BEC II BLAKE CPA

Question 1

Costs that would have been saved or profits that would have been earned if another decision had been selected defines which of the following?

Answer 1

Opportunity Cost

Net benefit given up from the best alternative use of the capacity

Implicit costs are opportunity costs and ignored in financial accounting

Question 2

What is correct sequence for preparing budgets?

Answer 2

Sales budget, Production budget, Materials budget, budgeted income statement, budgeted balance sheet

Question 3

R Squared “coefficient of determination”

Answer 3

If 1 truly variable

If 1 Truly Fixed Costs

used to understand if a cost is fixed, varaible or mixed

Question 4

Y = a +bx

Answer 4

Y = Dependent Variable
X = Independent variable
b = Slope
a = Fixed Cost

Question 5

What describes a regression equation?

Answer 5

Estimates the dependent variable based on changes in the independent variable

Question 6

Variable Costing Income Statement - only applies to product costs

Answer 6

Sales
-VC
=Contribution Margin
-FC
=Net profit

Question 7

Absorption Costing - split between product costs & Period Costs - Income statement

Answer 7

Revenues
- COGS
= Gross Margin
- Variable SG&A
- Fixed SG&A
=Net Income

Question 8

Target Price Formula

Answer 8

Step 1) Total Sales Target

Traceable costs/ (1 - Target profit %) = Total Sales

Step 2) Target Selling Price

Total Sales / Total Sales Units

Question 9

Margin of Safety & Margin of Safety Ratio

Answer 9

Step 1) Margin of Safety in Dollars

Total Sales - Break Even Sales (FC / CM %)
=Margin of safety ($’s)

Step 2) Margin of safety Ratio

Margin of safety ($’s) / Total Sales = %

Question 10

Monitoring

Answer 10

1) ongoing and/or separate evaluations

2) Communication of deficiencies

Question 11

Components of Internal Control

Answer 11

C - Control Environment
R - Risk Assessment
I - Information & Communication
M - Monitoring
E - Existing control activities

Question 12

Information & Communication

Answer 12

1) Obtain and use information
2) Internally communicate information
3) Communicate externally

Question 13

Existing Control Activities - 3 Principles

Select and develop

Implement

Answer 13

1)Select & Develop control activities - control that help mitigate risk of IC not working properly

2) Select & develop technology controls - Organization will select adequate controls to function properly

3) Disposition of policies and procedures - Deploy policies that help establish expectations

Question 14

Control Environment - 5 components COOCA

Answer 14

Core & Foundation of any Internal control

1) Commitment to ethics & integrity
2) Board independence and oversight
2) Organizational structure - Internal auditor reports to BOD
4) Commitment to competence - Hire competent CPA
5) Accountability

Question 15

FishBone Diagram

Answer 15

Cause & Effect diagram

Elements: Manpower, method & machinery

Not MOH since it is allocated

Question 16

ROI

Answer 16

Firm’s Income / Investment Capital

Question 17

Economic Value Added

Answer 17

Firm’s investment center’s net operating profit AFTER taxes (NOPAT) - Required return (after-tax cost of capital on the investment)

NOPAT = EBIT x (1 - Taxes)

Required Return = Investment (Total Assets) X Cost of Capital or WACC

Question 18

Cost of Jobs completed (Total cost for COGM)

Answer 18

DM used + DL + Overhead APPLIED + Beginning WIP - Ending WIP

Question 19

Performance Reports vs strategic plans

Answer 19

Specific & Shorter term compared to strategic plans that are broad based and L/T in nature

Include: User focus, Specific time horizon & exceptional items that are controllable

Question 20

The essence of responsibility accounting is

Answer 20

Developing performance reports emphasizing costs and revenues that manager can control

Not held accountable for revenues and costs out of their control

Question 21

What are operating budgets used for?

Answer 21

Operating budgets: sales budget, production budget, selling and administrative expense budget ect

Used to create proforma F/S & Cash budget

Question 22

Total Debt Ratio

Answer 22

Total Debt / Total Asset

Total Debt / (Debt + Equity)

Question 23

What is the first step of the budget development process?

Answer 23

Forecast of Sales Volume

Question 24

Accounting profit

Answer 24

Total Revenue - Total explicit costs

Implicit costs are opportunity costs and ignored in financial accounting

Question 25

Selling Price Variance

Answer 25

Actual Sold Units X (Actual Selling price - Budgeted selling price)

Question 26

Risk Assessment

Answer 26

Part of COSO

1) Identify and assess changes
2) Consider potential for fraud
3) Specify financial Objectives
4) Identify & analyze risk

Question 27

3 COSO Operating Objectives ORC

Answer 27

Reporting objectives - pertain to the reliability, timeliness and transparency of a company’s external and internal financial/nonfinancial reporting.

Operating Objectives - relate to the effectiveness and efficiency of an entity’s operations

Compliance objectives - following all related laws and regulations

Question 28

Enterprise Risk Management

Answer 28

Outlines methods and processes to assist a company in managing risk

Everyone is involved, works alongside the COSO Frame work

Question 29

Four Objectives of ERM - ORCS

Answer 29

Reporting

Operations

Compliance - compliance with laws and regulations (External)

Strategic

Question 30

Financial Expert Criteria

Answer 30

Knowledge of GAAP & experience in preparing or reviewing F/S

Experience in designing and maintaining an effective internal control system

General understanding of audit committee functions