Suppose That Badger's 2011 Ending Inventory, Valued at Year-End Costs

question 55

Multiple Choice

Suppose that Badger's 2011 ending inventory, valued at year-end costs, was $153,600 and that the relative cost index for this inventory in 2011 was 1.20. What inventory balance would Badger report on its 12/31/11 balance sheet?

• A)$128,000
• B)$129,800
• C)$153,600
• D)None of these is correct $153,600/1.20 = $128,000.This includes the first two layers, the first at $100,000 and the second at $20,000, plus another at $8,000 from 2010.No additional layers are added in 2011 because the inventory in base year terms actually decreased in 2011.To get the 12/31/11 balance, the three layers are multiplied by their relative price indexes of 1.00, 1.05, and 1.10, respectively.

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Definitions:

Technological Change

Technological Change refers to advancements and innovations in technology, which can significantly impact productivity, economic growth, and the way society operates.

Labor Supply Curve

A graphical representation that shows the relationship between the quantity of labor supplied and the wage rate.

Technological Progress

The advancement in technology which increases production efficiency and productivity.

Wage Rate

The amount of compensation an individual receives per unit of time for their labor.