[jpat1980]

I have a question…

Under variable/direct costing, Fixed AND Variable SG&A (selling, general and administrative costs) costs are period costs under variable/direct costing and absorption costing..correct? So the variable SG&A should not be subtracted as a variable cost to reach contribution margin, correct?

In Becker there are two problems in the practice where one problem the variable SG&A is not subtracted to reach contribution margin #CPA-05808, and another problem where Variable SG&A IS subtracted to reach contribution margin #CPA-04798…

Please someone explain which is the correct way… Or maybe Im missing something in the problems… But both questions are using variable costing…

My exam is on sat… and im a lil stressed…

AUD-68,74,88
REG-81
BEC-75
FAR-71,79
(Primary: Becker | Supplemental: Wiley MCQ's, Ninja Notes)

CFP - passed(3/2013)
(KIER, College for Financial Planning-cffp.edu, Jeff Rattiner Books and Notes)

[msgolds]

It's my understanding that all variable costs are subtracted to reach contribution margin. Can you post the problems on here? I might be able to explain the distinction.

BEC - 90 PASSED
FAR - 84 PASSED
AUD - 93 PASSED
REG - 84 PASSED

I DID IT!!!!

Using Becker Self-Study

"If we were put here to carry a great weight, then the very things we hate are here to build those muscles."

[make_yourself]

I too was under the impression that all variable costs are subtracted to reach contribution margin.

My exam is also on Saturday, BEC 5 is killing me.

FAR - 81 (07/24/2012)
BEC - 92 (10/06/2012)
AUD - 92 (11/29/2012)
REG - 88 (02/28/2013)

Ethics - 90

California Licensed CPA - 12/2013

[nimmle02]

All variable costs are subtracted to reach contribution margin.

However, variable SG&A is included when you are figuring product/inventory/COGS costs under the absorption method

REG - 5/21/2012 - 85
FAR - 7/24/2012 - 86
BEC - 8/27/2012 - 85
AUD - 10/5/2012 - 72....rematch 1/3/13 (waiting)

[Anonymous]

Variable costing

---

> Contribtution = Sales – Variable , where Variable = DM+DL+ Direct Variable O/H

Indirect Variable O/H (Selling & Admin cost) goes below contribtution margin line.

[Anonymous]

this is my understanding –

Variable approach

Sales

less: DM

DL

Var O/H

Var SG&A

Equals: Contribution Margin

Fixed O/H – Period Cost

Fixed SG&A – Period Cost

Absorption Approach

Sales

Less: DM

DL

Variable O/H

Fixed O/H

Equals: Gross Margin

Fixed/Var SG&A – Period Cost

[jpat1980]

CPA-05808

Selected info for company for the year ended Dec 31 as follows:

Units Produced — 20,000

Units Sold– 18,000

DM Used –$80,000

DL Incurred — $40,000

Fixed F-O/H — $50,000

Variable F-O/H — $24,000

Fixed selling and admin expenses $60,000

Variable selling and admin expesnes — $9,000

WIP at the beginning and end of year were zero. What was the company's finished goods inventory cost Dec 31 under the variable/direct costing method?

ANSWER: $14,400

DM+DL+V-F-O/H / units X ending inventory

80,000 + 40,000 + 24,000 = 144,000/20,000 = 7.20 x 2,000 = 14,400 (Ending Inventory)

______________________________________________________________________________________

CPA-04798

Selling price per unit — $80

Variable Costs Per Unit:

DM — $21

DL — $10

Variable mgf O/H — 3

Variable selling and admin — 6

Fixed Costs

Mgf O/H — 76,000

Selling and admin $58,000

Units:

Beg Inventory – 0

Months Production – 5,000

Number Sold — 4,500

Ending Inventory — 500

What is the total contribution margin for the month under variable costing approach?

ANSWER: $180,000

Sales price – all variable costs including SG&A

80-21-10-3-6 = 40 x 4500 units = $180,000

---

So, in my eyes these 2 problems are pretty similar… One uses var sg&a and the other doesnt… am I missing something in the problem?

AUD-68,74,88
REG-81
BEC-75
FAR-71,79
(Primary: Becker | Supplemental: Wiley MCQ's, Ninja Notes)

CFP - passed(3/2013)
(KIER, College for Financial Planning-cffp.edu, Jeff Rattiner Books and Notes)

[jpat1980]

Why isnt the variable SG&A factored into the inventory cost for the first problem?

I must be missing something here, but not sure what… i dont like BEC

AUD-68,74,88
REG-81
BEC-75
FAR-71,79
(Primary: Becker | Supplemental: Wiley MCQ's, Ninja Notes)

CFP - passed(3/2013)
(KIER, College for Financial Planning-cffp.edu, Jeff Rattiner Books and Notes)

[Anonymous]

Here is my understanding :

First problem is asking for the finished goods inventory cost. Variable S&A costs are not product costs, so it was not included.

Second problem asks for contribution margin, which is equal to selling price minus all variable costs.

i.e. DM — $21

DL — $10

Variable mgf O/H — 3

Variable selling and admin — 6

Total 40 per unit.

Selling price is 80 minus variable cost 40 equals to contribution margin of 40 x 4500 units = 180000

Hope this is clear.

If I am wrong please correct me…i am also struggling with BEC…….(

[make_yourself]

I don't get it either. I have notes from the lecture that specifically say “Variable costs = DM + DL + var. mfg. overhad + var. SG&A,” written right next to the formula for contribution margin.

Maybe this is an error on Becker's part that hasn't been corrected. Or I'm missing something too.

FAR - 81 (07/24/2012)
BEC - 92 (10/06/2012)
AUD - 92 (11/29/2012)
REG - 88 (02/28/2013)

Ethics - 90

California Licensed CPA - 12/2013

[jpat1980]

aishcpa — Im guessing your right… Thats the difference between the two questions is one is asking product cost and the other is asking about CM…

I just thought that under variable costing that var-SG&a would be factored into the product/inventory cost, but if your correct… The var sg&a is only factored in when using/solving for CM… is that correct?

AUD-68,74,88
REG-81
BEC-75
FAR-71,79
(Primary: Becker | Supplemental: Wiley MCQ's, Ninja Notes)

CFP - passed(3/2013)
(KIER, College for Financial Planning-cffp.edu, Jeff Rattiner Books and Notes)

[Anonymous]

It's sales- direct variable cost= contribution margin from manufacturing

Contribution margin from manufacturing – variable sellin&admin= contribution margin

I thought u were askin contribution margin from manufacturing …

[Anonymous]

@jpat1980 – yes, that's correct.

[msgolds]

Yeah that's the big difference. Under the absorption method you differentiate between product and period costs. Under the contribution method you differentiate between fixed and variable costs.

BEC - 90 PASSED
FAR - 84 PASSED
AUD - 93 PASSED
REG - 84 PASSED

I DID IT!!!!

Using Becker Self-Study

"If we were put here to carry a great weight, then the very things we hate are here to build those muscles."

[Author]

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