1. On the Income Statement, which of the following would be classified as a variable cost?

• Direct Labor Expense
• R&D Expense
• Promotion Expense
• Depreciation Expense

2. Andrews Corp. ended the year carrying $64,289,000 worth of inventory. Had they sold their entire inventory at their current prices, how much more revenue would it have brought to Andrews Corp.?

• $113,060,000
• $64,289,000
• $27,587,000
• $156,022,800

3. Last year, Baldwin Corp paid their workers $26.81 per hour. How much will they be paying them 2 rounds from then?

• 29.56
• $28.15
• $31.04
• $28.29

4. It is January 2nd. Senior management of Digby meets to determine their investment plan for the year. They decide to fully fund a plant and equipment purchase by issuing 50,000 shares of stock plus a new bond issue. The CFO happily notes this will raise their Leverage (=assets/equity) to a new target of 2.7. Assume the stock can be issued at yesterday’s stock price ($41.17). Which of the following statements are true? Check all that apply.

• Digby will issue stock totaling $2,058,500
• Total investment for Digby will be $5,557,950
• The Digby bond issue will be $3,499,450
• The Digby Working Capital will be unchanged at $18,736
• Total Assets will rise to $233,420,000
• Long term debt will increase from $83,075,819 to $85,134,319

5. The statement of cash flows for Baldwin Company shows what happens in the Cash account during the year. It can be seen as a summary of the sources and uses of cash (sources of cash are added, uses of cash are subtracted). Please answer which of the following is true if Baldwin issues bonds:

• It is a use of cash, and will be shown in the investing section as a subtraction.
• It is a source of cash, and will be shown in the investing section as an addition.
• It is a use of cash, and will be shown in the financing section as a subtraction
• It is a source of cash and will be shown in the financing section as an addition.

6. This year Baldwin achieved an ROE of 26.1%. Suppose next year the profit margin (Net Income/Sales) decreases. Assuming sales, assets and financial leverage remain the same next year, what effect would you expect this action to have on Baldwin's ROE?

• Baldwin ROE will remain the same.
• Baldwin ROE will increase.
• Baldwin ROE will decrease.

7. Suppose the Baldwin company expands to other markets with good designs, high awareness and easy accessibility, what strategy would they be implementing?

• Road differentiation
• Broad cost leader
• Niche differentiation
• Niche cost leader

1. On the Income Statement, which of the following would be classif...