[jeff]

Welcome to the Q2 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

[Spartans92]

Hey Hannah, so for instance (since @aa brought up chapter 6) the prompt was on options and swap rates, let's say it asked us to described the benefits of each.. I would probably use as many words possible related to those two like futures, call options, put options, hedging, interest rate risk, market risk etc.. anything u can think of that relates to those two key words/topic. Yes, restate the prompt. Again, the computer most likely can't detect the content.. I most likely won't know what to write anyways aside from explaining what they are broadly. Hope that kinda helped.

BEC- PASS

[hannahFletcher16]

Yes that did actually help a lot. I was not thinking of that when I heard buzz words but it makes total sense. I appreciate the response, thanks!

[hannahFletcher16]

Yes that did actually help a lot. I was not thinking of that when I heard buzz words but it makes total sense. I appreciate the response, thanks!

[aatoural]

Smart Co. uses a static budget. When actual sales are less than budget, Smart would report favorable variances on which of the following expense categories?
a – Sales commisions – no
Building rent – yes
b – Sales commisions – yes
Building rent – no
c- Sales commisions – yes
Building rent – yes
d- Sales commisions -no
Building rent – no

BECKER Explanation
Choice “b” is correct. Static budgets do not take changes in sales volume into account. Sales are less than budget, so sales commissions will also be less than budgeted. Sales commissions would have a favorable budget variance. Building rent is generally a fixed expense and is likely not influenced by the level of company sales. There would be no variance in building rent as a result of changes in sales volume.
Note: Favorable sales commission variance is not good news; it means actual sales are less than budgeted. Yet, variances from a static budget would show positive or “favorable” variances from budget. Flexible budget variances provide more meaningful information than static budget variances.

Can somebody give me a better explanaition? Thanks.

BEC - PASSED
AUD - 8/29/16
FAR - TBS
REG - TBS

[Spartans92]

@aa, so for variances we basically compared actual output to what we think. When it is related to expenses think about how much we spent versus how much we think we gonna pay. The question says actual sales being less than budget so we have to determine which expense category gets affected by sales. Building rent has no effect from sales because generally it is a fixed amount of money we pay. Think about your rent payments are they affected by how much you get pay? Most likely not.. whether I make $40/hr or $7.5/hr I still gotta pay $700/ month. So Building rent is gonna be out. That leaves sales commission . Well let's say I am a sales and I get 1% every sales I make. But the ACTUAL sales is less than what I thought I would sell (i.e, I thought I would sell 3 cars but only sold 1) hence, my commission is going to be LESS because I budgeted 3%total commission but I am only paying 1%. So put this in simple terms..I thought I would pay out 300 bucks but I only pay 100 so I save 200 which is favorable.

I could have shorten this LOL. Way too wordy but hope that helps.

BEC- PASS

[pyacpa49]

@aatoural

Since commissions depend on sales, if sales are lower than budgeted then commissions will also be lower than budgeted. Less commissions means less expense, which means a favorable variance.

For the Building rent I always think in terms of cost per unit. So the total cost per sales in this case. Because sales are lower than budgeted, the cost per unit will be higher (total cost divided by a smaller number in sales). when compared to budget this is an unfavorable variance because the cost per unit is higher.

Not sure if this is how a textbook would explain it, but it makes sense to me.

Edit: ugh Spartan beat me to it.

[aatoural]

Thank you both! This helps a lot!

BEC - PASSED
AUD - 8/29/16
FAR - TBS
REG - TBS

[mckan514w]

Economics may be the death of me… I was HORRIBLE in it undergrad and avoided it completely Grad… it is taking me FOREVER… to get through the notes / lectures on this… going on day 4 and I am STILL not done and don't feel like I am comprehending any of it… I'm wondering if I am spending too much time on this and should move on and come back to it or keep plodding it out. I feel like my head is going to explode.

and they ask me why I drink...

FAR- 61-next time I'll ask for lube instead of a calculator
REG-75- Never been so happy to see such a low grade
BEC- 8/11
AUD- 9/2

[Spartans92]

Mckan, keep at it until it sticks. Can't say I am a “pro/expert” but feel free to post some questions or anything you need clarification on. Happy to help! 🙂 If u r using becker I find those AD and AS charts to be USELESS.

BEC- PASS

[mckan514w]

Thanks Spartan! right now I don't even know enough to ask the questions I am getting wrong thats who poorly I am doing and comprehending!!! I'm Roger's and he's good (or as good as someone can be) I just seriously have a brain block when it comes to econ… I will keep at it though… worse case scenario is pushing the test back…

and they ask me why I drink...

FAR- 61-next time I'll ask for lube instead of a calculator
REG-75- Never been so happy to see such a low grade
BEC- 8/11
AUD- 9/2

[mckan514w]

HOW? am I suppose to know that this question is asking about Company Risk instead of any other type of risk? It seems oxo vague what am I missing here?

Which of the following types of risk can be reduced by diversification?

Incorrect A. High interest rates

B.Inflation

C.Labor strikes

D.Recessions

(correct answer is C- Labor Strikes- because diversification can reduce company risk of labor strikes)

and they ask me why I drink...

FAR- 61-next time I'll ask for lube instead of a calculator
REG-75- Never been so happy to see such a low grade
BEC- 8/11
AUD- 9/2

[aatoural]

Yeah that one was a toughy!… I asked myself the same thing. But post questions you need help, I believe I have a good grasp of this topic! (Hopefully I actually do on exam day ;p)

BEC - PASSED
AUD - 8/29/16
FAR - TBS
REG - TBS

[aatoural]

However I thought that was chapter 6. Are you using BEcker?

BEC - PASSED
AUD - 8/29/16
FAR - TBS
REG - TBS

[mckan514w]

Thanks aa- no I am using Rogers- he's actually pretty good at explaining econ (or as good as one can be I suppose) but I have a SERIOUS block against this…. I get to the questions and get MAJORLY confused…. it is taking me so long just to grasp the basic concepts and know enough to even ask questions….. UGH

and they ask me why I drink...

FAR- 61-next time I'll ask for lube instead of a calculator
REG-75- Never been so happy to see such a low grade
BEC- 8/11
AUD- 9/2

[aatoural]

I share your feelings. In my case is hedhges and currency situtations in Final Risk Management and Finacial Valuations

BEC - PASSED
AUD - 8/29/16
FAR - TBS
REG - TBS

[Author]

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