[Anonymous]

Ok so here it is — cost accounting frustrates the crap out of me. I find it rather ironic because I really enjoyed my cost accounting class in undergrad and I did rather well. For some reason though, this topic keeps tripping me up on BEC. And it’s do or die now because if I don’t pass BEC next week I will lose my credit for FAR (which I refuse to let happen!!).

I’m trying to plow through as many cost problems as I can, but today especially I have a real Negative Nancy attitude towards the entire subject. Maybe I just need a pep talk. I understand the concepts fine when I read through the material, but then when I look at the problems I don’t even know where to begin sometimes. Does this happen to anyone else?

Are there certain areas of cost that are more important than others? Maybe I am getting lost in all the tiny details when I should be focusing on more broad concepts within cost accounting? Any advice/recommendations would be much appreciated!

[M.O.D.]

The most important thing to understand is that cost accounting is not GAAP and differs greatly from GAAP. Although GAAP takes some information from it, the theory's purpose is to make managerial decisions (what to produce, how much to produce, how much to pay the managers, etc.)

Then study the difference between absorption (which is GAAP) and variable costing (not GAAP). Do several examples and see how and why the results are different in ending inventories and in net income.

Use two different sets of T accounts to compare the accounting systems.

You did not not mention variance analysis but that is also very important. Again, this has nothing to do with GAAP, but with the measurement of production efficiency.

Nevertheless, you can use T accounts (make some up for each type of variance and account) and follow the flow of money.

One other thing I do is put product qtys, standard pricing info, etc into the T accounts. A double-decker T-acct with product on the top deck, and money on the bottom deck. This is because much of cost acct is about tracking product as much as money.

Although the test questions are about money, the answer can only be found by first calculating product.

BA Mathematics, UC Berkeley
Certificates in CPA and EA preparation, College of San Mateo
CMA I 420, II 470
FAR 91, AUD Feb 2015 (Gleim self-study)

[M.O.D.]

The most important thing to understand is that cost accounting is not GAAP and differs greatly from GAAP. Although GAAP takes some information from it, the theory's purpose is to make managerial decisions (what to produce, how much to produce, how much to pay the managers, etc.)

Then study the difference between absorption (which is GAAP) and variable costing (not GAAP). Do several examples and see how and why the results are different in ending inventories and in net income.

Use two different sets of T accounts to compare the accounting systems.

You did not not mention variance analysis but that is also very important. Again, this has nothing to do with GAAP, but with the measurement of production efficiency.

Nevertheless, you can use T accounts (make some up for each type of variance and account) and follow the flow of money.

One other thing I do is put product qtys, standard pricing info, etc into the T accounts. A double-decker T-acct with product on the top deck, and money on the bottom deck. This is because much of cost acct is about tracking product as much as money.

Although the test questions are about money, the answer can only be found by first calculating product.

BA Mathematics, UC Berkeley
Certificates in CPA and EA preparation, College of San Mateo
CMA I 420, II 470
FAR 91, AUD Feb 2015 (Gleim self-study)

[RayHCPA]

I agree with everything M.O.D. mentions and would just add that thoroughly understanding the flow of product and costs is important since many questions require you to back into numbers.

CA Candidate

AUD - 7/8/13 - 85
REG - 8/20/13 - 67, 12/5/13 - 73 2/27/14 - 78
BEC - 10/1/13 - 86
FAR - 11/24/13 - 87

[RayHCPA]

I agree with everything M.O.D. mentions and would just add that thoroughly understanding the flow of product and costs is important since many questions require you to back into numbers.

CA Candidate

AUD - 7/8/13 - 85
REG - 8/20/13 - 67, 12/5/13 - 73 2/27/14 - 78
BEC - 10/1/13 - 86
FAR - 11/24/13 - 87

[musicamor]

I would also argue that “back of the napkin” calculations are necessary to be successful on this portion of the exam. You'll need to be able to exhibit a certain level of rigor associated with common sense calculations.

Texas CPA - licensed in 2012!!!

[musicamor]

I would also argue that “back of the napkin” calculations are necessary to be successful on this portion of the exam. You'll need to be able to exhibit a certain level of rigor associated with common sense calculations.

Texas CPA - licensed in 2012!!!

[Anonymous]

Beginning Inventory

+Purchases

---

Cost of goods available for sale

-Cost of goods sold

---

Ending Inventory

And there more complicated versions of those equations, such as one involving Beginning Work in Process, Ending Work in Process, etc.. If you know them and also know it the other way around, you should be all right.

[Anonymous]

Beginning Inventory

+Purchases

---

Cost of goods available for sale

-Cost of goods sold

---

Ending Inventory

And there more complicated versions of those equations, such as one involving Beginning Work in Process, Ending Work in Process, etc.. If you know them and also know it the other way around, you should be all right.

[Author]

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