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Econ 6. Consider the following AD/AS diagram. Suppose the economy experiences a positive aggregate demand shock say, an increase in the demand for Canada's exports. This increases real GDP to Y1. a. Explain what happens if the Bank of Canada does not react to the shock. Show this in the diagram. b. Now suppose the Bank decides to maintain real GDP at Yi-that is, it decides to validate the shock. Explain how this is possible and show it in a diagram. c. What is the effect on inflation from the policy in part (b)? Is inflation constant or is it rising? Explain.5. Consider the following ADXAS diagram. Suppose the economy experiences a positive aggregate demand shocksay, an increase in the demand for Canada's exports. This increases real GDP to Y]. '2 3 is: 3. Explain what happens if the Bank of Canada does not react to the shock. Showr this in the diagram. b. Now suppose the Bank decides to maintain real GDP at Y.that is, it decides to validate the shock. Explain how this is possible, and show it in a diagram. . 1What is the efhct on ination from the policy in part [b]? Is inflation constant or is it rising? Explain. Consider an open economyr that is described by the following model: C = 25G + {SIIDIIY Whe re: C = Consumption Y = Income | = 35 | 2 Investment (3 = 6U G = Government spending t = D.2Et = Tax rate X = 413 X = Exports M = 513 M = Imports m = '[1.3 m = Marginal propensity to import Yf = 650 Yf = Full employment income level Note: show all your workings. Round off to two decimal places. 21 Calculate the multiplier forthe open economy. [3} 2.2 Calculate the total auto nomous spen cling. {2] 23 Calculate the equilibrium income for this economy. [2} 2.4 Graphically illustrate the equilibrium income {based on your response to 23], using the Keynesian model [expenditureinco me cliagram]. [5] 2.5 Based on the value of net exports, what conclusions can be made about the economy in question? [4} 2.6 Calculate the change in investment required to reach the full employment level of income. The Yates Corporation manufactures lamps. It has set up the following standards per finished unit for direct materials and direct manufacturinglabor. $49.0 Direct materials: 10 lb. at $4.90 per lb. 0 Direct manufacturing labor: 0.5 hour at $32 per hour 16.00 The number of finished units budgeted for January 2014 was 9930; 9900 units were actually produced. Actual results in January 2014 were as follows: Direct materials: 97,500 lb. used Direct manufacturing labor. 4,900 hours $ 165,375 Assume that there was no beginning inventory of either direct materials or finished units. During the month, materials purchases amounted to 99,300 at a total cost of $501,465. Input price variances are isolated upon purchase. Input-efficiency variances are isolated at the time of usage. 1. Compute the January 2014 price and efficiency variances of direct materials and direct manufacturing labor. 2. Prepare journal entries to record the variances in requirement 1. 3. Comment on the January 2014 price and efficiency variances of Yates Corporation. 4. Why might Yates calculate direct materials price variances and direct materials efficiency variances with reference to different points in time? Requirement 1. Compute the January 2014 price and efficiency variances of direct materials and direct manufacturing labeLet's begin by calculating the actual input at the budgeted price. (Round your answers to the nearest whole dollar.) Actual input X Budgeted price E Cost Direct materials (purchases) Direct materials (usage) Direct manufacturing laborKatharine Johnson is the owner of Better Bikes, a company that produces high quality cross-country bicycles. Better Bikes participates in a supply chain that consists of Suppliers, manufacturers, distributors, and elite bicycle shops. For several years Better Bikes has purchased titanium from suppliers in the supply chain. Better Bikes uses titanium for the bicycle frames because it is stronger and lighter than other metals and therefore increases the quality of the bicycle. Earlier this year, Better Bikes hired Samson, a recent graduate from StateUniversity, as purchasing manager. Michael believed that he could reduce costs if he purchased titanium from an online marketplace at a lower price. I Compute the direct materials price and efficiency variances. What factors can explain the variances identified In requirement 1? lEould any other variances be affected? Was switching suppliers a good idea for Better Bikes? Explain why or why not. Should Michael Samson's performance evaluation be based solely on pricevariances? Should the production manager's evaluation be based solely on efciency variances? Why is it important for Katharine Johnson to understand the causes of a variance before she evaluates performance? lDther than performance evaluation, what reasons are there for calculatingvariances? 6. What future problems could result from Better Bikes' decision to buy a lower quality of titanium from the online marketplace? i Data Table X Better Bikes established the following standards based upon the company's experience with their previous suppliers. The standards are as follows: Cost of titanium $ 23 per pound Titanium used per bicycle 8 lbs. Actual results for the first month using the online supplier of titanium are as follows: Bicycles produced 500 Titanium purchased 6,500 lb. for $143,000 Titanium used in production 5,000 lb. Requirement 1. Compute the direct materials price and efficiency variances. Let's begin by calculating the cost for the actual input at the budgeted price. Actual input Budgeted price Cost Direct materials (purchases) Direct materials (usage)E7-29 (similar to) Question Help The Chemung Corporation manufactures Lamps. It has set up the following standards per finished unit for Assume that there was no beginning inventory of either direct materials or finished units. During the month, direct materials and direct manufacturing labor: materials purchased amounted to 97,500 It, at a total cost of $148,500. Input price variances are isolated (Dick be icon in view the siandards ) upon purchase. Input-officiancy variances are isolated at the time of usage. The number of "nished units budgeted for January 2017 was 9,750; 9,650 units were actually produced. Read the mopurements (Click te kan to view icial dula) Let's begin by calculating the actual input at the budgeted price. [Round your answers to the nearest whole dollar.] Actual input Budgeted prion Cost Direct materials (purchases] 97 400 138 750 Direct material (usagel 05 500 429.750 Dared manufacturing isbor 4 800 30 00 138 090 Next determine the formula and calculate the ensis for the flexible budget Budgeted input for actual output Budgeted price " Fluxible budget poet Diroot materials 95 500 4.50 134.280 Direct manufacturing labor 4 825 30.00 144.750 Now can puts the price and efficiency verdances for direct materials and direct manufacturing labor. Label each variance as favorabie (F) or unfavorable (U). Price Dingof materials Direct manufacturing labor Direct materials: 10 lb. at $4.50 per lb. $ 45.00 Direct manufacturing labor: 0.5 hour at $30 per hour 15.00Actual results in January 201? were as follows: Direct materials: 95,500 lb. used Direct manufacturing labor: 4,600 hours $ 146,050 1. Compute the January 201? price and eiciency variances of direct materials and direct manufacturing labor. 2. Prepare journal entries to record the variances in requirement 1. 3. Comment on the January 201? price and efficiency variances of Chemung Corporation. 4. Whyr might Chemung calculate direct materials price variances and direct materials efficiency variances with reference to different points in time? The Seneca Corporation manufactures lamps. It has set up the following standards per finished unit for direct materials and direct manufacturing labor, (Click the icon to view the standards. ) The number of finished units budgeted for January 2014 was 9,910, 9,900 units were actually produced (Click the icon to view actual data ) Assume that there was no beginning inventory of either direct materials or finished units. During the month, materials purchases amounted to 99, 100 lb, at a of $515.320. Input price variances are isolated upon purchase. Input efficiency variances are isolated at the time of usage. Read the requirements. Requirement 1. Compute the January 2014 price and efficiency variances of direct materials and direct manufacturing labor. Let's begin by calculating the actual input at the budgeted price. (Round your answers to the nearest whole dollar ) Actual input X Budgeted price E Cost Direct materials (purchases) Direct materials (usage) Direct manufacturing labor Next determine the formula and calculate the costs for the flexible budget Flexible budget cost Direct materials Direct manufacturing labor Now compute the price and efficiency variances for direct materials and direct manufacturing labor. Label each variance as favorable (F) or unfavorable (U). Choose from any list or enter any number in the input fields and then continue to the next question.Data Tableh Direct materials: 10 lb. at $5.00 per lb $ 50.00 Direct manufacturing labor: 0.5 hour at $30 per hour 15.00 Print Done Actual results in January 2014 were as follows: Direct materials: 97,000 lb. used Direct manufacturing labor: 4,900 hours $ 154,3501. Some (More) Math Review a) Let N = 3. Expand out all the terms in this expression: Cov Xi b) Now write out all the terms using the formula from last class for variance of a sum: Var( X:) = _Var(X) + > > Cov(X, X;) i-1 1=1 i-lj=1ifi Verify that (a) and (b) are giving you the same thing. Hint: Cov(X, X) = Var(X). c) Suppose that D is a roulette wheel that takes on the values {1, 2, 3} all with probability 1/3. What is the expected value of this random variable? What about the variance? d) Now suppose that M is another roulette wheel that takes on the values {1, 2,3} all with probability 1/3. Solve for the expected value of 1/M. e) Finally, suppose that D and M are independent. Solve for: E Hint: You do not need to do any new calculations here. Just remember that for independent RVs, E(XY) = E(X)E(Y). f) Does E(D/M) = E(D)/ E(M)