Consider the following time series data.

Grab a blank sheet of paper and try some inflation analysis on your own. Take a picture or scan your sheet, and upload it after you are finished. This contributes to your participation grade in the class.

1. Because inflation increased by only 1.7% in 2008, the American Association of Retired Persons comments that this is “an unfortunate side effect of inflation, since Social Security payments, which are indexed to inflation, will increase by only 1.7% in 2008.” Comment on whether this is an “unfortunate side effect of inflation” or not.
2. The Federal Reserve Bank (Fed) can impact the economy through changes in the Federal funds rate, because changes in this interest rate will change all interest rates throughout the economy. The Federal funds rate was constant at 5.25% from 1996–1998, a time of falling inflation. What impact did this have on real interest rates during this time? What was likely to happen to investment spending?
3. “Traveling in Turkey is much cheaper now than it was 10 years ago,” says a friend. "Ten years ago, a dollar bought 1,000 lira; this year, a dollar buys 1,500 lira.” Total inflation over this period was 25% in the United States and 100% in Turkey. Is your friend right or wrong—has it become more or less expensive to travel in Turkey?

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The production department of Zan Corporation has submitted the following forecast of units to be produced by quarter for the upcoming fiscal year:

1st Quarter2nd Quarter3rd Quarter4th Quarter

Units to be produced24,00027,00026,00025,000

In addition, 42,000 grams of raw materials inventory is on hand at the start of the 1st Quarter and the beginning accounts payable for the 1st Quarter is $8,600.

Each unit requires 7 grams of raw material that costs $1.80 per gram. Management desires to end each quarter with an inventory of raw materials equal to 25% of the following quarter’s production needs. The desired ending inventory for the 4th Quarter is 5,000 grams. Management plans to pay for 60% of raw material purchases in the quarter acquired and 40% in the following quarter. Each unit requires 0.40 direct labor-hours and direct laborers are paid $12.50 per hour.

Required:

1.&2. Calculate the estimated grams of raw material that need to be purchased and the cost of raw material purchases for each quarter and for the year as a whole.

3. Calculate the expected cash disbursements for purchases of materials for each quarter and for the year as a whole.

4. Calculate the estimated direct labor cost for each quarter and for the year as a whole.

PA8-6 Preparing Operating Budgets for a Merchandising Firm [LO 8-5, 8-3a, f, g, h]

Red Canyon T-shirt Company operates a chain of T-shirt shops in the southwestern United States. The sales manager has provided a sales forecast for the coming year, along with the following information:

• Each T-shirt is expected to sell for $14.
• The purchasing manager buys the T-shirts for $6 each.
• The company needs to have enough T-shirts on hand at the end of each quarter to fill 24 percent of the next quarter’s sales demand.
• Selling and administrative expenses are budgeted at $78,000 per quarter plus 16 percent of total sales revenue.

Required:
1. Determine budgeted sales revenue for each quarter.



2. Determine budgeted cost of merchandise purchased for each quarter.



3. Determine budgeted cost of good sold for each quarter.



4. Determine selling and administrative expenses for each quarter.



5. Complete the budgeted income statement for each quarter.

PA8-6 Preparing Operating Budgets for a Merchandising Firm [LO 8-5, 8-3a, f, g, h]

Red Canyon T-shirt Company operates a chain of T-shirt shops in the southwestern United States. The sales manager has provided a sales forecast for the coming year, along with the following information:

• Each T-shirt is expected to sell for $18.
• The purchasing manager buys the T-shirts for $7 each.
• The company needs to have enough T-shirts on hand at the end of each quarter to fill 28 percent of the next quarter’s sales demand.
• Selling and administrative expenses are budgeted at $68,000 per quarter plus 14 percent of total sales revenue.Required:
  1. Determine budgeted sales revenue for each quarter
  
  2. Determine budgeted cost of merchandise purchased for each quarter.
  
  3. Determine budgeted cost of good sold for each quarter.
  
  4. Determine selling and administrative expenses for each quarter.
  
  5. Complete the budgeted income statement for each quarter.
  

1. If the change in GDP in South Korea from 2016 Quarter 3 to 2016 Quarter 4 was 6%, then we may conclude that the s.a.a.r for GDP in the same period was

1. 1.6%, because s.a.r. measures quarter-to-quarter growth
2. 3.2%, because s.a.a.r. measures the upper limit of current GDP growth
3. One-fourth of 1.6%, or 0.4%, because s.a.a.r. removes all annualized data
4. Four times 1.6%, or 6.4%, because s.a.a.r. annualizes quarterly data

2. The difference between an economic indicator being a flow variable rather than a stock variable is that

1. A flow refers to measuring a variable over time, while a stock measures a variable at a point in time
2. A flow refers to measuring a variable at a point in time while a stock measures a variable in non-monetary units
3. A flow refers to measuring a variable over time while a stock measures a variable in monetary units only
4. A stock is a measure of a variable over time while a flow measures a variable at a point in time

3. The level of potential GDP used as the benchmark comparison in assessing the long-run prospects of an economy is computed as:

1. The growth in labor force plus the growth in productivity plus the growth in hours worked
2. The growth in productivity plus the growth rate of the population
3. The growth rate of population plus the growth rate of current production
4. The growth rate of current production plus the growth rate of productivity plus the growth rate in hours worked

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

UR T (Time)

Year Quarter Rate For Regression

2018 Q1 11.9 1

Q2 7.0 2

Q3 8.1 3

Q4 10.1 4

2019 Q1 12.1 5

Q2 6.8 6

Q3 7.0 7

Q4 9.8 8

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

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

1. Calculate the four quarter moving average;

2. Centre the data if necessary;

3. Calculate the seasonal factors for each Quarter.

4. Calculate the average seasonal factors for each quarter.

5. What percentage is the rounding error in this calculation?