1. How does a change in the autonomous expenditure influence the AE curve curve? Use graph to support your answer (2.5 Marks) 2. What is the difference between financial capital, physical capital and human capital? (2.5 Marks) Question Two: (A1, C1) 1. Explain how change in the interest rate and inflation might affect saving and investment decision in the economy? (2.5 Marks) 2. What are the five main determinants of consumption spending? Which of these is the most important? (2.5 Marks)

Flexible Budget, Standard Cost Variances, T-Accounts

Ingles Company manufactures external hard drives. At the beginning of the period, the following plans for production and costs were revealed:

During the year, 24,800 units were produced and sold. The following actual costs were incurred:

There were no beginning or ending inventories of direct materials. The direct materials price variance was $10,168 unfavorable. In producing the 24,800 units, a total of 12,772 hours were worked, 3 percent more hours than the standard allowed for the actual output. Overhead costs are applied to production using direct labor hours.

Required:

Instructions for parts 1 and 2: If a variance is zero, enter "0" and select "Not applicable" from the drop down box.

1. Prepare a performance report comparing expected costs to actual costs.

Feedback

1. A flexible budget (1) provides expected costs for a variety of activity levels, or (2) provides budgeted costs for the actual level of activity.

2. Determine the following. If a variance amount is zero, enter "0" and select "Not applicable" from the drop-down list.

a. Direct materials usage variance
$ Unfavorable

b. Direct labor rate variance
$ Not applicable

c. Direct labor usage variance
$ Unfavorable

d. Fixed overhead spending and volume variances

e. Variable overhead spending and efficiency variances

Feedback

2.
a. MUV (Materials usage variance) = (AQ – SQ) x SP
b. LRV (Labor rate variance) = (AR – SR) x AH
c. LEV (Labor efficiency variance) = (AH – SH) x SR
d. Fixed OH spending variance = AFOH -BFOH
Volume variance = Budgeted fixed OH – Applied fixed OH
e. Variable overhead spending variance = (Actual variable OH rate (AVOR) – (SVOR) Standard variable OH rate) x AH)
Variable overhead efficiency variance = (AH – SH) x SVOR

3. Use T-accounts to show the flow of costs through the system. In showing the flow, you do not need to show detailed overhead variances. Show only the over- and underapplied variances for fixed and variable overhead. Record the following transactions in the T-accounts: If an amount is zero, enter "0".

(a) purchase of materials,

(b) issuance of materials into production,

(c) incurrence of direct labor cost,

(d) application of variable overhead cost to production,

(e) application of fixed overhead cost to production,

(f) transfer of finished goods to finished goods inventory,

(g) sale of goods,

(h) closure of Direct Materials Price Variance account,

(i) closure of Direct Materials Usage Variance account,

(j) closure of Direct Labor Efficiency Variance account,

(k) closure of Variable Overhead Control account, and

(l) closure of Fixed Overhead Control account.

Enter these transactions in the T-accounts in the same order that they are presented here.

The unemployment rate (UR) for PEI by quarter was as follows:

   UR t

Year Quarter Rate For Regression

2017 Q1 11.9 1

Q2 7.9 2

Q3 8.1 3

Q4 10.1 4

2018 Q1 12.1 5

Q2 6.8 6

Q3 6.0 7

Q4 9.8 8

a) Sketch this data on a graph. Is there seasonality in the data?

b) Use a four quarter moving average to determine the seasonal factors for the four quarters.

The following table shows some information on a hypothetical economy. The table lists real GDP, consumption (C), investment (I), government spending (G), net exports (X – M), and aggregate expenditures (AE). In this problem, assume that investment, government spending, and net exports are independent of the economy's real GDP level.

Using the numbers provided in the table, enter the correct numbers in the empty cells. Then, using the dropdown selection menus in the right-most column, indicate whether output will tend to increase, decrease, or remain in equilibrium at each level of real GDP in the table. (Note: The table uses negative numbers to indicate an unplanned inventory investment depletion and positive numbers to indicate an unplanned inventory investment accumulation.)

True or False: The most fundamental assumption behind the aggregate expenditures model is that prices in the economy are flexible.

When aggregate expenditures are greater than real GDP, there is an unplanned inventory investment _____ . This will prompt firms to ______ employment and production.

At the end of the year, a company offered to buy 4,610 units of a product from X Company for a special price of $11.00 each instead of the company's regular price. The following information relates to the 61,300 units of the product that X Company has already made and sold to its regular customers:

The special order product has some unique features that will require additional material costs of $0.72 per unit and the rental of special equipment for $4,000.

5. Profit on the special order would be

6. The marketing manager thinks that if X Company accepts the special order, regular customers will be lost, with demand falling by 750 units. This loss in sales will cause firm profits to fall by

Inventory by Three Methods; Cost of Goods Sold

The units of an item available for sale during the year were as follows:

There are 19 units of the item in the physical inventory at December 31.

Determine the cost of ending inventory and the cost of goods sold by three methods, presenting your answers in the following form:

Round your final answers to the nearest dollar.

PA8-4 Preparing Operating Budget Components [LO 8-3a, b, c, d]

Wesley Power Tools manufactures a wide variety of tools and accessories. One of its more popular items is a cordless power handisaw. Each handisaw sells for $32. Wesley expects the following unit sales:

Wesley’s ending finished goods inventory policy is 30 percent of the next month’s sales.
       Suppose each handisaw takes approximately .60 hours to manufacture, and Wesley pays an average labor wage of $22 per hour.
       Each handisaw requires a plastic housing that Wesley purchases from a supplier at a cost of $6.00 each. The company has an ending raw materials inventory policy of 20 percent of the following month’s production requirements. Materials other than the housing unit total $4.50 per handisaw.
       Manufacturing overhead for this product includes $72,000 annual fixed overhead (based on production of 27,000 units) and $1.20 per unit variable manufacturing overhead. Wesley’s selling expenses are 7 percent of sales dollars, and administrative expenses are fixed at $18,000 per month.

Required:
1. Compute the following for the first quarter: (Do not round your intermediate calculations.)

rev: 04_09_2015_QC_CS-13078

Periodic inventory by three methods; cost of goods sold

The units of an item available for sale during the year were as follows:

There are 80 units of the item in the physical inventory at December 31. The periodic inventory system is used.

Determine the ending inventory cost and the cost of goods sold by three methods. Round interim calculations to one decimal and final answers to the nearest whole dollar.

1. Periodic inventory by three methods; cost of goods sold

   The units of an item available for sale during the year were as follows:

   Jan. 1	Inventory	30 units at $118
   Mar. 10	Purchase	60 units at $128
   Aug. 30	Purchase	30 units at $136
   Dec. 12	Purchase	80 units at $142

   There are 60 units of the item in the physical inventory at December 31. The periodic inventory system is used.

   Determine the ending inventory cost and the cost of goods sold by three methods. Round interim calculations to one decimal and final answers to the nearest whole dollar.

   Cost of Ending Inventory and Cost of Goods Sold
   Inventory Method	Ending Inventory	Cost of Goods Sold
   First-in, first-out (FIFO)	$fill in the blank 1	$fill in the blank 2
   Last-in, first-out (LIFO)	fill in the blank 3	fill in the blank 4
   Weighted average cost	fill in the blank 5	fill in the blank 6

he budgeted unit sales of ToneV Company for the upcoming fiscal year are provided below: 1St Quarter 2nd Quarter 3rd Quarter 4th Quarter Budgeted Unit Sale 22,000 21,000 24,000 23,000 The company’s variable selling and administrative expenses per unit are $1.80. Fixed selling and administrative expenses include advertising expenses of $18,000 per quarter, executive salaries of $47,000 per quarter, and depreciation of $14,000 per quarter. In addition, the company will make insurance payments of $8,000 in the 2nd quarter and $8,000 in the 4th quarter. Finally, property taxes of $4,200 will be paid in the 3rd quarter. What is the total cash disbursement for selling and administrative expenses for the year? a - $104,600 b - $110,800 c - $442,200 d - $112,400