1. Briefly explain why portfolios need to be sorted on lagged Research Spending to test return predictability.

Does the “spending multiplier effect” make fiscal policy more effective, or less? Explain briefly.

2. Graphically illustrate and explain how an increase in the interest rate would affect consumer spending.

What has been happening to private investment compared to government spending/investment in recent years?

According to the neoclassical theory of investment how do firms determine their optimal amount of investment spending?

What Should the US do differently to Reduce Federal and State Government Spending? (4 paragraphs)

SFcakes is the supplier of various kinds of cakes to a variety of restaurants and caterers. The company uses a standard costing system. Its standard non-manufacturing overheads are fixed at $10,000 per month. The company has a standard monthly production and sales level of 1,000 units (cakes) and sells its cakes at a standard unit selling price of $70. The standard manufacturing overheads are allocated on the basis of labor hours. The standard input quantities and prices for direct-cost inputs and overheads are as follows:

To understand more about the company’s profitability, the following input usage information for January is gathered to help analyze the situation:

The actual output results for January are as follows:

There are no inventory at the beginning of January. Inventory are valued at standard cost. The company uses absorption costing system. Production volume variance, if any, is written off to cost of goods sold.

For each of the following questions (Sub-question A - J), enter your numeric answer inside the first answer box. Do NOT enter dollar sign or comma or decimal point, if any.

Enter F as favorable or U as unfavorable in the answer box following the numeric answer box for the same question.

Q29-A.    What is sales volume variance?

Q29-B.    What is selling price variance?

Q29-C.    What is direct materials price variance?

Q29-D.    What is direct materials efficiency variance?

Q29-E.     What is direct manufacturing labor price variance?

Q29-F.     What is direct manufacturing labor efficiency variance?

Q29-G.    What is variable manufacturing spending variance?

Q29-H.    What is variable manufacturing efficiency variance?

Q29-I.       What is fixed manufacturing spending variance?

Q29-J.     What is production volume variance?

Fraud investigators found that 70 percent of the nearly $160 million in sales booked by an Asian subsidiary of a European company between September 2006 and June 2007 were fictitious. In an effort to earn rich bonuses tied to sales targets, the Asian subsidiary’s managers used highly sophisticated schemes to fool auditors. One especially egregious method involved funneling bank loans through third parties to make it look as though customers had paid, when in fact they hadn’t.

In a lawsuit filed by the company’s auditors, it was alleged that former executives “deliberately” provided “false or incomplete information” to the auditors and conspired to obstruct the firm’s audits. To fool the auditors, the subsidiary used two types of schemes. The first involved factoring unpaid receivables to banks to obtain cash up front. Side letters that were concealed from the auditors gave the banks the right to take the money back if they couldn’t collect from the company’s customers. Hence, the factoring agreements amounted to little more than loans.

The second, more creative, scheme was used after the auditors questioned why the company wasn’t collecting more of its overdue bills from customers. It turns out that the subsidiary told many customers to transfer their contracts to third parties. The third parties then took out bank loans, for which the company provided collateral, and then “paid” the overdue bills to the company using the borrowed money. The result was that the company was paying itself. When the contracts were later canceled, the company paid “penalties” to the customers and the third parties to compensate them “for the inconvenience of dealing with the auditors.”

The investigators also found that the bulk of the company’s sales came from contracts signed at the end of quarters, so managers could meet ambitious quarterly sales targets and receive multimillion-dollar bonuses. For example, 90 percent of the revenue recorded by the subsidiary in the second quarter of 2007 was booked in several deals signed in the final nine days of the quarter. But the company was forced to subsequently cancel 70 percent of those contracts because the customers—most of them tiny startups—didn’t have the means to pay.

List revenue-related fraud symptoms and schemes used in this case. Briefly discuss how actively searching and understanding revenue-related fraud symptoms could have led to discovering the fraud by the company’s auditors.

YOUR BUDGET CONSTRAINT ANALYSIS

Instructions:

In your reply, answer the following:

Think back from March 2020 until now, during the COVID-19 pandemic and:

1. Describe the most fundamental consumption decisions (of goods and services) you have made (and can be shared);
2. has COVID-19 affected or benefited you, and why;
3. provide an example of consumption decisions you have increased, and why;
4. provide an example of consumption decisions you have had to sacrifice, and why.