[Q3] BEC Study Group 2014 - Page 19

  • Creator
    Topic
  • #185552
    jeff
    Keymaster

    @h0wdyus

    Incorrect

    The answer is B. Comparable sales.

    “The use of comparable sales is not an income approach to valuation of a business, it is a market approach. Under the comparable sales approach, the value of a business is determined by comparing it to other entities with comparable characteristics for which the value is more readily determinable.”

    This was a tricky one

    AUD - 79
    BEC - 80
    FAR - 76
    REG - 92
    Jeff Elliott, CPA (KS)
    NINJA CPA | NINJA CMA | NINJA CPE | Another71
Viewing 15 replies - 271 through 285 (of 2,289 total)
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  • #593885
    Anonymous
    Inactive

    I'm having a hard time with that one too Charlie…I keep coming up with the same answer as you are.

    #593886
    Anonymous
    Inactive

    I think the question could be wrong. look at the AICPA released question that is nearly the same

    31. CPA-08310 A company is considering outsourcing one of the component parts for its product. The company currently makes 10,000 parts per month. Current costs are as follows:

    Per unit Total Direct materials $4 $40,000

    Direct labor 3 30,000

    Fixed plant facility cost 2 20,000

    The company decides to purchase the part for $8 per unit from another supplier and rents its idle capacity for $5,000/month. How will the company's monthly costs change?

    a. Decrease $15,000.

    b. Decrease $10,000.

    c. Increase $5,000.

    d. Increase $10,000.

    Solution: Choice “c” is correct. Monthly costs of the company would increase by $5,000 if the company elects to buy rather than make its component part. Change in cost is computed as follows: Cost of purchased component (10,000 parts x $8 per part) $80,000 Rental of idle capacity (5,000) Net cost $75,000

    Avoidable costs

    ā€”

    direct materials ($40,000) Avoidable costs

    ā€”

    direct labor ( 30,000) Total costs avoided $(70,000) Cost increase $ 5,000 Choice “a” is incorrect. A decrease of $15,000 appears to include fixed plant facility costs as part of the incremental reduction in expenses.

    Choice “b” is incorrect. A decrease of $10,000 appears to include fixed plant facility costs as part of the incremental reduction in expenses while ignoring the benefit of the rental of idle space.

    Choice “d” is incorrect. An increase of $10,000 appears to ignore the benefit of the rental of idle space.

    #593887
    Anonymous
    Inactive

    @Darcer- I was wondering if something was off with the question…

    @Charlie- where is that question from? If it's from Becker, you should submit it to them.

    #593888
    Anonymous
    Inactive

    I think I should submit it to Jeff. It comes from Ninja MCQ.

    #593889
    JamesBJames
    Participant

    Like everyone else, I'm getting that income goes down $5,000 for that. I'm ignoring fixed overhead since it's going to be there regardless, meaning the relevant cost for making is 40k + 30k = 70k. The relevant cost for buying is 80k, but we mitigate it a little by renting out idle capacity, so 80k – 5k = 75k. Buying is more expensive by $5,000.

    Good question, though.

    FAR: May 1st, 2014 - 91
    AUD: May 29th, 2014 - 97!
    BEC: July 16th, 2014 - 91
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    #593890
    Anonymous
    Inactive

    @ballerina- yep, it's nothing but sunshine and 80 degrees outside and I'm in my office studying away. I noticed we're taking the test within a day of each other (I'm taking it on the 11th). Do you feel prepared? I'm using Becker and am about halfway thru the material….hoping to finish B3 by tonight or tomorrow morning and knock out the B4 lecture tomorrow.

    #593891
    Anonymous
    Inactive

    @amanda – I wish I were feeling prepared but I am not there yet! I am using CPAexcel and I feel good about the content I have covered, but I am only about 30% through. I am trying to be very slow and methodical. I hope to be done with my study content by July 1 (which seems reasonable) so that I can have 9 days (including the holiday weekend šŸ™ ) to do nothing but MCQ's.

    How about you? do you feel prepared?

    #593892
    Anonymous
    Inactive

    I feel about the same. I'm trying to make sure I go back so that I don't forget things as I move through. I'm also trying to be done with my material by around the same time but I'm doing the lecture, reading the book, and then all the MCQs section by section, so its taking longer. Plus all these darn formulas and ratios to memorize are killing me.

    #593893
    Anonymous
    Inactive

    Jeff- any thoughts on whether that question in the Ninja MCQ is worded incorrectly?

    #593894
    JamesBJames
    Participant

    @Amanda_88: The formulas and ratios are insane… and I'm still working my way through B2. I've taken FAR and AUD already, but I still don't think I'm ready for the onslaught of financial ratios that are later in the book. I'm already running out of room on my computer screen for formulas and mnemonics (https://i.imgur.com/4RRE0qV.png)

    FAR: May 1st, 2014 - 91
    AUD: May 29th, 2014 - 97!
    BEC: July 16th, 2014 - 91
    REG: August 29th, 2014 - 88

    Licensed December 2015

    Feel free to add me on LinkedIn by clicking my username!

    #593895
    Anonymous
    Inactive

    Hi All!!!!!!

    Please suggest the best way to use NINJA MCQ!

    Whats diff between trending score and avg score?

    I am like in 60% overallā€¦.What am I gonna do!!!!

    Appreciated any thoughts and advices

    #593896
    Anonymous
    Inactive

    @james I know, it's so much to memorize. I failed the first time I took BEC by two points because I basically spent all my time memorizing formulas. Now, I'm writing every formula down on notecards and going through them and writing down the formulas to memorize them and then spending most of my time on the MCQs so that I actually can apply them. I just took FAR so it doesn't feel quite as bad because it's not 8 million journal entries but it's still a lot.

    #593897
    Anonymous
    Inactive

    Good Afternoon!! Starting Financial Mgmt today. Happy Studies!!

    #593898
    Peterman25
    Participant

    @Amanda

    How I have been approaching it…

    Just think of ROI as how much $$ did I make off my assets?

    net income / total assets.

    Then there's that silly DuPont ROI that I just got a MCQ on. (How much $$ did I make off my sales) X (How much sales $$ did my assets get me) NI/sales X sales/total assets

    I am approaching 100 note cards just for formulas to study…ugh…this is silly

    BEC 7/14 - PASS
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    #593899
    Anonymous
    Inactive

    @peter thanks! That actually makes a lot more sense. Becker's explanation seemed really convoluted and confusing so I just wasn't really picking up how to calculate it. I just used that on an MCQ and got the right answer!

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