The next CPA Exam Question of the Day is answered by Yaeger CPA Review Instructor Cindy Simpson, CPA, CMA, CIA. Yaeger CPA Review provides these exclusively to the readers of another71.com.

2009 Wiley BEC, Module 45 (Planning, Control, and Analysis), MCQ 14, Page 338.

A. I and II.
B. I and III.
C. II and III.
D. I, II, and III.

The Wiley answer on pages 347–348 states that [C] is the correct answer. Wiley states that item [I] is false in variable costing because the breakeven point will be the same even if production does not equal sales. Here is some additional explanation for why [C] is the BEST answer.

This question can be a little tricky because it mixes two concepts: CVP analysis and variable costing. If you refer to page 320 in the Wiley BEC book, item 3, you can see under the Assumptions of CVP Analysis, that question item [I] corresponds to assumption item [g] Units produced = Units sold, question item [II] corresponds to assumption item [d] Variable costs per unit are constant, and question item [III] corresponds to assumption item [b] The sales mix remains constant. Therefore, [I], [II], and [III] are all assumptions of CVP analysis. Regarding question items [II] and [III], both assumptions apply to variable costing because they are important in calculating contribution margin in single- and multi-product firms, and contribution margin is used in the variable costing income statement found on page 321 (middle of the page). Contribution margin = sales price — variable costs.

But what makes this question tricky is that they also include variable costing in the question. The difference between variable costing and absorption costing is the treatment of fixed factory overhead. In variable costing, fixed factory overhead is treated as a PERIOD cost and the entire amount is always subtracted in calculating net income.

However, in absorption costing (which is the costing we use in GAAP), fixed factory overhead is treated as a PRODUCT cost and flows through the inventory accounts of work-in-process and finished goods inventory, and is eventually expensed as Cost of Goods Sold (COGS) when the product is sold. If we produce MORE than we sell, then finished goods inventory goes up (trapping the fixed factory overhead), COGS goes down, and net income is higher (as compared to net income under variable costing). If we produce LESS than we sell, then finished goods inventory goes down (releasing the fixed factory overhead), COGS goes up, and net income is lower (as compared to net income under variable costing). The thing is, as you can see in my examples of comparing absorption costing versus variable costing . . . there is no requirement in variable costing that Sales = Production, so question item [I] is FALSE. That makes the BEST answer as question items [II] and [III] because these assumptions apply to both CVP analysis and variable costing, which is answer [C].

One other note: There is no requirement that Sales = Production in absorption costing either; that’s why we have changes in ending inventory from one accounting period to the next.

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Have questions? Need help? Take advantage of this opportunity from Yaeger CPA Review.

Here are the guidelines for submitting CPA Exam questions:
1) This is open to all current CPA Exam candidates
2) Questions submitted can only be from the 2009 Wiley CPA Review 4-volume textbooks
3) Questions can only be in multiple choice format, (no simulations)
4) Questions need to be emailed directly to Yaeger CPA Review at phil4help@aol.com

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Related posts:

1. Wiley CPA Exam Review QOTD – BEC
2. Yaeger CPA Review’s CPA Exam Question of the Day for FAR: Governmental Accounting
3. Yaeger CPA Review’s CPA Exam Question of the Day for BEC: Information Technology

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Yaeger CPA Review is offering CPA Exam candidates an opportunity to submit questions that they are struggling with from the Wiley CPA Exam Review books.

Here are the guidelines:
1) This is open to all current CPA Exam candidates
2) Questions submitted can only be from the 2009 Wiley CPA Review 4-volume textbooks
3) Questions can only be in multiple choice format, (no simulations)
4) Questions need to be emailed directly to Yaeger CPA Review at phil4help@aol.com

The first CPA Exam Question of the Day is answered by Yaeger CPA Review Instructor Cindy Simpson, CPA, CMA, CIA:

2009 Wiley BEC, Module 39 (Information Technology), MCQ 48, Pages 102-103.

A. Encryption of data files on the laptop computer.
B. Setting up a password for the screensaver program on the laptop computer.
C. Using a laptop computer with a removable hard disk drive.
D. Using a locking device that can secure the laptop computer to an immovable object.

The Wiley answer on page 115 states that [B] is the correct answer because screensaver programs can be easily bypassed. Here is some additional explanation for why [B] is the BEST answer.

Obviously, answer [A] would provide the most security for sensitive data stored on the laptop, so it cannot be the BEST answer. But, if you look at answers [C] and [D], they are both related to hardware and answer [B] is related to software because it mentions a “program.” Therefore, I am inclined to choose the answer that is the most different of the three, which would be [B], because it is related to software.

Also, because the question states “outside of the normal office location,” bolting the laptop to a table (an example of [D]) is not something you would do with your laptop if you were using it at Starbucks . . . and I don’t think you would remove the hard drive and leave the computer either (an example of [C]). So, you could think of answers [C] and [D] as being “not applicable” as opposed to providing the least security.

Now, let’s discuss security in more general terms. The security for all the methods above could be circumvented in some manner. [A] could be circumvented by stealing the encryption keys and codes. [B] could be circumvented because users rarely use passwords that are difficult to guess unless they are forced to do so; also, it may take some time before the screensaver program activates, depending on how they programmed the settings. [C] relies on a user actually taking the hard drive out and locking it up (which then presents its own issues such as who else has access to the locked cabinet). [D] locks the computer to a desk or table, but assumes that the user turns the laptop off or locks the keyboard if they leave it turned on (which again presents the same issues regarding passwords that are difficult to guess).

One other note: if you misread the question as which provides the most security instead of least security, then you would have chosen answer . . . [A] (as I have stated so many times in our Yaeger HomeStudy program . . . the most often chosen wrong answer!).

Get the Yaeger CPA Review BEC HomeStudy course for $345

Related posts:

1. Yaeger CPA Review’s CPA Exam Question of the Day for BEC: Financial Analysis – Breakeven Point
2. Yaeger CPA Review’s CPA Exam Question of the Day for FAR: Governmental Accounting
3. Wiley CPA Exam Question – AUD

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I have received several e-mails today from frustrated people who failed BEC for the ___ time today. One person failed it on their 5th attempt and another on their 3rd. I’m no expert on BEC, but I do know a thing or two about repeatedly failing it, so I can relate.

I began this blog the morning that I received my 3rd failing BEC score.

Another Freaking 71.

I got mad and decided that I would never let this stupid exam get in the way of my CPA license. I decided that I wanted to get some audio lectures to listen to at work. I was having a hard time deciding between Yaeger audios and another company and as fate would have it, I went with Yaeger because I wanted them today and they were the only one that offered mp3 downloads.

I bought the audios…got the BEC cram after talking with John who is in charge of their student development…ordered the Wiley book online and the rest is history. I finally slayed that miserable dragon. Some people breeze through BEC and struggle with Auditing. I breezed through Auditing and struggled with BEC. Everyone is different.

If you got your result back from this testing window and you’re feeling like you’ve been kicked in the face, you have the right to be sad for a day, but tomorrow – get up, shake it off, purchase another NTS, get whatever resources you need to pass (I recommend the cram – do what you need to do), and keep on fighting.

If you’re mad because you failed BEC again – you’re not alone…there’s probably hundreds of candidates out there feeling the same way right now. I’ve been there. I’ll say this: I would rather re-take FAR than BEC. I consider FAR to be the most difficult, but BEC is the Twilight Zone of the CPA Exam. It’s just a weird exam.

Past posts on BEC you may find helpful:

BEC is the 2nd hardest section of the CPA Exam

BEC CRAM – the answer for struggling candidates?

…and the flagship post of my site: Keep Moving Forward

Related posts:

1. My Advice for Passing the CPA Exam: Keep Going
2. CPA Reviewed – Podcast #5
3. Club 75 CPA Exam CHAT Monday – EVERYONE wins a Yaeger CRAM!

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