BEC Study Group Q2 2016 - Page 67

  • This topic has 1,014 replies, 103 voices, and was last updated 9 years ago by Anonymous.
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  • #767019
    Anonymous
    Inactive

    On the sample problem below, my question is this: Aside from just being a distracter, why would there be a mention of this statement: ALMO'S AFTER-TAX PROFIT OBJECTIVE WAS $240,000; THE COMPANY'S EFFECTIVE TAX RATE IS 40 PERCENT? Am I missing something?

    CPA-04253
    Almo developed its business plan based on the assumption that canopies would sell at a price of $400
    each. The variable costs for each canopy were projected at $200, and the annual fixed-costs were
    budgeted at $100,000. ALMO'S AFTER-TAX PROFIT OBJECTIVE WAS $240,000; THE COMPANY'S EFFECTIVE TAX RATE IS 40 PERCENT. If no changes are made to the selling price or cost structure, determine the number of units
    that Almo Company must sell in order to break-even.
    a. 167 units.
    b. 250 units.
    c. 500 units.
    d. 750 units.
    CPA-04253 Explanation
    Choice “c” is correct. 500 units must be sold to breakeven.
    Total fixed cost $100,000 ÷ contribution margin per unit of $200 = 500 units to breakeven.
    Choices “a”, “b”, and “d” are incorrect, per the above calculation.

    #767020
    aatoural
    Participant

    Amor – maybe the reason for that extra info is because some of the MCQs are a sequence and the might ask you another question like total sales to acheive the 240k profit using the same information.

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

    #767021
    mckan514w
    Participant

    Actually just did a similar problem Amor- and in the explanation of the problem it said something along the lines about remembering that Break-even / variable cost were to be calculated on a pre-tax basis…. so I think they throw it in there to see if you know that you are suppose to calculate it pre-tax instead of net / after tax..

    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

    #767022
    Anonymous
    Inactive

    I thought we would only add Opportunity Cost Per unit to VCPU when it is full capacity?

    CPA-05248

    Rodder, Inc. manufactures a component in a router assembly. The selling price and unit cost data for the component are as follows:
    Selling price $15
    Direct materials cost 3
    Direct labor cost 3
    Variable overhead cost 3
    Fixed manufacturing overhead cost 2
    Fixed selling and administration cost 1
    The company received a special one-time order for 1,000 components. Rodder has an alternative use of production capacity for the 1,000 components that would produce a contribution margin of $5,000. What amount is the lowest unit price Rodder should accept for the component?
    a. $9
    b. $12
    c. $14
    d. $24
    CPA-05248 Explanation
    Note: This question is answered in the Required Homework Reading relating to Relevant Costs in Chapter B5.
    Choice “c” is correct. The lowest unit price that Rodder should accept is the variable cost of producing the router ($3 + $3 + $3 = $9) plus the $5,000 contribution margin on a unit basis ($5,000 / 1,000 = $5) of the alternative use for the production capacity. The total of these amounts is $14 [$3 + $3 + $3 + $5 = $14].
    Choice “a” is incorrect. The lowest unit price that Rodder should accept is the variable cost of producing the router ($3 + $3 + $3 = $9) plus the $5,000 contribution margin on a unit basis ($5,000 / 1,000 = $5) of the alternative use for the production capacity, not just the variable cost ($9) of producing the router.
    Choice “b” is incorrect. The lowest unit price that Rodder should accept is the variable cost of producing the router ($3 + $3 + $3 = $9) plus the $5,000 contribution margin on a unit basis ($5,000 / 1,000 = $5) of the alternative use for the production capacity, not the variable and fixed cost ($9 + $2 + $1 = $12) of producing the router.
    Choice “d” is incorrect. The lowest unit price that Rodder should accept is the variable cost of producing the router ($3 + $3 + $3 = $9) plus the $5,000 contribution margin on a unit basis ($5,000 / 1,000 = $5) of the alternative use for the production capacity, not the variable cost and selling price ($9 + $15 = $24) of producing the router.

    #767023
    cpa007
    Participant

    I have 2 Q's

    1st Q I have trouble analyzing ABC .Can some one please explain ABC with reference to cost drive.
    Second Q
    This Q is more about cost allocation of service department cost to production department. Please explain why ANS:c is correct

    In allocating factory service department costs to producing departments, which one of the following items would most likely be used as an activity base?

    a.Direct materials usage.

    b. Units of product sold.

    c. Units of electrical power consumed.

    d. Salary of service department employees.
    Thanks!

    #767024
    cpa007
    Participant

    During May, Mercer Company completed 50,000 units costing $600,000, exclusive of spoilage allocation. Of these completed units, 25,000 were sold during the month. An additional 10,000 units, costing $80,000, 50 percent complete at May 31. All units are inspected between the completion of manufacturing and transfer to finished goods inventory. Normal spoilage for the month was $20,000, and abnormal spoilage of $50,000 was also incurred during the month. The portion of total spoilage that should be charged against revenue in May is:

    a. $20,000
    b. $60,000
    c. $70,000
    d. $50,000
    ANS is B. 60000
    Someone Please explain this Q to me?
    thanks!

    #767025
    mckan514w
    Participant

    Amor- This question is basically asking at what price would it make it worth while to the company to use the idle space to produce the special order. They could either make the special order component unit OR they could use the idle capacity space for something else that would earn them $5,000. If they are making the special unit they lose out on the 5,000 which equates to $5 a unit that they would potentially lose. In order NOT to lose that they add that into the cost of producing a special unit. Opportunity cost needs to be added into incremental cost because you basically need to account for what you are losing.

    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

    #767026
    Kmay89
    Participant

    @cpa007, abnormal spoilage is a period cost so the total $50,000 would be deducted in this period. In addition, normal spoilage becomes a product cost just like manufacturing overhead and needs to be allocated evenly among units. The question states that 25,000 units out of 50,000 units were sold so 50% of the units product costs go to cost of goods sold. If you take 50% of the normal spoilage of $20,000, you get $10,000 for a total amount of $60,000 of spoilage expenses being deducted in this period.

    BEC- 93
    FAR- 9/6/2016
    AUD- 10/7/2016
    REG- 11/21/2016

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    #767027
    cpa007
    Participant

    @Kmay89
    Thanks . Explanation in my book is not great . Appreciate your response.

    #767028
    aatoural
    Participant

    Well i am done with the first exam. For better or worst. I have terrible mixed feelings. I felt it went from medium to extremely hard to medium-hard. Lots of computation but not hard ones at all. Not too much COSO either to my desappintment. Lots of IT thuough :(.

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

    #767029
    mckan514w
    Participant

    Thanks for checking back in AA! Fingers are crossed for you- interesting on the COSO and BOO on the IT…. ugh I dread a test with tons of IT- it just does not click with me for some reason….

    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

    #767030
    Crunchtime
    Participant

    @aatoural, sounds like you did a good job!!! I hope I can get your test questions. That is awesome!!

    AUD-77
    BEC-70,73,68,74 SH##!!!!!, 80
    REG-73,76
    FAR -74,82

    Ethics here I come!!

    #767031
    aatoural
    Participant

    Thank u mckan and crunchtime! Lets hope for the best as I start studying for AuD.

    Do we know when are the scores gonna be posted? Yet? Last time I checked in the NASBA website nothing was up for Q3

    Crunchtime. If you dont mind a lil bit of IT, then

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

    #767032
    aatoural
    Participant

    Oops the emoji didnt come out. It was supossed to be an OK habd gesture!

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

    #767033
    mckan514w
    Participant

    Actually JUST like 10mins ago got an email from NASB with release dates– looks like August 4th will be the day- which TOTALLY SUCKS! I'll try to copy and paste if I can

    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

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