Let’s examine how the goals of the Fed influence its response to shocks. Suppose that in scenario A the Fed cares only about kee
ping the price level stable and in scenario B the Fed cares only about keeping output and employment at their natural levels. Explain how in each scenario the Fed would respond to the following.
a. An exogenous decrease in the velocity of money.
b. An exogenous increase in the price of oil.
a. An exogenous decrease in the velocity of money.
b. An exogenous increase in the price of oil.
1 answer:
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Answer:
A. $5,250
Explanation:
As for the provided details we have,
The total cost of work in process on 31 March = $14,000
In this amount included as cost of direct labor = $5,000
This means the remaining amount $14,000 - $5,000 = 9,000 relates to cost of direct material and cost of manufacturing overheads.
Also provided that manufacturing overheads are applied using the predetermined rate of 75% of direct labor.
Thus, amount charged to work in process inventory for manufacturing overheads shall be $5,000 direct labor cost 75% = $3,750
Thus, direct material cost in work in process = $14,000 - $5,000 - $3,750 = $5,250