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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
How to calculate the net realizable value of an asset?
Selling price - cost to sell
26
How to calculate the market value of an asset using the replacement cost method?
replacement cost + any transportation and assembling cost
27
What are things included using the cost approach for a patent?
Materials Labor Applicable overhead Development costs legal costs opportunity costs Not included: sunk costs because they have already been incurred
28
How to calculate the value of a company's patent using the income approach?
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
29
How to calculate beta?
% change in stock price/ % change in market price
30
How to calculate economic value added?
Caclulated the after tax income Calculate the required return based on the WACC Subtract after tax income from the required rate of return
31
How to calculate the annual savings needed based on an investment?
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
32
represents the risk associated with the unique circumstances of a particular company, as they might affect the shareholder value of that company
business risk
33
relates to the exposure of lenders to the failure of borrowers to repay principal and interest on debt.
financial risk or default risk
34
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.
commercial paper
35
How to calculate profitability index for a project?
Calculate the present value of the cash inflows for the project PV of cash inflows/the initial cash outflow of the project
36
How to calculate the minimum cost per unit of a special order when a company is operating below production capacity?
It is the amount that would cover the variable cost
37
How to calculate the minimum cost per unit of a special order when a company is operating at production capacity?
Variable cost per unit Add contribution margin per unit
38
How to calculate the net cost of debt?
Effective interest rate of bonds/(debt * weight of debt)
39
How to calculate whether to sell a product or process further?
Process further selling price - current selling price Subtract the incremental cost of processing further Determine whether it would be a gain/loss
40
How to calculate the split off break even point on when determining whether to process further?
Current Split off selling price + incremental costs of processing further
41
What do conversion costs consist of?
Direct labor overhead
42
What do prime costs consist of?
direct materials direct labor
43
What is the FIFO method equivalent for units?
Units Completed + % Ending Inventory - %Beginning Inventory
44
What is the weighted average method for equivalent units?
Units Completed during the period Add Ending WIP * % completed
45
How to calculate the unit cost of materials per unit using the weighted average method?
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
How to calculate net realizable value in cost accounting?
Sales value Less separable costs
47
How to calculate cost of goods manufactured?
CoGS Add (Ending inventory - beginning inventory)
48
Are utilities expense a product or period cost?
product cost
49
Are custodial staff salaries a product or period cost?
They are a product cost because it is considered indirect labor
50
What is the formula to find raw materials used?
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
What is the formula to calculate cost of goods manufactured?
raw material used Add Direct Labor (actual) Add Overhead applied Subtract ending Work in process
52
What is the formula for CoGS in cost accounting?
Beginning finished goods Add cost of goods manufactured Subtract ending cost of goods sold
53
How to allocate joint costs based on Relative NRV when there is no sales value known at split off?
Number of units * Sellling price after further process Subtract the further processing cost Allocate the cost based on this value
54
Which cost is fixed per unit?
Variable cost is fixed per unit
55
The range over which cost relationships are valid.
relevant range
56
an accounting system that collects financial and operating data on the basis of the underlying nature and extent of the cost drivers
activity-based costing
57
What are the types of ways to allocate joint costs?
Physical quantity NRV allocation NRV - transaction costs after split
58
What are examples of internal failure costs?
rework scrap reinspection retesting
59
What is an example of an external failure cost?
Responding to customer complaints
60
What are example of appraisal costs?
product testing statistical quality checks inspection for completed product to be shipped
61
Rank the Strategic Business Units (SBUs) from most to least responsibility
Investment Profit Revenue Cost
62
associated with performance reports and a focus on revenues and costs that are within the control of the manager being evaluated
responsibility accounting
63
What are examples of prevention costs?
Employee training preventive matainenance supplier education expense
64
What are conformance costs?
prevention and appraisal costs
65
What are non-conformance costs?
internal and external failure costs
66
Period cost or inventoriable cost for normal spoilage and abnormal spoilage?
Normal spoilage - inventoriable cost Abnormal spoilage - period cost
67
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.
process costing
68
a hybrid system that allows the company to use job order costing for some costs of production and process costing for other costs.
operation costing
69
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.
job order costing
70
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
activity based costing
71
What is the relationship between NPV, IRR, and required rate of return?
When NPV>0 IRR>Required rate of return When NPV<0 IRR
72
How to calculate the partial productivity ratio?
Quantity of units produced/Certain raw material Example Quantity of units produced/quantity of iron used
73
How to calculate total productivity ratio?
total units produced/(raw material unit of a * price of a)+(raw material unit b * price of b)
74
How to calculate economic value added?
Cost of machine * cost of capital= required return Net operating profit after taxes - required return
75
How to calculate contribution margin
Selling price Less: Direct labor, Direct materials, and Variable overhead
76
The coefficient of determination, R2, in a multiple regression equation is the
percentage of variation in the dependent variables explained by the variation in independent variables
77
How to calculate estimated cost for handing using the high low method?
(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
What is the formula for the variable costing approach to find contribution margin?
Selling price Less the following Direct matierals Direct Labor Variable manufacturing overhead Variable selling and administrative Equals Contribution Margin * # of Units sold
79
What is the difference between variable costing and absorption costing?
Fixed manufacturing overhead is treated at a product cost for absorption Fixed manufacturing overhead is treated at a period cost for variable costing
80
How to calculate the breakeven point in units?
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
Formula for CoGS under absorption costing
Direct Materials Direct Labor Variable Overhead Fixed Overhead
82
Formula for CoGS under variable costing
Direct Materials Direct Labor Variable Overhead
83
When looking at the reward to risk ratio between types of investments, what do you do?
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
What is the contribution margin ratio?
Contribution Margin/Selling Price
85
How to calculate number of units to sell to reach a desired profit?
Pretax desired profit+fixed cost/(Contribution Margin) If it is after tax then solve for pretax After tax = Pretax * (1-tax rate)
86
used to establish the product cost allowed to ensure both profitability per unit and total sales volume
target costing
87
accounts for variable costs only
direct costing
88
tracks costs to individual products/jobs
job costing
89
assigns costs in a mass production environment
process costing
90
counts materials costs as product costs
throughput costing
91
What is the journal entry for a cash advance made to a divisional office?
DR: Receivable CR: Cash
92
How to calculate the operating profit margin?
EBIT/Sales EBIT = Net Income + Interest expense + Taxes
93
What is the formula for profit margin?
Net Income/Sales
94
What is the formula for dales sales outstanding?
Ending A/R/(Sales/365)
95
a data mining technique that identifies similar data
clustering
96
uses the data mining technique of prediction.
forecasting
97
a data mining technique that looks for sequential patterns. It can often help discover similar patterns in transaction data over time.
sequencing
98
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.
association
99
Why would a firm offer favorable credit terms like 2/10 net 30?
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 (13 decks)

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