Answer:
Lower by $8,250
Explanation:
The operating income reported will be different as the unit level of inventory increased during the account period
.
Denominator rate:
= Fixed manufacturing costs ÷ Budgeted denominator level
= 18,000 ÷ 2,400
= 7.5
Operative income:
= Total Units produced - (Total units sold × Denominator rate)
= 2,700 - (1,600 × 7.5
)
= 1,100 × 7.5
= $8,250
Lower by $8,250 under the variable costing because 8250 of fixed manufacturing cost remain in inventory under absorption.
Answer:
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Answer:
A) change in the cost of eating index = <u>20% increase</u>
B) Suppose that consumers are completely indifferent between two chickens and one ham. For this example, how large is the substitution bias in the official "cost-of-eating" index?
The <u>INCREASE</u> in the cost-of-eating index is <u>18</u> %.
The <u>OVERESTIMATE</u> of inflation in the cost of eating reflects substitution bias.
Explanation:
2015
product units unit cost total
chickens 30 $4 $120
hams 10 $5 $50
<u>steaks 10 $8 $80</u>
total $250
2016
product units unit cost total
chickens 30 $5 $150
hams 10 $7 $70
<u>steaks 10 $8 $80</u>
total $300
A) ($300 - $250) / $250 = 20%
B)
if consumers are indifferent for 2 chickens per 1 ham, then the new basket should be assuming consumers will purchase the cheapest option:
2016
product units unit cost total
hams 25 $7 $175
<u>steaks 10 $8 $80</u>
total $255
the increase in inflation would have been = ($255 - $250) / $250 = 2%
the substitution bias = reported inflation - real inflation = 20% - 2% = 18%
