BEC CPA EXAM 2012

• 1. Strategic -- high level goals
• 2. Operations -- achieved through effectiveness and efficiency
• 3. Reporting -- reliable
• 4. Compliance -- with laws and regulations

• P Philosophy & operating style of mgmt
• H Human Resources
• R Reporting (financial) competencies
• A Authority and responsibility
• S Structure (organizational)
• E Ethical values
• D Directors

• C  Control Enviornment: "tone at the top"
• R  Risk Assessment: risk of misstatement/ fraud
• I   Information and Communication Systems: timely & accurate
• M Monitoring: effectiveness/report deficiencies
• E  Existing Control Activities: policies and procedures to implement internal control

• I Internal Enviornment
• S Setting objectives

• E Event Identification
• A Assessment of risk
• R Risk reponse
• A Activities (control)
• I Information and communication
• M Monitoring

• P Product costing
• I Income determination
• E Efficiency measurements

Prime cost = direct labor + direct material

Conversion cost = Direct labor + Manufacturing overhead

Step 1: Calculateed overhead reate = budgeted overhead costs / Estimated cost driver

Step 2: Applied overhead = actual cost driver x overhead rate (from step 1)

• 1.) Work in process (% complete) +
• 2.) [Units completed during period -amount from beginning inventory] +
• 3.) Ending WIP (% complete)

• 1) Completed during period
• 2) Ending WIP (% complete)

"Transaction Based Costing"

• Revenue
• <Less: Variable Costs> (DM, DL, var mfg O/H, var. SG&A)
• Contribution Margin
• <Less: Fixed Costs>
• Net Income

Contribution margin/Revenue = Contribution margin ratio

• Revenue
• Less: COGS (DM +DL + var. mfg O/H + fixed mfg. O/H)
• Gross Margin
• Less: Operating expenses (Fixed + var SG&A, ie "period costs")
• Net Income

Selling price per unit - variable price per unit = contribution margin

Total fixed costs / contrubution margin per unit

• 1. Sales
• 2. Production
• 3. Direct materials purchases
• 4. Cash Disbursements