Managerial Accounting/Economics

1. A. (Exercise 6-13 – Revised) Select one of the following quotes from the text to discuss. Clearly state whether you either agree or disagree with the comment and support your opinion with at least one scholarly resource. Include in your response an explanation of the major purposes of budgeting. Your initial post should be (250 words.)

  • “One major criticism of budgeting is that it is used as a ‘cost reduction’ tool rather than a ‘cost control’ tool. The objective of the budget is to control costs at an efficient level of operation.”
  • “There are generally three benefits from allowing employees to participate in developing the budget: (1) Employees tend to accept the budget as their own plan of action. (2) Participation tends to increase morale among employees and toward management. (3) Employee cohesiveness is increased, and productivity will also increase if dictated by the group norm.”
  • “Even though budgets are quantitative tools, considerable emotion is connected to budgeting. The individual in control often sees the budget as a means of getting things done. People being controlled often have feelings of anxiety because their success and promotion are tied directly to the budget.”

1.B Using Chapter 7 of your text as a reference, define a standard cost and explain what constitutes the components of a standard cost. Describe the advantages and disadvantages of a standard cost system and explain under what circumstances a standard cost system is most effective. Your initial post should be (250 words)

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2,A What is the marginal rate of substitution (MRS) and why does it diminish as the consumer substitutes one product for another? Use examples to illustrate.

Guided Response: In (350 words) or more, please, provide your response to the above discussion question. Find two goods from your own consumption basket and explain how the MRS changes for the two products as you substitute one for the other. Respond substantively to at least two of your classmates’ postings. Substantive responses use theory, research, and experience or examples to support ideas and further the class knowledge on the discussion topic.

2.B Please, read the article Hainer, R. (2010), provided in the required readings section for this week. The tobacco industry is a prime example to consider when talking about price elasticity of demand. While nicotine use can be addictive for many users, it is not addictive for the so-called “social smokers”.

What can we say about the price elasticity of demand for nicotine products (such as cigarettes, pipes, tobacco) in the group of nicotine addicted users, versus the group of “social smokers”? Can we say whose demand is likely to be more elastic? Why? (300 Words)

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