b” is correct. Whitehall should process further and sell to flank if the total selling price per unit after further processing is greater than $5.00.

Can someone explain to me why joint cost is being considered? In becker textbook, it says that joint costs are irrelevant. So I picked C (90000/60000 = 1.5) for my answer but it's wrong….

[famh110]

good luck to everyone who's testing tomorrow!!

[julyaf1207]

I think it includes the 3.50 it can get selling them without further processing + the $1.50 that you calculated. Because they want to make more if they're going to spend the time processing them further. So it really isn't considering joint costs.

[famh110]

@wowwow93. so the way i interpret it is like this….if W decides to sell the product at split off point it will receive 60k*3.5 = 210,000, in case he wants to consider selling it to F he will need to incur additional costs of 90,000 so cost at split off plus further processing combined is the total cost that must be considered. now divide it by # of units and you get $5. for this whole transaction to make sense for W he needs to sell it $5 per unit instead of $3.5. so going below 3.5 would n't make sense at all because even when doesn't process it further thats the minimum he's getting …hopefully this make sense

[cottonkandi]

@wowwow93 I did another question like this. Joint costs to the split-off point are unavoidable and are considered as a sunk cost to the decision. The selling price before split-off already considers the joint cost within the selling price of 3.5.

[A1lessio]

Finish the 2nd becker practice exam… not looking good. 64% on the 3 sets of mcqs. They were so hard! (71%,58%, and 62%)

AUD (08/02/2016)

[cottonkandi]

@A1lessio – They say the second one is harder than the first. People who pass the exam usually score between 70-80 in the first one and 60-70 in the second one. I don't take the first practice until tomorrow night…this makes me anxious!

[mperez102204]

Hey all. Just stopping by to wish everyone well who is testing this week! I am testing on Friday and know that the pressure is one! WE CAN DO IT!

[Tarheel83]

Well this should be an interesting test day. Woke up at 2am with my 1.5 year old having major stomach issues. Had to change out everything and give him a bath. Thank god I went to bed early last night and decided to cram and review in the morning.

Good luck to everyone taking the exam today!

[GinjaNinja]

My test is today and I have a quick question about written communications. The written communications in Ninja and the practice AICPA exam already address who the memo is to and from (i.e. To: Board of Directors, From: CPA Candidate). If this is the case, are we suppose to restate who the memo is to and from? Seems redundant but I don't want to not restate it and lose points if that's what they are looking for.

[mperez102204]

Can anyone help me with this questions. I do not understand why we are using the difference of the PV, why not just do each year themselves, since it is assumed it will be reinvested??? Right?

Pole Co. is investing in a machine with a 3-year life. The machine is expected to reduce annual cash operating costs by $30,000 in each of the first two years and by $20,000 in Year 3. Present values of an annuity of $1 at 14% are:

Period 1 0.8772
2 1.6467
3 2.3216
Using a 14% cost of capital, what is the present value of these future savings?

A.$59,600

B.$60,800

C.$62,900

D.$69,500

the correct answer is C. Here is the explanation:

Present value of Year 1
and 2 savings of $30,000 = Savings x Annuity factor for 2 years
= $30,000 x 1.6467
= $49,401
Present value of Year 3
savings of $20,000 = Savings x Difference between second- and
third-year annuity factor
= $20,000 x (2.3216 -1.6467)
= $20,000 x 0.6749
= $13,498
Present value of
Years 1-3 savings = Present value of Year 1 and 2 savings +
Present value of Year 3 savings
= $49,401 + $13,498
= $62,899, or $62,900 rounded

Thanks!

[JMG]

During the current year, the following manufacturing activity took place for a company's products:

Beginning work-in-process, 70% complete 10,000 units
Units started into production during the year 150,000 units
Units completed during the year 140,000 units
Ending work-in-process, 25% complete 20,000 units

What was the number of equivalent units produced using the first-in, first-out method?

According to the Ninja explanation, the answer should be calculated as 140K + 5K – 7K = 138K

But in the Becker book, they had me calculate it as 7K + (140K – 10K) + 5K = 142K

Can someone explain the difference, or am I missing something here?

[mooseonloose]

Hello everyone, after receiving a brutal 73 on this exam, I am back. I find BEC dreadful, and now with sims.

[famh110]

@msperez..just did this problem an hr ago. the reason is when n=3 it considers periods 1,2, and 3. since cf are not same every year, we use n=2 for years 1-2 as they cfs are same for those years and for last year we subtract the total factor of 3yrs from that of year 2 to get the factor just for yr 3

[Tarheel83]

Well, I just took BEC. I feel like I killed the MCQ. The second and third testlets were definitely harder. Here's to hoping I am halfway done. Best of luck everyone!

[Author]

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