By the time I sat for BEC, I was only needing to “memorize” like 5 formulas. The most difficult concepts for me to grasp at the time was IRR, which is the rate that sets the NPV to 0, along with DOL and DFL (DOL+DFL=DTL).
Here are some personal tips:
First, I think this list is pretty good for a comprehensive formula list… https://www.another71.com/cpa-exam-forum/topic/first-time-poster-bec-formulas/
Second, go here and read the fifth post (from rsg149) in regards to BEC SIMs and formula memorization… https://www.another71.com/cpa-exam-forum/topic/just-took-the-new-bec/
Now before I go in to detail, I'd say it's much more important to practice working with the formulas themselves and understanding the concepts and implications of each metric, then worrying about memorizing every single one on its face. With that said, of course the more you know, the better it is.
For cost accounting, You definitely need to know how to calculate the six major variances, but they basically only use two formulas (there are many different methods of studying these, and many tricks that will make it easier). I would look up YouTube videos if you do not have any easy to understand source materials for this part.
For liquidity measures, e.g., working capital, quick ratio, and current ratio are all extremely easy to remember and use. Keep in the back of your mind how a change in one ratio can have an effect on the others by using examples with simple numbers.
For turnover measures, whatever is getting turned over, take the average of that number and put it in the denominator. E.g., inventory turnover is COGS /Avg Inventory.
For return ratios, you are usually putting NI in denominator and your performance benchmark such as total assets or sales in the denominator; e.g., Return on Assets = NI/Avg Assets and Return on Sales = NI/Sales
For inventory planning, just remember EOQ formula. “To OverDose Overseas makes you a square root” which reads as 2OD/C, hence EOQ= sqrt(2OD/C) where O= Order Cost, D= Demand, C = Carrying Cost.
Reorder point and safety stock are EZ … ROP = avg demand * avg lead time and safety stock = (Max demand * Max LT) – ROP. Note that when avg demand is similar to max demand, and avg LT is similar to max LT, there is no required safety stock.
For economics, remember the two ways to calculate GDP. That is, the income method of GDP = W+R+I+Pr and the expenditure method of GDP = C+G+I+(X-N). Just remember “WRIP” and “CGIX”. Then, remember the formulas under GDP, and go down the line. NDP = GDP – Depr, NI = NDP – NFFI – INDIRECT TAX, PI = NI – SS – CORP I/T – TRANSFER PAYMENTS – UNDISTRIBUTED CORP PR, DI = PI – PERSONAL TAX . It's a long formula, but if you do enough problems, this will become second nature. You will probably do something like writing it down on exam day only to find out that you don't even need to consult your notes.
Other economics topics tend to be easier, in regards to formulas. The reserve ratio, MPS+MPC=1 , the multiplier effect, etc are generally simple formulas. Also, have a through understanding of price elasticity of supply/demand. E.G Price elasticity of demand = %ΔQ/%ΔP (Most of the elasticity formulas are set up in a similar fashion).
For Cost of Capital, know the costs of Equity, and the costs of Debt. If you can solve for these, weighted average cost of capital (WACC) is easy as pie. Understand how a compensating balance can affect COst of capital.
Standard Capital budgeting problems focus on algebraic equations, so as long as you understand the concepts and know how to solve algebraically, there is not much to remember. Similar thing can be said about NPV/IRR/payback period calculations… you do not need to worry about formulas insomuch as being able to apply the time value of money concepts.
The leverage formulas were probably the most tricky for me to memorize, and (key point) can be calculated a number of different ways:
DOL = %ΔEBIT/%ΔSALES or DOL=(S-VC)/(S-VC-FC)=CM/OP INCOME
DFL = %ΔEPS/%ΔEBIT or EBIT/(EBIT-INTEREST)
DTL = DOL*DFL=(%ΔEBIT/%ΔSALES)*(%ΔEPS/%ΔEBIT)=%ΔEPS/%ΔSALES or [Q(P-V)]/[Q(P-VC)-FC-I]
There, we just covered the majority of the formulas for BEC. Good luck!
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