The reason for increased operating income is the deferral of fixed manufacturing overhead contained in unsold inventory (Chapter 9: Absorption/Variable Costing, n.d.). * One motivation for an undesirable buildup of inventories could be due to the fact that a manager’s bonus is based on absorption-costing operating income. * Top management, with help from the controller and management accountants, can take several steps to reduce the undesirable effects of absorption costing. * Focus on careful budgeting and inventory planning to reduce management’s freedom to build up excess inventory. * Incorporate a “carrying charge” for inventory in the internal accounting system.
So to be able to have a productive and successful business, business owners may want to look into maximizing their profits by way of the profit maximization concept. Profit maximization is when a company comes to a conclusion on the price and output level that will turn the maximum profit by using this particular process (Wikipedia). Granted there are many different approaches to this problem; however in this essay we will be considering the TR to TC method and the MR MC method. Tiffany C Wright expressed that the total revenue to total cost method is dependent on the fact that profit equals revenue minus cost. Total revenue equals price time’s quantity.
Evaluating Fiscal Policy Alternatives Simulation ECO 372 November 28, 2011 Matthew Angner A government has a couple of roles the need to enforce in order to ensure that their people and land will be able to support them through any times. One of these roles is to invoke and sustain economic growth. The government can achieve this by trying to manipulate the trends in that particular economy, though fiscal policy. Fiscal policy is changes that are made to government spending or taxes that leads to one of two conclusions. One of these conclusions is that the economy will stimulate because of the changes being made, or the economy will slow down.
All monetary policy factors work together in collaboration to achieve a balance between economic growth, low inflation, and a reasonable rate of unemployment. It is important to have a good balance between the different factors influencing monetary policy because if the money supply is either too “easy” or too “tight” there are undesirable effects on the economy. If the money supply is increased to eliminate or reduce inflation, and it is not done carefully, and gradually—the economy could suffer from increased unemployment and a recession may result. If the money supply is decreased to help the economy overcome a recession, and it is not done carefully and with gradually, it can result in economic inflation. Neither one of these are desired effects, so caution and careful consideration of possible monetary policy actions is necessary each time a decision is
Therefore, understanding exactly how monetary policies will affect the economy is extremely important. Monetary policies generally will raise or lower interest rates, which will ultimately affect individuals and business demand for goods and services. Unfortunately, many individuals do not understand the entire concept surrounding the Federal Reserve real interest rate. For example, any magnitude of decreasing the real rates will lower the cost of borrowing; this will increase investment spending, and influence individuals to buy durable goods. These items may consist of automotive, recreational vehicle, homes, and higher educational opportunities.
The basic ideas of the monetary policy and economic stabilization policy were foreign at the time, dating only from John Maynard Keynes' work in 1936 (Keynes, 2011). These rates influence financial conditions in the household and the ability to secure and spend more money. Short-term rates alter borrowing costs for firms, households, and the spending circulation cycle is affected. Movements in short-term directly affect long-term notes such as bonds and mortgages. These factors indicate current and future values of the short-term rates, therefore it creates issue with future long-term rates.
The bottom line for GDP is that it is a tool used to see how whether a particular economy is doing poorly or well. There are two types of GDP; Real GDP and Nominal GDP. Both still measure the value of goods and services, but the difference is that in Real GDP, the effects of price changes are excluded (Rittenberg, et al, 2009). Basically, Real GDP is adjusted to account for inflation. There are some limitations in using Real GDP.
: A. making short-run decisions to increase profits that are not in the company's best long-run interests B. creating budgetary slack C. decreasing profits when actual profits are significantly exceeding the profit target D. all of these answers are correct Question 7 An example of a favorable variance is _____. A. actual revenues are less than expected B. actual expenses are less than expected C. material prices are greater than expected D. expected labor costs are less than actual costs Question 8 Differences between the static budget and the flexible budget are due to _____. A. problems of cost control B. poor usage of material and labor C. a combination of price and material variances D. actual activity differing from expected activity levels Question 9 The type of budget that serves as the original benchmark for evaluating performance is called a _____ budget. A. balanced B. cost C. flexible D. static Question 10 Activity-level variances plus flexible-budget variances
In contrast, Supply side economists believe that unemployment is caused by the supply side of the economy not functioning properly. Extract E states how the recent strong performance of our labour market has “to some extent, been based on a foundation of macro economic stability“. This macroeconomic stability has been reached by using “appropriate fiscal and monetary policies to manage aggregate demand“. The fall in unemployment from 7.1% to 4.7% from 1997 to 2006 shown in Extract D is therefore evidence that managing aggregate demand can contribute to an effective reduction in unemployment. Managing aggregate demand(eg) can be self-financing because when the increase in aggregate demand causes an increase in employment, it means that fewer people would be on unemployment benefits.