Suppose years of schooling, s, is the only variable that affects earnings. The equations for the weekly salaries of male and female workers are given by w m = 500 + 100s and w f = 300 + 75s On average, men have 14 years of schooling and women have 12 years of schooling. a. What is the male–female wage differential in the labor market? b. Using the Oaxaca decomposition, calculate how much of this wage differential is due to discrimination?
> Tadpole Learning Systems Inc. was organized on February 28. Projected selling and administrative expenses for each of the first three months of operations are as follows: March ……………………… $ 120,000 April ………………………… 140, 000 May ………………….……… 160, 000 Depr
> Innovative Office Inc. has “cash and carry” customers and credit customers. Innovative Office estimates that 30% of monthly sales are to cash customers, while the remaining sales are to credit customers. Of the credit customers, 75% pay their accounts in
> Pet Stop Inc., a pet wholesale supplier, was organized on May 1. Projected sales for each of the first three months of operations are as follows: May ………………………. $ 1,200,000 June ………………………… 1,800,000 July …………………………. 2,200,000 All sales are on account. Of
> The controller of Pueblo Ceramics Inc. wishes to prepare a cost of goods sold budget for April. The controller assembled the following information for constructing the cost of goods sold budget: Use the preceding information to prepare a cost of good
> Nutty Candy Company budgeted the following costs for anticipated production for August: Prepare a factory overhead cost budget, separating variable and fixed costs. Assume that factory insurance and depreciation are the only factory fixed costs. Pr
> Levi Strauss & Co. manufactures slacks and jeans under a variety of brand names, such as Dockers® and 501 Jeans®. Slacks and jeans are assembled by a variety of different sewing operations. Assume that the sales budget for Docke
> a. Matzinger Company budgets sales of $10,400,000, fixed costs of $1,100,000, and variable costs of $6,656,000. What is the contribution margin ratio for Matzinger Company? b. If the contribution margin ratio for Raynor Company is 41%, sales are $6,200,0
> Miss River Railroad decided to use the high-low method and operating data from the past six months to estimate the fixed and variable components of transportation costs. The activity base used by Miss River Railroad is a measure of railroa
> Liberty Inc. has decided to use the high-low method to estimate costs. The data for various levels of production are as follows: Units Produced Total Costs 100,000 $ 1,800,000 180,000 2,800,000 300,000 4,300,000 a. Deter
> SunRise Inc. and SunSet Inc. have the following operating data: a. Compute the operating leverage for SunRise Inc. and SunSet Inc. b. How much would operating income increase for each company if the sales of each increased by 25%? c. Why is there a dif
> A manager of Coastal Sporting Goods Company is considering accepting an order from an overseas customer. This customer has requested an order for 50,000 dozen golf balls at a price of $12 per dozen. The variable cost to manufacture a dozen golf balls is
> Yellow Dove Airways provides air transportation services between Portland and Minneapolis. A single Portland to Minneapolis round-trip flight has the following operating statistics: Fuel and landing fees ……………………………………………………………………… $19,400 Flight crew sa
> Northwest Technology Inc. manufactures and sells two products, digital game players and computer tablets. The fixed costs are $936,000, and the sales mix is 70% game players and 30% computer tablets. The unit selling price and the unit var
> Using the data for Cabinet Inc. in Exercise 11-16, (a) determine the maximum possible operating loss, (b) compute the maximum possible operating income, (c) construct a profit volume graph, and (d) estimate the break-even sales (units) by using the profit-
> For the coming year, Cabinet Inc. anticipates fixed costs of $60,000, a unit variable cost of $70, and a unit selling price of $100. The maximum sales within the relevant range are $500,000. a. Construct a cost-volume-profit graph. b. Estimate the break-e
> Media outlets such as ESPN and Fox Sports often have Web sites that provide in-depth coverage of news and events. Portions of these Web sites are restricted to members who pay a monthly subscription to gain access to exclusive news and commentary. These
> The Garden Club of Palm Springs, California, collected recipes from members and published a cookbook entitled Desert Dishes. The book will sell for $40 per copy. The chairperson of the cookbook development committee estimated that the club needed to sell
> Molson-Coors Brewing Company (TAP) reported the following operating information for a recent year (in millions): Sales …………………………………………………………………………………. $3,568 Cost of goods sold ……………………………………………………………. (2,164) Gross profit ……………………………………………………………………… $
> Umbrella Insurance Company carries three major lines of insurance: auto, workers’ compensation, and homeowners. The company has prepared the following report for 20Y2: Management is concerned that the administrative expenses may make
> Deer Lodge Regional Hospital plans to use activity-based costing to assign hospital indirect costs to the care of patients. The hospital has identified the following activities and activity rates for the hospital indirect costs: The reco
> Jupiter Shirt Company manufactures various styles of men’s casual wear. Shirts are cut and assembled by a workforce that is paid by piece rate. This means that workers are paid according to the amount of work completed during a period of time. To illustr
> Break-even analysis is one of the most fundamental tools for managing any kind of business unit. Consider the management of your school. In a group, brainstorm some applications of break-even analysis at your school. Identify three areas where break-even
> The American textile industry has moved much of its operations offshore in the pursuit of lower labor costs. Over the past 50 years, textile imports have risen from 2% of all textile production to over 70%. Offshore manufacturers make long runs of standa
> The chief executive officer (CEO) of Kankakee Industries has just returned from a management seminar describing the benefits of the just-in-time philosophy. The CEO issued the following statement after returning from the conference: This company will beco
> Media Connect Inc. provides advertising services for clients across the nation. Media Connect is presently working on four projects, each for a different client. Media Connect accumulates costs for each account (client) on the basis of both direct costs
> The following events took place for Bridger Bikes Inc. during July 20Y6, the first month of operations, as a producer of road bikes: ▪ Purchased $340,000 of materials. ▪ Used $329,000 of direct materials in production. ▪ Incurred $160,000 of direct labor
> Wagner Printing Inc. began printing operations on July 1. Jobs 7-01 and 7-02 were completed during the month, and all costs applicable to them were recorded on the related cost sheets. Jobs 7-03 and 7-04 are still in process at the end of the month, and
> The following account appears in the ledger after all postings have been completed except for the entries to transfer the costs of the jobs completed in October. Work in Process Balance, October 1 ……â€
> Mt Ellis Medical Center has a single operating room that is used by local physicians to perform surgical procedures. The cost of using the operating room is accumulated by each patient procedure and includes the direct materials costs (drugs and medical
> Novus Engine Shop uses a job order cost system to determine the cost of performing engine repair work. Estimated costs and expenses for the coming period are as follows: Engine parts ………………………………………………………………………… $1,257,500 Shop direct labor …………………………………
> Prostheses Industries operates two factories. The manufacturing operations of Factory 1 are machine intensive, while the manufacturing operations of Factory 2 are labor intensive. The company applies factory overhead to jobs on the basis of machine hours
> Chamlee Industries Inc. manufactures recreational vehicles. Chamlee Industries uses a job order cost system. The time tickets from May jobs are summarized below. Job 5-100 ………………………………. $6,400 Job 5-101 …………………………………. 3,900 Job 5-102 …………………………………. 4,800
> Sales volume has been dropping at Pinnacle Publishing Company. During this time, however, the Shipping Department manager has been under severe financial constraints. The manager knows that most of the Shipping Department’
> The weekly time tickets indicate the following distribution of labor hours for three direct labor employees: The direct labor rate earned by the three employees is as follows: Leavitt ………&acir
> For a recent year, McDonald’s (MCD) company-owned restaurants had the following sales and expenses (in millions): Assume that the variable costs consist of food and packaging, payroll, and 45% of the general, selling, and administrati
> Big Timber Furniture Company manufactures furniture. Big Timber Furniture uses a job order cost system. Balances on June 1 from the materials ledger are as follows: The materials purchased during June are summarized from the receiving reports as follow
> Materials issued for the current month are as follows: a. Determine the amount of materials transferred to Work in Process and Factory Overhead for the current month. b. Illustrate the effect on the accounts and financial statements of the materials tr
> An incomplete subsidiary ledger of wire cable for July is as follows: a. Complete the materials issuances and balances for the wire cable subsidiary ledger. Assume a first-in, first-out cost flow. b. Determine the balance of wire cable at the end of Ju
> The following information is available for the first month of operations of Lane Inc., a manufacturer of art and craft items: Using the above information, determine the following: a. Cost of goods sold b. Direct materials cost c. Direct
> Third World Gamer Inc. manufactures components for computer games within a relevant range of 500,000 to 1,000,000 disks per year. Within this range, the following partially completed manufacturing cost schedule has been prepared: Complete the cost sche
> Intuit Inc. (INTU) develops and sells software products for the personal finance market, including popular titles such as Quicken® and TurboTax®. Classify each of the following costs and expenses for this company as either variable or fixed to the number o
> For apparel manufacturer Ann Taylor, Inc., classify each of the following costs as either a product cost or a period cost: a. Advertising expenses b. Corporate controller’s salary c. Depreciation on office equipment d. Depreciation on sewing machines e.
> Steelcase Inc. is one of the largest manufacturers of office furniture in the United States. In Grand Rapids, Michigan, it produces filing cabinets in two departments: Fabrication and Assembly. Assume the following information for the Assembly Department:
> The owner of Dawg Prints, a printing company, is planning direct labor needs for the upcoming year. The owner has provided you with the following information for next year’s plans Each color on the banner must be printed one at a time
> Ebenezer Manufacturing Company allows employees to purchase, at cost, manufacturing materials, such as metal and lumber, for personal use. To purchase materials for personal use, an employee must complete a materials requisition form, which must then be
> Each employer faces competitive weekly wages of $2,000 for whites and $1,400 for blacks. Suppose employers undervalue the efforts/skills of blacks in the production process. In particular, every firm is associated with a discrimination coefficient, d (0
> Use Table 220 of the 2008 U.S. Statistical Abstract to do the following. Conditioned on educational attainment (not a high school graduate, high school graduate, bachelor’s degree, master’s degree, and doctorate degree), how much did the average female w
> Cindy, a tenured, full professor of French literature at a large university, is paid $60,000. The university reports median salaries by gender and rank as a new initiative on faculty compensation. From reading the report, Cindy learns that she is paid $2
> Suppose the firm’s production function is given by where E w and E b are the number of whites and blacks employed by the firm respectively. It can be shown that the marginal product of labor is then Suppose the market wage for black wor
> In 1960, the proportion of blacks in southern states was higher than the proportion of blacks in northern states. The black–white wage ratio in southern states was also much lower than in northern states. Does the difference in the relative black–white w
> Suppose a restaurant hires only women to wait on tables, and only men to cook the food and clean the dishes. Is this most likely to be indicative of employer, employee, consumer, or statistical discrimination?
> Suppose black and white workers are complements in that the marginal product of whites increases when more blacks are hired. Suppose also that white workers do not like working alongside black workers. Under what conditions will this employee discriminat
> In 2006, Evo Morales assumed the presidency in Bolivia, a South American country in which official commerce is done in Spanish. Morales was the first Bolivian president of indigenous decent. As president, he quickly instituted reforms that were designed
> Consider a data set with the following descriptive statistics. Wage is the worker’s hourly wage; Black takes on a value of 1 if the worker is black and a value of 0 otherwise; work experience is actual years of work experience; school
> Suppose the discrimination coefficient increases as the firm employs more black workers. In particular, suppose the discrimination coefficient is d = 0.01 E B where E B is the number of blacks hired by the firm so that each employer facing competitive wa
> Suppose 100 men and 100 women graduate from high school. After high school, each can work in a low-skill job and earn $200,000 over his or her lifetime, or each can pay $50,000 and go to college. College graduates are given a test. If someone passes the
> Consider a town with a population that is 10 percent black (and the remainder is white). Because blacks are more likely to work the night shifts, 20 percent of all cars driven at night are driven by blacks. One out of every 20 people driving at night is
> After controlling for age and education, it is found that the average woman earns $0.80 for every $1.00 earned by the average man. After controlling for occupation to control for compensating differentials (that is, maybe men accept riskier or more stres
> Feeling that local firms follow discriminatory hiring practices, a nonprofit firm conducts the following experiment. It has 200 white individuals and 200 black individuals, all of whom are similar in age, experience, and education, apply for local retail
> Under 2001 tax legislation enacted in the United States, all income tax filers became eligible to deduct from their total income half of the expenses incurred when moving more than 50 miles to accept a new job. Prior to the change, only tax filers who it
> In addition to it being illegal to enter the U.S. without a visa or to over-stay one’s visa, it is also illegal for U.S. employers to hire undocumented or “illegal” immigrants. Meanwhile, federal U.S. enforcement of immigration laws tends to concentrate
> There are two reasons why the immigration surplus is greater when immigration is accompanied by human capital externalities compared to when there are no human capital externalities associated with immigration. Both reasons are evident in Figure 8-12. Th
> In the absence of any legal barriers on immigration from Neolandia to the United States, the economic conditions in the two countries generate an immigrant flow that is negatively selected. In response, the United States enacts an immigration policy that
> Suppose the United States enacts legislation granting all workers, including newly arrived immigrants, a minimum income floor of ̲̲ y dollars. (Assume there is positive selection of migrants from the home country to the United States before the policy ch
> Labor demand for low-skilled workers in the United States is w = 24 - 0.1E where E is the number of workers (in millions) and w is the hourly wage. There are 120 million domestic U.S. low-skilled workers who supply labor inelastically. If the U.S. opened
> Patrick and Rachel live in Seattle. Patrick’s net present value of lifetime earnings in Seattle is $125,000, while Rachel’s is $500,000. The cost of moving to Atlanta is $25,000 per person. In Atlanta, Patrick’s net present value of lifetime earnings wou
> Suppose high-wage workers are more likely than low-wage workers to move to a new state for a better job. a. Explain how this migration pattern can be due solely to differences in the distribution of wages. b. Explain how this migration pattern can take p
> Consider the Roy model of potential immigrant flows as discussed in the chapter. a. Why is it that a source country can experience both an outflow of low-skill workers and an outflow of high-skill workers at the same time? b. Provide a graph of the retur
> KAPC, a pharmaceutical company located in rural Kansas, is finding it difficult to retain its employees, who frequently leave after just six months of working at KAPC for jobs at pharmaceutical companies paying higher wages in Chicago. To address its pro
> The Immigration Reform Act of 2006 provided fewer work visas than were available in previous years for foreign-born college graduates to remain in the United States. The exception is that work visas remained plentiful for college graduates who majored in
> a. Explain how a universal health care system would likely cause a greater amount of efficient turnover. b. Defined-benefit retirement plans promise a fixed amount of retirement income to workers, but in order to receive benefits workers must be vested i
> a. According to standard migration theory, how will skill selection (positive versus negative) change on average as the distance between the source country and the destination country increases? b. Does Table 8-2 lend empirical support for the idea that
> Suppose the immigrant flow from Lowland to Highland is positively selected. In order to mitigate the “brain drain” Lowland experiences as a result of this migration, public officials of Lowland successfully convince all Lowlanders who migrate to Highland
> Suppose a worker with an annual discount rate of 10 percent currently resides in Pennsylvania and is deciding whether to remain there or to move to Illinois. There are three work periods left in the life cycle. If the worker remains in Pennsylvania, he w
> Before 1990, the 80-50 and the 50-20 log wage gap was higher for women than for men (see Figure 7-4). What are some likely reasons for this? Reference Figure 7-4: FIGURE 7-4 Earnings Inequality, 1937–2005 Wojciech Kopczuk, Emmanuel Saez, and Jae Son
> Consider the following (highly) simplified description of the U.S. wage distribution and income and payroll tax schedule. Suppose 50 percent of households earn $40,000, 30 percent earn $70,000, 15 percent earn $120,000, and 5 percent earn $500,000. Margi
> The two points for the international income distributions reported in Table 7-1 can be used to make a rough calculation of the Gini coefficient. Use a spreadsheet to estimate the Gini coefficient for each country. Which three countries have the most equa
> Recently President Obama has tried to focus public attention on inequality. a. What is the difference between income inequality and wealth inequality? b. Most policies that target inequality either target it at the low end of the income distribution by t
> Use the two wage ratios for each country in Table 7-4 to calculate the percent increase in the 90-10 wage ratio from 1984 to 1994. Which countries experienced a compression in the wage distribution over this time? Which three countries experienced the gr
> a. Is the presence of an underground economy likely to result in a Gini coefficient that overstates or understates poverty? b. Consider a simple economy where 90 percent of citizens report an annual income of $10,000 while the remaining 10 percent report
> From 1970 to 2000, the supply of college graduates to the labor market increased dramatically, while the supply of high school (no college) graduates shrank. At the same time, the average real wage of college graduates stayed relatively stable, while the
> What effect will each of the following proposed changes have on wage inequality? a. Indexing the minimum wage to inflation. b. Increasing the benefit level paid to welfare recipients. c. Increasing wage subsidies paid to firms that hire low-skill workers
> Explain why the intergenerational correlation of earnings would likely be higher or lower than average for the following groups or as a consequence of policy changes in the United States: a. Improved educational outcomes for all populations (for example,
> File-sharing software threatens the music industry in part because artists will not be fully compensated for their recordings of songs. Suppose that the government decides that file-sharing software products are legal anyway. a. The almost immediate resu
> Consider two developing countries. Country A, though quite poor, uses government resources and international aid to provide public access to quality education. Country B, though also quite poor, is unable to provide quality education for institutional re
> Suppose the bottom 50 percent of a population (in terms of earnings) all receive an equal share of p percent of the nation’s income, where 0 ≤ p ≤ 50. The top 50 percent of the population all receive an equal share of 1 - p percent of the nation’s income
> Suppose two households earn $40,000 and $56,000, respectively. What is the expected percent difference in wages among the children, grandchildren, and great grand-children of the two households if the intergenerational correlation of earnings is 0.2, 0.4
> Ms. Aura is a psychic. The demand for her services is given by Q = 2,000 - 10 P, where Q is the number of one-hour sessions per year and P is the price of each session. Her marginal revenue is MR = 200 - 0.2 Q. Ms. Aura’s operation has no fixed costs, bu
> Evaluate the validity of the following claim: The increasing wage gap between highly educated and less-educated workers will itself generate shifts in the U.S. labor market over the next decade. As a result of these responses, much of the “excess” gain c
> Some economists maintain that the returns to additional years of education is actually quite small but that there is a substantial “sheepskin” effect whereby one receives a higher salary with the successful completion
> Suppose there are two types of persons: high-ability and low-ability. A particular diploma costs a high-ability person $8,000 and costs a low-ability person $20,000. Firms wish to use education as a screening device where they intend to pay $25,000 to wo
> Suppose people with 15 years of schooling average earnings of $60,000 while people with 16 years of education average $66,000. a. What is the annual rate of return associated with the 16th year of education? b. It is typically thought that this type of c
> Suppose Carl’s wage-schooling locus is given by Years of Schooling………….Earnings 9…………………………………..$18,500 10………………………………….$20,350 11….………………………………$22,000 12…………………………………$23,100 13………………………………..$23,900 14………………………………..$24,000 Derive the marginal rate of r
> a. Describe the basic self-selection issue involved whenever discussing the returns to education. b. Does the fact that some high school or college dropouts go on to earn vast amounts of money (for example, Bill Gates dropped out of Harvard without ever
> Suppose the skills acquired in school depreciate over time, perhaps because technological change makes the things learned in school obsolete. What happens to a worker’s optimal amount of schooling if the rate of depreciation increases?
> Jane has three years of college, Pam has two, and Mary has one. Jane earns $21 per hour, Pam earns $19, and Mary earns $16. The difference in educational attainment is due completely too different discount rates. How much can the available information re
> Peter lives for three periods. He is currently considering three alternative educationwork options. He can start working immediately, earning $100,000 in period 1, $110,000 in period 2 (as his work experience leads to higher productivity), and $90,000 in
> Suppose the decision to acquire schooling depends on three factors—preferences (joy of learning), costs (monetary and psychic), and individual-specific returns to education. a. Explain how each of these factors affects one’s optimal amount of schooling.
> A high school graduate has to decide between working and going to college. If he works, he will work for the next 50 years of his life. If he goes to college, he will be in college for 5 years, and then work for 45 years. In this model, the rate of disco
> a. Draw the wage-schooling locus for someone for whom the returns to schooling decrease through college but increase after college. (Assume college is completed after 16 years of schooling and that one can receive at most 6 years of post-college schoolin
