[jeff]

Welcome to the Q2 2015 CPA Exam Study Group for BEC.

Economic Cycles (All Across the Land)https://www.another71.com/economic-cycles-rap/

Posted by Another71 on Thursday, November 6, 2014

Free NINJA: https://www.another71.com/cpa-exam-study-plan/

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

[jsch8912]

Hey Carolina! I got that question wrong too and I am not too sure of that either. But I think the question is asking for an annual effect so 4 quarters make up a year. That's why they multiplied the difference of 3 yen by 4 to get 12 yen.

[CM]

@jsch8912 that's makes sense. I saw somewhere that they multiple it by 4, but I wasn't sure why. I thought you were supposed to multiple it by 3 months instead of 4 quarters.

Thanks!

FAR: 78 (5x)
AUD: 80 (3x)
BEC: 9/07/2016
REG: 12/06/2016

Failure is never an option.

"Faith in your own powers and confidence in your individual methods are essential to success." Roderick Stevens

[CM]

@ Amor D the way I can explain this is the following. Let's say you are in the process of buying a house, before you sign the closing paperwork the house needs to be appraised, so the value of the house is estimated. An appraisal is done by performing an inspection of the house to see what fixtures and damages the house has. This inspection/appraisal cost is then added to the cost of the house at the closing date.

On the other hand, inspection expense is an example of prevention cost because after you buy the house you do a plumbing inspection to make sure your plumbing system is good and to see if you need to perform any treatment to prevent any rupture or water leak.

FAR: 78 (5x)
AUD: 80 (3x)
BEC: 9/07/2016
REG: 12/06/2016

Failure is never an option.

"Faith in your own powers and confidence in your individual methods are essential to success." Roderick Stevens

[Anonymous]

Thank you VERY MUCH for that excellent explanation. I truly appreciate it!

Additional request though (please bear with me), do you have the formula for the sunk cost or cost saving for n/10, 2/30 term?

Thanks again!

[jsch8912]

A company is offered a one-time special order for its product and has the capacity to take this order without losing current business. Variable costs per unit and fixed costs in total will be the same. The gross profit for the special order will be 10%, which is 15% less than the usual gross profit. What impact will this order have on total fixed costs and operating income?

a. Total fixed costs do not change, and operating income increases.

b. Total fixed costs do not change, and operating income does not change.

c. Total fixed costs increase, and operating income decreases.

d. Total fixed costs increase, and operating income increases.

I don't understand why the answer is A. I get that the total fixed costs do not change, but wouldn't operating income decrease? My answer isn't even an option.

[CM]

@Amor D No, I don't have that formula. If I find it, I will post it here.

@jsch8912 the answer is A because this is an special order. Fixed costs do not change when a special order is placed. The operating income increases because this problem states that variable costs do not change and the company is not losing its current customers; therefore, the company is making extra money without incurring any additional cost or losing sales.

I hope this helps.

FAR: 78 (5x)
AUD: 80 (3x)
BEC: 9/07/2016
REG: 12/06/2016

Failure is never an option.

"Faith in your own powers and confidence in your individual methods are essential to success." Roderick Stevens

[jsch8912]

Thank you Carolina!!

[jeff]

"I had a dream that NASBA sent me an email that my score was between 86 and 92….I woke up at my normal time to go check my score and to my dismay I received a 72 on BEC."

Posted by Another71 on Tuesday, May 19, 2015

https://www.another71.com/pushing-forward-ninja-mcqs/

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

[Troblin]

@rp12,

Sorry for the late response, I was on vacation. I would just move on. You can really nail down the topics and troubleshoot your weak areas in the adaptive learning/review phase of Ninja's MCQ.

I would actually post your troubled questions in this thread and everyone can help troubleshoot the answer. Gabe and Angelwatch helped me tremedously in REG last quarter in this respect.

FAR: 85(11/22/2014) - Becker(full)/Ninja MCQ (5 day cram)
AUD: 79 (2/1/2015) -Becker/Ninja MCQ/Ninja Notes
REG: 84(4/19/2015) -Becker/Ninja MCQ/Ninja Notes
BEC: 83 (7/13/2015) -Becker/Ninja MCQ/Ninja Notes

Date I Got My Life Back!: 8/4/2015 🙂

[Anonymous]

In its first year of operations, Magna Manufacturers had the following costs when it produced 100,000 and sold 80,000 units of its only product:

Manufacturing costs–Fixed $180,000

Variable 160,000

Selling and admin. costs–Fixed 90,000

Variable 40,000

How much lower would Magna's net income be if it used variable costing instead of full absorption costing?

A.$36,000 <— correct answer

B.$54,000

C.$68,000

D.$94,000

________________________________________________________________________________________

Absorption costing requires that all manufacturing costs, variable and fixed, be treated as product costs, while selling and administrative costs are treated as period costs. Absorption costing is required by GAAP for external reporting. Variable costing or direct costing is a method in which costs of inventory include only the variable manufacturing costs.

Fixed manufacturing cost per unit under absorption costing is $1.80. (Computed $180,000 ÷ 100,000 units)

The difference in income can be computed:

Income difference = Change in inventory x Fixed cost per unit

= (100,000 – 80,000) x $1.80 = 20,000 x $1.80 = $36,000

Proof:

End. Inv. (Ab.Cost) = 20,000 units x (($180,000 + $160,000) / 100,000)

= 20,000 units x $3.40 = $68,000

End. Inv. (Vr.Cost) = 20,000 units x ($160,000 / 100,000 units)

= 20,000 units x $1.60 = $32,000

Difference = $68,000 – $32,000 = $36,000

_____________________________________________________________________________________

Could anyone put this into a language I can understand? I am really struggling with this question for some reason, I have read it like 10 times and it's just not clicking. In my mind it seems like the N/I should be $36,000 higher (less costs). What am I missing here? This seems basic.

[kbito]

Can somebody explain step by step how to handle this step allocation problem?

Parat College allocates support department costs to its individual schools using the step method. Infor¬mation for May is as follows:

Support Departments

---

Maintenance Power

---

---

Costs incurred $99,000 $54,000

Services percentages provided to:

Maintenance — 10%

Power 20% —

School of Education 30% 20%

School of Technology 50% 70%

---

---

100% 100%

What is the amount of May support department costs allocated to the School of Education?

A. $40,500

Incorrect B. $42,120

C. $46,100

D. $49,125

Explanation:Step allocation is the allocation of the costs of each service department in sequence to all departments that receive the service, whether other service departments or production departments. In each step, costs are allocated only to remaining departments such that ultimately all service costs are allocated to production; this method recognizes some of the service rendered from one to another service department.

The School of Education would receive 30% of $99,000, or $29,700, from maintenance. Power would receive 20% of $99,000, or $19,800. After that allocation, the Power Department would have $73,800 ($54,000 + $19,800) to allocate to Education and Technology. Education would receive 2/9 of $73,800, or $16,400 from the Power Department. Therefore, total support department cost allocated to the School of Education is $46,100 ($29,700 from Maintenance and $16,400 from Power).

Aud-61, 7/13
BEC-72,80
REG-68, 8/10
FAR-78

[kbito]

Can somebody explain step by step how to handle this step allocation problem?

Parat College allocates support department costs to its individual schools using the step method. Information for May is as follows:

Support Departments

---

Maintenance Power

---

---

Costs incurred $99,000 $54,000

Services percentages provided to:

Maintenance — 10%

Power 20% —

School of Education 30% 20%

School of Technology 50% 70%

---

---

100% 100%

What is the amount of May support department costs allocated to the School of Education?

A. $40,500

Incorrect B. $42,120

C. $46,100

D. $49,125

Explanation:Step allocation is the allocation of the costs of each service department in sequence to all departments that receive the service, whether other service departments or production departments. In each step, costs are allocated only to remaining departments such that ultimately all service costs are allocated to production; this method recognizes some of the service rendered from one to another service department.

The School of Education would receive 30% of $99,000, or $29,700, from maintenance. Power would receive 20% of $99,000, or $19,800. After that allocation, the Power Department would have $73,800 ($54,000 + $19,800) to allocate to Education and Technology. Education would receive 2/9 of $73,800, or $16,400 from the Power Department. Therefore, total support department cost allocated to the School of Education is $46,100 ($29,700 from Maintenance and $16,400 from Power).

Aud-61, 7/13
BEC-72,80
REG-68, 8/10
FAR-78

[Anonymous]

@kbito – I probably would have worked it as shown in the link below

View post on imgur.com

Not sure why you don't allocate the 10% of power to maintenance before allocating the 30% of Maintenance to the School of Education but I came up with $46,080 so I would have selected $46,100.

[Anonymous]

In regards to my earlier post about the absorption / variable cost question it finally dawned on me a moment ago. I was totally ignoring the fact that absorption costing capitalized the fixed costs rather than expensing as a period cost as is under variable costing which would lead to the lower net income. Not sure how I continued to miss that while reading the provided explanation. I would edit but too late.

[Anonymous]

Does anyone have the formula for the sunk cost or cost saving for n/10, 2/30 term?

Thanks!

[Author]

Replies