Answer:
The answer to both a and b is in the explanation below
Explanation:
a) The increase in wage can either decrease or increase the hours worked. This is became an increase in wage has both substitution effect and income effect that work in different directions. Substitution effect An increase in wage increases the opportunity cost of leisure, thereby making the worker increase number of hours worked. Income effect The increase in wage also makers the worker richer, thereby making the worker decrease number of hours worked.
Since no information about worker's preferences is given, we do not Imow which effect will dominate the other effect and, therefore, we do not know what the net impact of the increase in wage will be.
b) The bonus will only have income effect. The bonus will make the workers richer, thereby making the worker decrease number of hours worked.
If in part a), the substitution effect and income effect are equal in magnitude, then there will be no change in the number of hours worked. The number of hours worked will remain the same at 2000 hours. Since the employer would be paying $5 extra on each hour worked, the cost to the employer of increase in wage would be $10,000 (=2000 x $5), which is the same as the bonus in part b).
Answer:
The correct answer is B.
Explanation:
Giving the following information:
James Inc.'s flexible budget for June, based upon actual output, called for the use of 10,500 pounds of materials at a standard cost of $7.40 per pound. The Production Department used 10,700 pounds of materials costing $7.10 per pound during June.
To calculate the direct materials price variance, we need to use the following formula:
Direct material price variance= (standard price - actual price)*actual quantity
Direct material price variance= (7.4 - 7.10)*10,700= $3,210 favorable
