BEC CPA 5

Question 1

Total cost in Ending Inventory using the Weighted-Average method

Answer 1

Units in end. inv. x % completed x Unit cost (end. inv. units completed + completed in month / (beg. costs + costs incurred during month)

Same equation for materials and conversion costs (DL + OH), add together

Question 2

High-low method of cost estimation

Answer 2

(highest cost - lowest cost) / (highest units - lowest units)

Question 3

To maximize profit at full capacity, a company should manufacture the product with…

Answer 3

greater contribution margin per hour of manufacturing capacity

Question 4

In joint-product costing, which cost is relevant when deciding the point at which a product should be sold to maximize profit?

Answer 4

Separable costs after the split-off point

Question 5

Additional fixed assets needed to maximize capacity equation

Answer 5

Expected sales
times: fixed asset capacity is use (fixed assets x % capacity)
Div.: current sales
Less: total current fixed assets

Question 6

Commercial paper general does not have:

Answer 6

an Active secondary market

Question 7

Amount of joint cost allocated to a product after split-off

Answer 7

Product A units x price per unit + product B units x price per unit = total sales value
Product A sales value / total = equal % x joint costs

Question 8

Characteristics of a monopolistic competition

Answer 8

• Numerous firms with differentiated products
• Ease of entry - few barriers
• Firms exact same influence over price and market
• Non-price competition is frequent and critical

Question 9

Overhead variance

Answer 9

budgeted / hours = $ per hour x actual hours - actual OH

Question 10

Why would a firm choose to finance temporary assets with short-term debt?

Answer 10

matching the maturities of assets and liabilities reduces risk

Question 11

Fixed OH costs equation

Answer 11

Depreciation (machine & building
plus: Insurance
Plus: manager’s salaries (not DL)

Question 12

Incremental revenue at split-off

Answer 12

end sale price - split-off sale price
- Incremental revenue at split off - incremental costs with producing = process future or sell

Question 13

A successful responsibility accounting reporting system is dependent upon?

Answer 13

the proper delegation of responsibility and authority

Question 14

What do you use to compare actual results with budgeted based in achieving volume

Answer 14

Flexible budget

Question 15

Finding the selling price with a gross margin %

Answer 15

cost per unit / (1 - gross margin)

Question 16

Total Variance vs.
Volume Variance vs.
Flexible budget variance

Answer 16

Total = actual operating income - master budget
Volume = flexible budget - master budget
Flexible = actual - flexible

Question 17

Direct material & Direct labor price/rate variance

Answer 17

Actual quantity or hours x (actual price or rate - standard price or rate)

Question 18

Direct material & Direct labor usage/ efficiency variance

Answer 18

Standard price/rate x (actual quantity/hours - standard quantity/hours used)

Question 19

Variable overhead rate (spending) variance

Answer 19

Actual hours x (actual rate - standard rate)

Question 20

Fixed overhead volume variance

Answer 20

Budgeted fixed overhead - standard fixed overhead cost (hours budgeted x actual production x standard FOH rate)

Question 21

The elasticity of the demand equation & unit quantity

Answer 21

[(Forecasted quantity demanded - current quantity demanded) / current quantity demanded] / [(future price - current price) / current price]
Units = Current quantity demanded x (1 + quantity increase %) which is [(Forecasted quantity demanded - current quantity demanded) / current quantity demanded]

Question 22

The elasticity of the Supply/cross/income equation & unit quantity

Answer 22

[(Forecasted quantity supplied - current quantity supplied) / current quantity supplied]/ [(Future price - current price) / current price]
Units = Current quantity demanded x (1 + price increase %) which is [(Future price - current price) / current price]

Question 23

Perfect competition

Answer 23

• Many firms that sell the exact same thing
• no barriers to enter
• has no control over quantity produced but not price
• perfectly elastic (Sell as much or as little at the given market price)
• negative economic profit

Question 24

Monopolistic competition

Answer 24

• Many firms with some differentiation
• Low barriers to enter
• Mostly has control over quantity produced but not price
• Highly elastic but downward slope
• Zero economic profit

Question 25

Oligopoly

Answer 25

- Few firms with various products - High barriers to entry due to economies of scale - Control over quantity produced and price - Inelastic - Positive economic profit

Question 26

Monopoly

Answer 26

- One firm sells one product - No entry is possible - Control over quantity and price - Inelastic - Positive economic profit

Question 27

Cost Leadership Strategies

Answer 27

Organizations sell their product or service for less than competitors to achieve an overwhelming market share. - works well in markets where customers have large amounts of bargaining power

Question 28

Differentiation Strategies

Answer 28

Organizations create the perception that their product or service is better and more unique than competitors and can demand higher prices. - works well when customers see value in a product. brand loyalty

Question 29

Best Cost Strategies

Answer 29

Combines cost leadership and differentiation to give customers higher value for a reasonable price (bang for your buck). - works well when generic products are not acceptable but customers are still price conscious

Question 30

Focus/Niche Strategies

Answer 30

Organizations focus their strategy on a select, small group of consumers. - works well when firms have proper resources and few firms in the market can compete with price or address a particular feature (baseball gloves that have special features for each position and are sold to professionals)