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BAR CPA Exam > BAR Exam Deck 2 > Flashcards

BAR Exam Deck 2 Flashcards

1
Q

How to calculate the effect interest rate of a loan when there a company is required to maintain a certain balance at a bank and they can earn interest on the balance?

A

Loan value * interest rate = interest owed
Minimum account balance * interest rate earninged
Interest owed - interest earned = Net interest
Net interest/(Loan - minimum balance required) = effective interest rate

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2
Q

The risk exposure faced by an entity that encounters the possibility that the currency in which a transaction is denominated will be adversely affected by the currency in which the transaction is settled

A

transaction exposure risk

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3
Q

describes a firm’s generalized exposure to reduced buying power as a result of inflation.

A

purchasing power risk

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4
Q

How to calculate the flexible budget variance?

A

Actual operating income - flexible operating income
This is the opposite of the volume variance because we are looking at the differences caused by the price changes.

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5
Q

How to calculate the volume variance?

A

It is the difference between the flexible budget and the master budget.
The reason why behind this is we are looking at the difference caused not by prices but by volume changes.

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6
Q

How to calculate a flexible budget?

A

Use actual sales units
Use all the same prices per unit as the master budget

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7
Q

Formula to calculate APR of quick payment discount?

A

360/(pay period - discount period)
Multiply by
Discount/(1 - Discount)

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8
Q

Which of the following effects would a lockbox most likely provide for receivables management

A

minimized collection float
A lockbox system expedites cash inflows (minimizes collection float) by having a bank receive payments from a company’s customers directly, via mailboxes to which the bank has access. Payments that arrive in these mailboxes are deposited into the company’s account immediately.

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9
Q

a series of budgets based on different activity levels within the relevant range.

A

flexible budget

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10
Q

an overall budget, consisting of many smaller budgets, that is based on one specific level of production

A

Master budget

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11
Q

What cost are not affected by inflation rates?

A

Depreciation expense
Interest expense

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12
Q

List the order in which the four types of budgets must be prepared.

A

Sales
Production
Direct Materials purchases
cash disbursements

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13
Q

methodology used to determine the transaction price charged between related parties

A

transfer pricing

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14
Q

How to calculate the price earnings to growth (PEG)?

A

PEG = (Current price of stock/current earnings)/(Growth rate * 100)

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15
Q

What is the underlying assumption to the Black-Scholes option-pricing model?

A

There are no transaction costs for buying and selling the stock or option

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16
Q

What are the inputs for the Black-Scholes pricing model?

A

Current price of stock
option exercise price
risk free interest rate
time to expiration
volatility of stock(measure of risk)

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17
Q

What are the four steps of the SCOR model for supply chains?

A

Plan
Source
Make
Deliver

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18
Q

What is the formula for the economic order quantity?

A

EOQ = square root((2 * annual sales quantity * cost per purchase order)/Annual cost of carry one unit in stock for one year)

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19
Q

How to calculate the growth rate for a stock?

A

(ROA * Retention rate)/
1-(ROA * Retention rate))

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20
Q

How to calculate current dividends by a company?

A

It is the company’s earnings per share and you multiply that by either the retention rate of earnings or the dividend payout rate.
EPS * Dividend payout rate

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21
Q

How to calculate the forward eps?

A

Current price of stock/Projected EPS

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22
Q

How to calculate the forward P/E based on the Gordon Growth model?

A

Dividend payout ratio/(required return - growth rate)

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23
Q

How to calculate the price of a stock based on the PEG ratio?

A

PEG * Current Earnings * growth rate of stock

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24
Q

How to calculate the price to sales ratio?

A

Figure out the price of stock by dividing the market capitalization by the total number of shares outstanding
Multiply the current sales by the sales growth rate
Divide the future sales by the number of shares outstanding
Divide price the the sales/share outstanding

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25
Q

How to calculate the net realizable value of an asset?

A

Selling price - cost to sell

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26
Q

How to calculate the market value of an asset using the replacement cost method?

A

replacement cost + any transportation and assembling cost

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27
Q

What are things included using the cost approach for a patent?

A

Materials
Labor
Applicable overhead
Development costs
legal costs
opportunity costs
Not included: sunk costs because they have already been incurred

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28
Q

How to calculate the value of a company’s patent using the income approach?

A

Multiply the probability by each discount factor to determine the discount factor
Use the applicable discount factor
Multiple the discount factor by the expected cash flows each year

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29
Q

How to calculate beta?

A

% change in stock price/
% change in market price

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30
Q

How to calculate economic value added?

A

Caclulated the after tax income
Calculate the required return based on the WACC
Subtract after tax income from the required rate of return

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31
Q

How to calculate the annual savings needed based on an investment?

A

Find the present value of the residual value
Subtract the initial cost from the pv of the residual value
Pv= pmt * pv factor
Cost of project = pmt * pv factor which is given
We are solving for the pmt

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32
Q

represents the risk associated with the unique circumstances of a particular company, as they might affect the shareholder value of that company

A

business risk

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33
Q

relates to the exposure of lenders to the failure of borrowers to repay principal and interest on debt.

A

financial risk or default risk

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34
Q

an unsecured, short-term debt instrument issued by corporations. It’s typically used to finance short-term liabilities such as payroll, accounts payable, and inventories.

A

commercial paper

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35
Q

How to calculate profitability index for a project?

A

Calculate the present value of the cash inflows for the project
PV of cash inflows/the initial cash outflow of the project

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36
Q

How to calculate the minimum cost per unit of a special order when a company is operating below production capacity?

A

It is the amount that would cover the variable cost

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37
Q

How to calculate the minimum cost per unit of a special order when a company is operating at production capacity?

A

Variable cost per unit
Add contribution margin per unit

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38
Q

How to calculate the net cost of debt?

A

Effective interest rate of bonds/(debt * weight of debt)

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39
Q

How to calculate whether to sell a product or process further?

A

Process further selling price - current selling price
Subtract the incremental cost of processing further
Determine whether it would be a gain/loss

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40
Q

How to calculate the split off break even point on when determining whether to process further?

A

Current Split off selling price + incremental costs of processing further

41
Q

What do conversion costs consist of?

A

Direct labor
overhead

42
Q

What do prime costs consist of?

A

direct materials
direct labor

43
Q

What is the FIFO method equivalent for units?

A

Units Completed + % Ending Inventory - %Beginning Inventory

44
Q

What is the weighted average method for equivalent units?

A

Units Completed during the period

Add Ending WIP * % completed

45
Q

How to calculate the unit cost of materials per unit using the weighted average method?

A

Beginning cost of material + Ending costs of Materials

Units Completed during the period + (Ending WIP * % completed)

Divide the cost of material by the units completed during the period

46
Q

How to calculate net realizable value in cost accounting?

A

Sales value
Less separable costs

47
Q

How to calculate cost of goods manufactured?

A

CoGS
Add (Ending inventory - beginning inventory)

48
Q

Are utilities expense a product or period cost?

A

product cost

49
Q

Are custodial staff salaries a product or period cost?

A

They are a product cost because it is considered indirect labor

50
Q

What is the formula to find raw materials used?

A

Beginning raw materials
Add purchases of raw materials
Subtract Ending Raw materials
Raw materials used is the final part and this is similar to a roll forward

51
Q

What is the formula to calculate cost of goods manufactured?

A

raw material used
Add Direct Labor (actual)
Add Overhead applied
Subtract ending Work in process

52
Q

What is the formula for CoGS in cost accounting?

A

Beginning finished goods
Add cost of goods manufactured
Subtract ending cost of goods sold

53
Q

How to allocate joint costs based on Relative NRV when there is no sales value known at split off?

A

Number of units * Sellling price after further process
Subtract the further processing cost
Allocate the cost based on this value

54
Q

Which cost is fixed per unit?

A

Variable cost is fixed per unit

55
Q

The range over which cost relationships are valid.

A

relevant range

56
Q

an accounting system that collects financial and operating data on the basis of the underlying nature and extent of the cost drivers

A

activity-based costing

57
Q

What are the types of ways to allocate joint costs?

A

Physical quantity
NRV allocation
NRV - transaction costs after split

58
Q

What are examples of internal failure costs?

A

rework
scrap
reinspection
retesting

59
Q

What is an example of an external failure cost?

A

Responding to customer complaints

60
Q

What are example of appraisal costs?

A

product testing
statistical quality checks
inspection for completed product to be shipped

61
Q

Rank the Strategic Business Units (SBUs) from most to least responsibility

A

Investment
Profit
Revenue
Cost

62
Q

associated with performance reports and a focus on revenues and costs that are within the control of the manager being evaluated

A

responsibility accounting

63
Q

What are examples of prevention costs?

A

Employee training
preventive matainenance
supplier education expense

64
Q

What are conformance costs?

A

prevention and appraisal costs

65
Q

What are non-conformance costs?

A

internal and external failure costs

66
Q

Period cost or inventoriable cost for normal spoilage and abnormal spoilage?

A

Normal spoilage - inventoriable cost
Abnormal spoilage - period cost

67
Q

a method of allocating production costs to products and services by averaging the cost over the total units produced. Costs are usually accumulated by department rather than by job.

A

process costing

68
Q

a hybrid system that allows the company to use job order costing for some costs of production and process costing for other costs.

A

operation costing

69
Q

a method of allocating production costs to products and services that are identifiable as separate units and require greater or lesser amounts of work to complete.

A

job order costing

70
Q

a system that accumulates all costs of overhead for each of the activities of the organization and then allocates those activity costs to the cost objects that caused the activity

A

activity based costing

71
Q

What is the relationship between NPV, IRR, and required rate of return?

A

When NPV>0
IRR>Required rate of return
When NPV<0
IRR<Required rate of return

72
Q

How to calculate the partial productivity ratio?

A

Quantity of units produced/Certain raw material
Example
Quantity of units produced/quantity of iron used

73
Q

How to calculate total productivity ratio?

A

total units produced/(raw material unit of a * price of a)+(raw material unit b * price of b)

74
Q

How to calculate economic value added?

A

Cost of machine * cost of capital= required return
Net operating profit after taxes - required return

75
Q

How to calculate contribution margin

A

Selling price
Less: Direct labor, Direct materials, and Variable overhead

76
Q

The coefficient of determination, R2, in a multiple regression equation is the

A

percentage of variation in the dependent variables explained by the variation in independent variables

77
Q

How to calculate estimated cost for handing using the high low method?

A

(Cost at high - Cost at low)/(Quantity at high - Quantity at low)
equation for slope y = a + bx
First step helped you calculate the b which is the slope
Use the given numbers to calculate the a which is the intercept

78
Q

What is the formula for the variable costing approach to find contribution margin?

A

Selling price
Less the following
Direct matierals
Direct Labor
Variable manufacturing overhead
Variable selling and administrative
Equals Contribution Margin * # of Units sold

79
Q

What is the difference between variable costing and absorption costing?

A

Fixed manufacturing overhead is treated at a product cost for absorption

Fixed manufacturing overhead is treated at a period cost for variable costing

80
Q

How to calculate the breakeven point in units?

A

Find the fixed cost per unit
Selling price per unit - Variable cost per unit=contribution margin
Multiple units sold * fixed cost per unit to get total fixed costs
Total fixed cost/Contribution margin

81
Q

Formula for CoGS under absorption costing

A

Direct Materials
Direct Labor
Variable Overhead
Fixed Overhead

82
Q

Formula for CoGS under variable costing

A

Direct Materials
Direct Labor
Variable Overhead

83
Q

When looking at the reward to risk ratio between types of investments, what do you do?

A

Compare the mean return to the standard deviation of the investment
Example
US T Bills
Mean Return: 4%
Standard deviation: 3%
Common Stocks
Mean Return: 12%
Standard deviation: 20%
4:3 versus 3:5

84
Q

What is the contribution margin ratio?

A

Contribution Margin/Selling Price

85
Q

How to calculate number of units to sell to reach a desired profit?

A

Pretax desired profit+fixed cost/(Contribution Margin)
If it is after tax then solve for pretax
After tax = Pretax * (1-tax rate)

86
Q

used to establish the product cost allowed to ensure both profitability per unit and total sales volume

A

target costing

87
Q

accounts for variable costs only

A

direct costing

88
Q

tracks costs to individual products/jobs

A

job costing

89
Q

assigns costs in a mass production environment

A

process costing

90
Q

counts materials costs as product costs

A

throughput costing

91
Q

What is the journal entry for a cash advance made to a divisional office?

A

DR: Receivable
CR: Cash

92
Q

How to calculate the operating profit margin?

A

EBIT/Sales
EBIT = Net Income + Interest expense + Taxes

93
Q

What is the formula for profit margin?

A

Net Income/Sales

94
Q

What is the formula for dales sales outstanding?

A

Ending A/R/(Sales/365)

95
Q

a data mining technique that identifies similar data

A

clustering

96
Q

uses the data mining technique of prediction.

A

forecasting

97
Q

a data mining technique that looks for sequential patterns. It can often help discover similar patterns in transaction data over time.

A

sequencing

98
Q

a data mining technique that discovers links between two items. It can often find hidden patterns in data, like which products are often purchased together.

A

association

99
Q

Why would a firm offer favorable credit terms like 2/10 net 30?

A

It is a response to competitiors in the market or to improve their cash flow
This means that if a customer pays within 10 days they will receive a 2% discount and if they don’t they must pay within 30 days.

BAR CPA Exam (10 decks)

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