Questions
Based on the article “Why it is so difficult to measure inflation Tisk it or drat...

Based on the article
“Why it is so difficult to measure inflation
Tisk it or drat it, this task still takes a basket”
explain what the best method to calculate the cost of living is, and what challenges still exist with it.


Why it is so difficult to measure inflation
Tisk it or drat it, this task still takes a basket


BRITAIN introduced its first index of the cost of living in 1914. It has gone through plenty of iterations since then. The retail-prices index was introduced in 1947 and a consumer-prices index came into being in 1996. Most recently, in March 2017 Britain’s statistics office introduced a new headline measure of inflation, the “consumer-prices index including owner-occupiers’ housing costs” (CPIH), which includes the specific costs of owning a home, such as mortgages and estate agents’ fees. The update makes sense: after all, about 15% of household spending in Britain goes on owner-occupied housing. CPIH may be ultra-sophisticated (statistical agencies in other countries struggle to incorporate housing costs), but like all inflation measures it remains an imperfect measure of changes to Britain’s living standards.

At its simplest, inflation is a measure of how quickly prices increase. To estimate the figure, statisticians choose what they believe to be a representative “basket” of goods and services consumed by the population. The figures are usually expressed in terms of the percentage change on a year earlier. If all that sounds simple, it is not. First there is the question of what to put in the basket. Consumption habits change all the time and wonks must estimate what to put in the basket through surveys on household spending. Britain updates its basket once a year, so it is likely to be fairly representative (this year, gin and cycling helmets were added; menthol cigarettes were out). But America only does so every two years, and used to do so every ten. At the same time statisticians must account for the fact that the quality of the basket often improves. This year’s smartphone might cost more than last year’s, but it will also do more. If statisticians focus only on changes in price, they will overstate the true inflation rate by missing improvements in performance. An advisory committee set up by America’s Senate in the mid-1990s reckoned that the failure to adjust for quality and new products meant true inflation was overstated by at least 0.6% a year.


A single measure of inflation cannot reflect the different cost-of-living changes faced by different sorts of people. For instance, London has seen rapid increases in house prices each year, yet since CPIH is a national figure, the inflation faced by Londoners may be understated. There is also a rich-poor divide. The method of constructing an inflation index is often described as “plutocratic”, rather than “democratic”. In other words, the choice of what to put in the basket is skewed by what rich people buy, since rich people spend more. (So if a rich wag decided to spend billions of pounds all in one go on, say, shoehorns, then in theory shoehorns would make up a big chunk of the inflation basket the following year.) This can mean that rich and poor folk experience different inflation rates. For instance, poor households spend more of their budgets on food, and in the 2000s food prices were rising quickly. One paper found that from 2003 to 2014, the average inflation rate for those in the bottom income quintile was 3.4% compared with 3% for the top quintile.


It is not easy to get around any of these problems. Britain’s statistics office has mooted introducing regional indicators, as well as stratifying inflation by income. Yet even with these changes, inflation will remain a fuzzier measure than is commonly acknowledged.



In: Economics

On January 1, 2020, Sandhill Corp. granted stock options to its chief executive officer. This is...

On January 1, 2020, Sandhill Corp. granted stock options to its chief executive officer. This is the only stock option plan that Sandhill offers and the details are as follows:

Option to purchase: 2,400 common shares
Option price per share: $37.00
Fair value per common share on date of grant: $29.30
Stock option expiration: The earlier of eight years after issuance or the employee’s cessation
of employment with Sandhill for any reason other than retirement
Date when options are first exercisable: The earlier of four years after issuance or the date on which
the employee reaches the retirement age of 65
Fair value of options on date of grant: $7.00


On January 1, 2025, 1,920 of the options were exercised when the fair value of the common shares was $40. The remaining stock options were allowed to expire. The CEO remained with the company throughout the period.

Assume that the entity follows ASPE and has decided not to include an estimate of forfeitures upon initial recognition of the compensation expense. Record the journal entry on January 1, 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date

Account Titles and Explanation

Debit

Credit

January 1, 2020

enter an account title

enter a debit amount

enter a credit amount

enter an account title

enter a debit amount

enter a credit amount

eTextbook and Media

List of Accounts

  

  

Assume that the entity follows ASPE and has decided not to include an estimate of forfeitures upon initial recognition of the compensation expense. Record the journal entry on December 31, 2020, the fiscal year end of Sandhill Corp. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date

Account Titles and Explanation

Debit

Credit

December 31, 2020

enter an account title

enter a debit amount

enter a credit amount

enter an account title

enter a debit amount

enter a credit amount

eTextbook and Media

List of Accounts

  

  

Assume that the entity follows ASPE and has decided not to include an estimate of forfeitures upon initial recognition of the compensation expense. Record the journal entry on January 1, 2025, the exercise date. (Credit account titles are automatically indented when the amount is entered. Do not indent manually.)

Date

Account Titles and Explanation

Debit

Credit

January 1, 2025

enter an account title

enter a debit amount

enter a credit amount

enter an account title

enter a debit amount

enter a credit amount

enter an account title

enter a debit amount

enter a credit amount

eTextbook and Media

List of Accounts

  

  

Assume that the entity follows ASPE and has decided not to include an estimate of forfeitures upon initial recognition of the compensation expense. Record the journal entry on December 31, 2027, the expiry date of the options. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date

Account Titles and Explanation

Debit

Credit

December 31, 2027

enter an account title

enter a debit amount

enter a credit amount

enter an account title

enter a debit amount

enter a credit amount

In: Accounting

Use a multiple regression model with dummy variables as follows to develop an equation to account for seasonal effects in the data.

Quarter Year 1 Year 2 Year 3
1 3 6 8
2 2 4 8
3 4 7 9
4 6 9 11
(b) Use a multiple regression model with dummy variables as follows to develop an equation to account for seasonal effects in the data. Qtr1 = 1 if Quarter 1, 0 otherwise; Qtr2 = 1 if Quarter 2, 0 otherwise; Qtr3 = 1 if Quarter 3, 0 otherwise.
If required, round your answers to three decimal places. For subtractive or negative numbers use a minus sign even if there is a + sign before the blank. (Example: -300) If the constant is "1" it must be entered in the box. Do not round intermediate calculation.
ŷ =  +___  Qtr1 + ___ Qtr2 + ___ Qtr3
Compute the quarterly forecasts for next year based on the model you developed in part (b).
If required, round your answers to three decimal places. Do not round intermediate calculation.
Year Quarter Ft
4 1
4 2
4 3
4 4
Use a multiple regression model to develop an equation to account for trend and seasonal effects in the data. Use the dummy variables you developed in part (b) to capture seasonal effects and create a variable t such that t = 1 for Quarter 1 in Year 1, t = 2 for Quarter 2 in Year 1,… t = 12 for Quarter 4 in Year 3.
If required, round your answers to three decimal places. For subtractive or negative numbers use a minus sign even if there is a + sign before the blank. (Example: -300)
ŷ =  + __ Qtr1 +__  Qtr2 +__  Qtr3 +___  t
Compute the quarterly forecasts for next year based on the model you developed in part (d).
Do not round your interim computations and round your final answer to three decimal places.
Year Quarter Period Ft
4 1 13
4 2 14
4 3 15
4 4 16
Is the model you developed in part (b) or the model you developed in part (d) more effective?
If required, round your intermediate calculations and final answer to three decimal places.
Model developed in part (b) Model developed in part (d)
MSE

In: Statistics and Probability

Consider the following time series data. Quarter Year 1 Year 2 Year 3 1 2 5...

Consider the following time series data.

Quarter Year 1 Year 2 Year 3
1 2 5 7
2 0 2 6
3 5 8 10
4 5 8 10
(b) Use a multiple regression model with dummy variables as follows to develop an equation to account for seasonal effects in the data. Qtr1 = 1 if Quarter 1, 0 otherwise; Qtr2 = 1 if Quarter 2, 0 otherwise; Qtr3 = 1 if Quarter 3, 0 otherwise.
If required, round your answers to three decimal places. For subtractive or negative numbers use a minus sign even if there is a + sign before the blank. (Example: -300) If the constant is "1" it must be entered in the box. Do not round intermediate calculation.
ŷ =   +   Qtr1 +   Qtr2 +   Qtr3
(c) Compute the quarterly forecasts for next year based on the model you developed in part (b).
If required, round your answers to three decimal places. Do not round intermediate calculation.
Year Quarter Ft
4 1
4 2
4 3
4 4
(d) Use a multiple regression model to develop an equation to account for trend and seasonal effects in the data. Use the dummy variables you developed in part (b) to capture seasonal effects and create a variable t such that t = 1 for Quarter 1 in Year 1, t = 2 for Quarter 2 in Year 1,… t = 12 for Quarter 4 in Year 3.
If required, round your answers to three decimal places. For subtractive or negative numbers use a minus sign even if there is a + sign before the blank. (Example: -300)
ŷ =   +  Qtr1 +  Qtr2 +  Qtr3 +   t
(e) Compute the quarterly forecasts for next year based on the model you developed in part (d).
Do not round your interim computations and round your final answer to three decimal places.
Year Quarter Period Ft
4 1 13
4 2 14
4 3 15
4 4 16
(f) Is the model you developed in part (b) or the model you developed in part (d) more effective?
If required, round your intermediate calculations and final answer to three decimal places.

In: Statistics and Probability

EDC Copper Inc. operates a number of copper mines in Peru. On July 1, 2019 the...

EDC Copper Inc. operates a number of copper mines in Peru. On July 1, 2019 the company decided to dispose of one of its mining properties. The property contains mineral rights (an intangible asset) and on-site mining equipment. The mineral rights have a carrying value of $1,200,000 while the mining equipment has a net book value (after depreciation) of $500,000. The value of the mineral rights is estimated to be $850,000, due to the currently depressed value of copper metals on the world market. Since most of the equipment is fixed to the property and cannot be moved at any reasonable cost, the recoverable amount of the mining equipment is very low, no more than $120,000, The board of directors for EDC Copper is already actively searching for a buyer of the mine and they are confident that a buyer will be found within the year. Since the company is publicly traded, they must provide quarterly statements to the shareholders.

Required: 1. Prepare journal entries to recognize the mineral rights and equipment as a disposal group, including any reclassification entries, if necessary.

2. At the end of the third quarter, September 30, assume that the value of copper metals has increased and the mineral rights are worth $1,250,000. Prepare any necessary journal entries to

reflect the increase in value.

3. During the fourth quarter, on November 9, EDC Copper signs a contract which conveys all of the rights to the mine and the equipment to a Chilean-based mining company. The contract price is $1,490,000. Prepare the journal entry (or entries) to record the sale.

In: Accounting

Problem 20-4A Manufacturing: Preparation of a complete master budget LO P1, P2, P3 The management of...

Problem 20-4A Manufacturing: Preparation of a complete master budget LO P1, P2, P3

The management of Zigby Manufacturing prepared the following estimated balance sheet for March 2017:

ZIGBY MANUFACTURING
Estimated Balance Sheet
March 31, 2017
Assets
Cash $ 65,000
Accounts receivable 434,850
Raw materials inventory 87,505
Finished goods inventory 374,640
Total current assets 961,995
Equipment, gross 624,000
Accumulated depreciation (162,000 )
Equipment, net 462,000
Total assets $ 1,423,995
Liabilities and Equity
Accounts payable $ 199,405
Short-term notes payable 24,000
Total current liabilities 223,405
Long-term note payable 520,000
Total liabilities 743,405
Common stock 347,000
Retained earnings 333,590
Total stockholders’ equity 680,590
Total liabilities and equity $ 1,423,995


To prepare a master budget for April, May, and June of 2017, management gathers the following information:

  1. Sales for March total 22,300 units. Forecasted sales in units are as follows: April, 22,300; May, 16,300; June, 22,700; and July, 22,300. Sales of 252,000 units are forecasted for the entire year. The product’s selling price is $26.00 per unit and its total product cost is $21.00 per unit.
  2. Company policy calls for a given month’s ending raw materials inventory to equal 50% of the next month’s materials requirements. The March 31 raw materials inventory is 4,375 units, which complies with the policy. The expected June 30 ending raw materials inventory is 5,200 units. Raw materials cost $20 per unit. Each finished unit requires 0.50 units of raw materials.
  3. Company policy calls for a given month’s ending finished goods inventory to equal 80% of the next month’s expected unit sales. The March 31 finished goods inventory is 17,840 units, which complies with the policy.
  4. Each finished unit requires 0.50 hours of direct labor at a rate of $15 per hour.
  5. Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $3.90 per direct labor hour. Depreciation of $31,670 per month is treated as fixed factory overhead.
  6. Sales representatives’ commissions are 10% of sales and are paid in the month of the sales. The sales manager’s monthly salary is $4,200.
  7. Monthly general and administrative expenses include $24,000 administrative salaries and 0.9% monthly interest on the long-term note payable.
  8. The company expects 25% of sales to be for cash and the remaining 75% on credit. Receivables are collected in full in the month following the sale (none are collected in the month of the sale).
  9. All raw materials purchases are on credit, and no payables arise from any other transactions. One month’s raw materials purchases are fully paid in the next month.
  10. The minimum ending cash balance for all months is $62,000. If necessary, the company borrows enough cash using a short-term note to reach the minimum. Short-term notes require an interest payment of 1% at each month-end (before any repayment). If the ending cash balance exceeds the minimum, the excess will be applied to repaying the short-term notes payable balance.
  11. Dividends of $22,000 are to be declared and paid in May.
  12. No cash payments for income taxes are to be made during the second calendar quarter. Income tax will be assessed at 40% in the quarter and paid in the third calendar quarter.
  13. Equipment purchases of $142,000 are budgeted for the last day of June

8. Cash budget.
9. Budgeted income statement for the entire second quarter (not for each month separately).

ZIGBY MANUFACTURING
Budgeted Income Statement
For Three Months Ended June 30, 2017
Salesselected answer correct $1,593,800selected answer correct
Cost of goods soldselected answer correct not attempted
Gross profitselected answer correct not attempted
Operating expenses
Sales commissionsselected answer correct not attempted
Sales salariesselected answer correct not attempted
General administrative salariesselected answer correct not attempted
Long-term note interestselected answer correct not attempted
Bank loan interest expenseselected answer correct not attempted
not attempted not attempted
Total operating expenses 0
Income before taxesselected answer correct 0
Income taxselected answer correct 19,298selected answer correct
Net incomeselected answer correct $(19,298)

In: Accounting

Which statement is true?a. The largest federal government purchase is education.b. State and local...

Which statement is true?

a. The largest federal government purchase is education.

b. State and local government spending has been declining since the mid-1980s.

c. Defense spending as a percent of the federal budget has steadily fallen since 1990.

d. Today we spend as much on defense than the rest of the world combined.

In: Economics

In the Keynesian Cross model an increase in government spending leads to an increase in income...

In the Keynesian Cross model an increase in government spending leads to an increase in income that is a multiple of the increase in spending. Explain why. Why is the increase in equilibrium income following a change in G less than what the Keynesian Cross model predicts in the full IS-LM model? (Hint for this last part: what is the horizontal shift in IS following a change in G?)

In: Economics

1.2 At every income level, many people fall into the category of spending more than they...

1.2 At every income level, many people fall into the category of spending more than they earn, thereby accumulating debt.

With reference to the statement above briefly describe how the following factors may contribute:

1.2.1 Access to credit

1.2.2 Credit cards

1.2.3 Car loans

1.2.4 Influence of others

1.2.5 Spending to feel good.

In: Finance

QUESTION 6 (20 Marks) 6.1 Briefly discuss the main components of total spending in the economy....

QUESTION 6

6.1 Briefly discuss the main components of total spending in the economy.

6.2 Identify the THREE (3) main withdrawals (or leakages) from the circular flow of income and spending in

an open economy.

6.3 Explain with examples, the following:

6.3.1 Constant returns to scale.

6.3.2 Increasing returns to scale.

6.3.3 Decreasing returns to scale.

In: Economics