Perpetual Inventory Using FIFO

Beginning inventory, purchases, and sales data for DVD players are as follows:

The business maintains a perpetual inventory system, costing by the first-in, first-out method.

a. Determine the cost of the goods sold for each sale and the inventory balance after each sale, presenting the data in the form illustrated in Exhibit 3. Under FIFO, if units are in inventory at two different costs, enter the units with the LOWER unit cost first in the Cost of Goods Sold Unit Cost column and in the Inventory Unit Cost column.

b. Based upon the preceding data, would you expect the inventory to be higher or lower using the last-in, first-out method?

Perpetual Inventory Using FIFO

Beginning inventory, purchases, and sales data for DVD players are as follows:

The business maintains a perpetual inventory system, costing by the first-in, first-out method.

a. Determine the cost of the goods sold for each sale and the inventory balance after each sale, presenting the data in the form illustrated in Exhibit 3. Under FIFO, if units are in inventory at two different costs, enter the units with the LOWER unit cost first in the Cost of Goods Sold Unit Cost column and in the Inventory Unit Cost column.

b. Based upon the preceding data, would you expect the inventory to be higher or lower using the last-in, first-out method?

Question 13:

Suppose that an increase in aggregate demand propels the economy to an equilibrium output in excess of potential GDP. According to the self-correcting model:

1. The AD curve will eventually shift back to the left and return the economy to potential GDP
   
2. The short-run AS curve will eventually shift to the right and return the economy to potential GDP
3. The short-run AS curve will eventually shift to the left and return the economy to potential GDP
4. Potential GDP will expand after the increase in AD

Question 14:

1. Assume that the economy is initially in equilibrium at a price level of 100 and a potential GDP of $1,000 billion. If aggregate demand falls,
2. The price level will initially decline but will return to 100 when the self-correcting mechanism restores potential GDP
3. The price level will initially rise but will return to 100 when the self-correcting mechanism restores potential GDP
4. The price level will initially decline but will fall even further when the self-correcting mechanism restores potential GDP
5. The price level will initially increase but will rise even further when the self-correcting mechanism restores potential GDP

Question 15:

The "crowding out" phenomenon refers to the fact that:

1. Increased government spending can lead to higher interest rates and thereby reduce investment
2. Higher tax rates can lead to lower consumption spending by households and a lower level of equilibrium income
3. Businesses now provide many of the services households once provided for themselves
4. Both a and b

Question 16:

1. Which of the following could lead to "crowding out"?
2. Increased consumption spending and rising prices
3. Increased government spending and rising interest rates
4. Increased investment spending and rising prices
5. Reduced government spending and falling prices

Question 17:

1. Which of the following is evidence of an inflationary gap?
2. very low unemployment rates
3. very low sales figures
4. artificially high GDP rates
5. very long lines at employment agencies

Question 18:

Expansionary bias refers to the fact that:

1. Discretionary fiscal policy works with a lagged effect
2. Politicians are more willing to lower taxes and increase spending than they are to do the opposite
3. Policymakers tend to overestimate the size of the recessionary gap
4. Deficit-financed government spending can lead to crowding out

Question 19

To quickly and completely eliminate a recessionary gap, the best type of discretionary fiscal policy to impose is:

1. A decrease in taxes
2. An increase in government spending
3. An increase in interest rates
4. A decrease in interest rates

Question 20

When a recessionary gap exists, activists would recommend:

1. Contractionary fiscal policy leading to a budget deficit
2. Contractionary fiscal policy leading to a budget surplus
3. Expansionary fiscal policy leading to a budget surplus
4. Expansionary fiscal policy leading to a budget deficit

Question 21

The lags in discretionary fiscal policy:

1. Are desirable, because they provide time for the economy to adjust to the policy
2. Are desirable, because they result in eliminating the gaps
3. Are undesirable, because discretionary fiscal policy is ineffective
4. Are undesirable, because the policy action may be inappropriate by the time its impact is felt

Question 22:

1. If an inflationary gap existed, increasing government spending would
2. Eliminate the gap
3. Make the problem worse
4. Either reduce or eliminate the gap
5. None of the above

Question 23

The U.S. is currently running a budget deficit estimated at $ 441 billion. A budget deficit occurs because:

1. Government tax revenues exceed government spending
2. Government tax revenues are declining
3. Government spending exceeds government revenue
4. The government fails to earn enough tax revenue to pay off the public debt

Question 24

If potential GDP is $3000 billion and equilibrium GDP is $2000 billion:

1. An inflationary gap exists since prices in the economy are far too high
2. An inflationary gap exists since not all resources are being fully employed
3. A recessionary gap exists since not all resources are being fully employed
4. A recessionary gap exists since prices in the economy are far too high

Question 25

Which of the following will not shift the long-run aggregate supply curve to the right?

1. An increase in the stock of capital
2. A technological advance
3. An increase in the average wage rate
4. An increase in worker training

Question 26

Keynesian economists believe that there should be a very active government role in guiding the economy’s performance:

1. True
2. False

Question 27

Marginal propensity to consume always is between 0 – 1:

1. True
2. False

Question 28

The long run aggregate supply curve is always vertical:

1. True
2. False

Question 29

The marginal propensity to save is equal to the slope of the consumption function:

1. True
2. False

Question 30

The slope of the consumption function is equal to the change in consumption over the change in disposable income:

1. True
2. False

Question 31

The intercept represented by “a” in the equation C = a + b DI represents minimum savings:

1. True
2. False

Question 32

The government’s second largest source of revenue comes from taxing business which accounts for roughly 48%:

1. True
2. False

Question 33

The self-correcting mechanism is used frequently:

1. True
2. False

Question 34:

The government, unlike people, can sometimes be exempt from paying interest on their debt.

1. True
2. False

Question 35:

An inflationary gap is represented by an artificially high GDP number.

1. True
2. False

Question #1 (25 Points):

A company is planning to make equal quarterly deposits into a bank account. They want their account to have 2 million dollars after 5 years from now because they want to buy a certain machine. Note that the first quarterly deposit is made today and the last deposit is made at the end of year 5.

A) If the bank’s interest rate is 15% per year compounded monthly, how much should the company deposit each quarter? (12.5 points)

B) If the bank’s interest rate is still 15% per year but compounded continuously, how much should the company deposit each quarter? (12.5 points)

11. Suppose you were hired on January 1, 2015 and started depositing $800 at the end of each quarter (meaning every three months, with the first deposit on March 31, 2015) in a pension fund that pays interest of 6% per year compounded quarterly on the minimum quarterly balance and credited at the end of each quarter.

(a.) How much money was in the pension fund on July 1, 2015?

(b.) How much money was in the pension fund of October 1, 2015?

(c.) How much money will be in the pension fund on January 1, 2045?

(d.) What is the total amount of interest earned in this pension fund during these 30 years?

You are saving for your child's education since you did not participate in the Texas Tomorrow Fund. Your child is five-year-old today. Starting next quarter, you will deposit $300 every quarter until you child turns 17. Your last payment will be on his 17th year. You can to withdraw $X very year starting his 18th birthday for 4 years, first payment on his 18th birthday. Assuming you have investing your money in an account is provides 12% return and the interest is compounded daily (365 days).

a. $13,826.63

b. $11,998.78

c. $10,608.75

d. $8,982.45

e. $5,782.88

Tilger Farm Supply Company manufactures and sells a fertilizer called Snare. The following data are available for preparing budgets for Snare for the first two quarters of 2020.

Your assistant has prepared two budgets: (1) The manufacturing overhead budget shows expected costs to be 150% of direct labour cost. (2) The direct materials budget for Tarr shows the cost of Tarr purchases to be $297,000 in quarter 1 and $441,000 in quarter 2.

Prepare the following operating budgets by quarters. (Note: Classify items as variable and fixed in the selling and administrative expenses budget.) Do not prepare the manufacturing overhead budget or the direct materials budget for Tarr.

1. Prepare the production budget by quarters.

2. Prepare the direct labour budget by quarters.

3.Prepare the direct materials budget by quarters.

4. Prepare the selling and administrative expense budget by quarters.

5. Prepare the budgeted income statement for the first six months. (Round per unit calculations to 2 decimal places, e.g. 0.25 and final answers to 0 decimal places, e.g. 125.)

1) Bustillo Company operates sight-seeing buses. Management has identified two cost drivers—the number of buses in operation and the number of passengers served —that it uses in its budgeting and performance reports. Data concerning the company’s cost formulas appear below:

For example, vehicle operating costs should be $6,800 per month plus $476 per bus plus $4.5 per passenger. The company’s sales revenue should average $31 per passenger. In July, the company operated 54 buses and served a total of 3,300 passengers. How much is the company’s flexible budget operating income for July?

2)

A cash budget for the first three quarters of Brister Incorporated is given below (000 omitted). The company requires a minimum cash balance of at least $5,000 to start each quarter. If necessary, the company will borrow money from its bank to maintain this balance. The company will pay no interest in Quarters 1, 2, and 3. It will repay as much of its borrowings as possible as soon as it has more than $5,000 in cash in a given quarter. Suppose the company starts the first quarter with no bank debt. How much total bank debt does the company expect to have at the end of the third quarter?

Cook Farm Supply Company manufactures and sells a pesticide called Snare. The following data are available for preparing budgets for Snare for the first 2 quarters of 2020.

Your assistant has prepared two budgets: (1) the manufacturing overhead budget shows expected costs to be 125% of direct labor cost, and (2) the direct materials budget for Tarr shows the cost of Tarr purchases to be $298,000 in quarter 1 and $422,500 in quarter 2.

Prepare the sales budget.

Prepare the production budget.

Prepare the direct materials budget. (Round Cost per pound answers to 2 decimal places, e.g. 52.70.)

Prepare the direct labor budget. (Enter Direct labor time per unit in proportion to hours, e.g. for 45 minutes the proportion will be 0.75.)

Prepare the selling and administrative expense budget.

Prepare the budgeted multiple-step income statement for the first 6 months. (Round intermediate calculations to 2 decimal places and final answer to 0 decimal places, e.g. 1,255.)

Kingsport Containers Company makes a single product that is subject to wide seasonal variations in demand. The company uses a job-order costing system and computes plantwide predetermined overhead rates on a quarterly basis using the number of units to be produced as the allocation base. Its estimated costs, by quarter, for the coming year are given below:

Management finds the variation in quarterly unit product costs to be confusing and difficult to work with. It has been suggested that the problem lies with manufacturing overhead because it is the largest element of total manufacturing cost. Accordingly, you have been asked to find a more appropriate way of assigning manufacturing overhead cost to units of product.

Required:

1. Assuming the estimated variable manufacturing overhead cost per unit is $0.40, what must be the estimated total fixed manufacturing overhead cost per quarter? Answer: $172,000

2. Assuming the assumptions about cost behavior from the first three quarters hold constant, what is the estimated unit product cost for the fourth quarter? Answer: $4.64

3. What is causing the estimated unit product cost to fluctuate from one quarter to the next? Answer:The fixed portion of hte manufacturing overhead cost is causing the unit porduct costs to flucuate.  

4. Assuming the company computes one predetermined overhead rate for the year rather than computing quarterly overhead rates, calculate the unit product cost for all units produced during the year. ***I need help on this one***