Chateau Beaune is a family-owned winery located in the Burgundy region of France

Simple rate of return; payback; internal rate of return

Chateau Beaune is a family-owned winery located in the Burgundy region of France, which is headed by Gerard Despinoy. The harvesting season in early fall is the busiest part of the year for the winery, and many part-time workers are hired to help pick and process grapes. Mr. Despinoy is investigating the purchase of a harvesting machine that would significantly reduce the amount of labor required in the picking process. The harvesting machine is built to straddle grapevines, which are laid out in low-lying rows. Two workers are carried on the machine just above ground level, one on each side of the vine. As the machine slowly crawls through the vineyard, the worker cut bunches of grapes from the vines, which then fall into a hopper. The machine separates the grapes from the stems and other woody debris. The debris are then pulverized and spread behind the machine as a rich ground mulch. Mr. Despinoy has gathered the following information relating to the decision of whether to purchase the machine:

a. The winery would save €190,000 per year in labor costs with the new harvesting machine. In addition, the company would no longer have to purchase and spread ground mulch-at an annual savings of €10,000. (The French currency is the euro, which is denoted by the symbol €.)

b. The harvesting machine would cost €480,000. It would have an estimated 12-year useful life and zero salvage value. The winery uses straight-line depreciation.

c. Annual out-of-pocket costs associated with the harvesting machine would be insurance, €1,000; fuel, €9,000; and a maintenance contract, €12,000. In addition, two operators would be hired and trained for the machine, and they would be paid a total of €70,000 per year, including all benefits.

d. Mr. Despinoy feels that the investment in the harvesting machine should earn at least a 16% rate of return.



1. Determine the annual net savings in cash operating costs that would be realized if the harvesting machine were purchased.

2. Compute the simple rate of return expected from the harvesting machine.

3. Compute the payback period on the harvesting machine. Mr. Despinoy will not purchase equipment unless it has a payback period of five years or less. Under the criterion, should the harvesting machine be purchased?

4. Compute (to the nearest whole percent) the internal rate of return promised by the harvesting machine. Based on this computation, does it appear that the simple rate of return is an accurate guide in investment decisions?
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Nagoya Amusements Corporation places electronic games and other

Simple rate of return; payback


Nagoya Amusements Corporation places electronic games and other amusement devices in super markets and similar outlets throughout Japan. Nagoya Amusements is investing the purchase of a new electronic game called Mystic Invaders. The manufacturer will sell 20 games to Nagoya Amusements for a total price of ¥180,000. (The Japanese currency is the yen, which is denoted by the symbol ¥.) Nagoya Amusements has determined the following additional information about the game:


a. The game would have a five-year useful life and a negligible salvage value. The company uses straight-line depreciation.


b. The game would replace other games that are unpopular and generating little revenue. These other games would be sold for a total ¥30,000.


c. Nagoya Amusement estimates that Mystic Invaders would generate annual incremented revenues of ¥ 200,000 (total for all 20 games). Annual incremented out-of-pocket costs would be (in total): maintenance, ¥ 50,000; and insurance, ¥ 10,000. In addition, Nagoya Amusements would have to pay a commission of 40% of total revenues to the supermarkets and other outlets in which the games were placed.






1. Prepare a contribution format income statement showing the net operating income each year from Mystic Invaders.

2. Compute the simple rate of return on Mystic Invaders. Will the game be purchased if Nagoya Amusements accept any project with a simple rate of return greater than 14%?

3. Compute the payback period on Mystic Invaders. If the company accepts any investment with a payback period of less than three years, will the game be purchased?
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Problems 7-27 The Brandilyn Toy Company manufactures a line

7-27 Utilization of a Constrained Resource
The Brandilyn Toy Company manufactures a line of dolls and a doll dress sewing kit. Demand for the dolls increasing, and management requests assistance from you in determining the best sales and production mix for the coming year. The company has provided the data:
Product           Demand next year       Selling price       Direct Materials      Direct Labor
                         Per Unit                         Per Unit 
Marcy              26,000                            $35.00                $3.50                        $4.80
Tina                  42,000                            $24.00                $2.30                        $3.00
Carl                   40,000                           $22.00                 $4.50                        $6.40 
Lenny               46,000                            $18.00                $3.10                        $6.00      
Sewing kit     450,000                            $14.00                $1.50                        $2.40 
The following additional information is available:
a. The company’s plant has a capacity of 150,000 direct labor-hours per year on a single-shift basis. The company’s present employees and equipment can produce all five products.
b. The direct labor rate of $12.00 per hour is expected to remain unchanged during the coming year.
c. Fixed costs total $356,000 per year. Variable overhead costs are $4.00 per direct labor-hour
d. All of the company’s nonmanufacturing costs are fixed.
e. The company’s finished goods inventory is negligible and can be ignored.
1. Determine the contribution margin per direct labor-hour expended on each product.
2. Prepare a schedule showing the total direct labor-hours that will be required to produce the units estimated to be sold during the coming year.
3. Examine the data you have computed in (1) and (2) above. How would you allocate the 150,000 direct labor-hours of capacity to Brandilyn Tom Company’s various products?
4. What is the highest price, in terms of rate per hour, that Brandilyn Toy Company should be willing to pay for additional capacity (that is, for added direct labor time)?
5. Identify ways in which the company might be able to obtain additional output so that it would not have to leave some demand for its products unsatisfied.
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Bronson Company manufactures a variety of ballpoint pens

Make or Buy Decision

Bronson Company manufactures a variety of ballpoint pens. The company has just received an offer from an outside supplier to provide the ink cartridge for the company’s Zippo pen line, at a price of $0.48 per dozen cartridges. The company is interested in this offer because its own production of cartridges is at capacity.
Bronson Company estimates that if the supplier’s offer were accepted, the direct labor and variable manufacturing overhead costs of the Zippo pen line would be reduced by 10% and the direct materials cost would be reduced by 20%.
Under present operations, Bronson Company manufactures all of its own pens from start to finish. The Zippo pens are sold through wholesalers at $4 per box. Each box contains one dozen pens. Fixed manufacturing overhead costs charged to the Zippo pen line total $50,000 each year. (The same equipment and facilities are used to produce several pen lines.) The present cost of producing one dozen Zippo pens (one box) is given below:
Direct materials                                                               $1.50
Direct labor                                                                         1.00
Manufacturing overhead                                                  0.80*
Total cost                                                                           $3.30
*Includes both variable and fixed manufacturing overhead, based on production of 100,000 boxes of pens each year.
1. Should Bronson Company accept the outside supplier’s offer? Show computations.
2. What is the maximum price that Bronson Company should be willing to pay the outside supplier per dozen cartridges? Explain.
3. Due to the bankruptcy of a competitor, Bronson Company expects to sell 150,000 boxes of produce the cartridges for only 100,000 boxes of Zippo pens annually. By incurring $30,000 in added fixed cost each year, the company could expand its production of cartridges to satisfy the anticipated demand for Zippo pens. The variable cost per unit to produce the additional cartridges would be the same as at present. Under these circumstances, how many boxes of cartridges should be purchased from the outside supplier and how many should be made by Bronson? Show computations to support your answer.
4. What qualitative factors should Bronson Company consider in determining whether it should make or buy the ink cartridges?
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7-20 Hallas Company manufactures fast-bonding glue in its Northwest plant

Shutting Down or Continuing to Operate a Plant – Hallas Company

Hallas Company manufactures fast-bonding glue in its Northwest plant. The company normally produces and sells 40,000 gallons of the glue each month. This glue, which is known as MJ-7, is used in the wood industry to manufacture plywood. The selling price of MJ-7 is $35 per gallon, variable costs are $21 per gallon, fixed manufacturing overhead costs in the plant total $230,000 per month, and the fixed selling costs total $310,000 per month.

Strikes in the mills that purchase the bulk of the MJ-7 glue have caused Hallas Company’s sales to temporarily drop to only 11,000 gallons per month. Hallas Company’s management estimates that the strike will last for two months, after which sales of MJ-7 should return to normal. Due to the current low level of sales, Hallas Company’s management is thinking about closing down the Northwest plant during the strike.

If Hallas Company does close down the Northwest plant, fixed manufacturing overhead costs can be reduced by $60,000 per month and fixed selling costs can be reduced by 10%. Start-up costs at the end of the shutdown period would total $14,000. Because Hallas Company uses lean production methods, no inventories are on hand.


1.      Assuming that the strikes continue for two months, would you recommend that Hallas Company close the Northwest plant? Explain. Show computations to support your answer.

2.      At what level of sales (in gallons) for the two-month period should Hallas Company be indifferent between closing the plant or keeping it open? Show computations.


Hint: This is a type of break-even analysis, except that the fixed cost portion of your break-even computation should include only those fixed costs that are relevant (i.e. avoidable) over the two-month period.

Here’s the SOLUTION

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Abilene Meat Processing Corporation is a major processor of beef and other meat products

Sell or Process Further


Abilene Meat Processing Corporation is a major processor of beef and other meat products. The company has a large amount of T-bone steaks as is or to process them further into filet mignon and New York cut steaks.


 Management believes that a 1-pound T-bone steak would yield the following profit:


Wholesale selling price ($2.25 per pound)                               $2.25


 Less joint costs incurred up to the split-off point where


 T-bone steak can be identified as a separate product             1.70


 Profit per pound                                                                            $0.55


As mentioned above, instead of being sold as is, the T-bone steaks could be further processed into filet mignon and New York cut steaks. Cutting one side of a T-bone steak provides the filet mignon, and cutting the other side provides the New York cut. One 16-ounce T-bone steak cut in this way will yield one 6-ounce filet mignon and one 8-ounce New York cut; the remaining ounces are waste. The cost of processing the T-bone steaks into these cuts can be sold wholesale for $.20 per pound. The filet mignon can be sold for $3.60 per pound, and the New York cut can be sold wholesale $2.90 per pound.


 1. Determine the profit per pound from processing the T-bone steaks further into filet mignon and New York cut steaks.



2. Would you recommend that the T-bone steaks be sold as is or processed further? Why?
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Devry BUSN319 Final Exam (A+ Guaranteed)

Devry BUSN319 Final Exam

Question 1. (TCO 4) Three commonly used methods of evaluating marketing programs are marketing metrics, marketing dashboards, and (Points : 5)

marginal analysis.
marketing audits.
marketing ROI.
marginal analysis.
marketing control boards.

Question 2. (TCO 1) Ideally in effective marketing planning, goals should be _____ in terms of what is to be accomplished and when. (Points : 5)

loose and vague
as general as possible
flexible or elastic
quantified and measurable
None of the above

Question 3. (TCO 3) Which marketing strategy focuses on a single market segment but adds additional product lines? (Points : 5)

Full coverage
Market specialization
Product specialization
Selective specialization
Market-product concentration

Question 4. (TCO 1) Based on relative competitive scope (broad target to narrow target) and source of competitive advantage (lower cost to differentiation), Porter’s four generic business strategies are differentiation, cost focus, differentiation focus, and (Points : 5)

quality focus.
cost leadership.
service leadership.

Question 5. (TCO 1) Step 3 in the planning phase of the strategic marketing process is (Points : 5)

the situation analysis.
the market-product focus and goal setting.
the marketing program.
obtaining resources.

Question 6. (TCO 1) The consumer products industry is one with several large competitors, soaring raw materials prices, and strong demands from powerful retailers for lower prices. As a result, Colgate-Palmolive Co. and Unilever Group, the makers of products such as Colgate toothpaste and Ben & Jerry’s ice cream, both reduced their earnings forecasts. Yet Procter & Gamble, another consumer products company, did not. At P & G, innovation is a key attribute, allowing the company to update all 200 of its brands and to invent products, such as Crest Whitestrips, that consumers crave. P & G has also used its marketing know-how to develop unique product placements on television shows that highlight its brands. A SWOT analysis of this information for P & G would indicate that the overall industry situation is a _____, whereas the invention taking place at P & G is a _____. (Points : 5)

strength; weakness
weakness; threat
threat; strength
opportunity; threat
opportunity; strength

Question 7. (TCO 3) All of the following steps are part of the planning process used to develop an organization’s advertising program, except (Points : 5)

identify the target audience.
specify the advertising objectives.
write the advertising copy.
calculate the marketing ROI.
schedule the advertising program.

Question 8. (TCO 2) The proper blend of elements in the promotional mix depends on the type of product. The three specific characteristics to be considered are complexity, _____, and ancillary services. (Points : 5)


Question 9. (TCO 4) At which stage in the product life cycle would your promotional objective be to persuade the consumer to buy the product rather than substitutes? (Points : 5)


Question 10. (TCO 2) The _____ can be used to inform prospective buyers about the benefits of the product. (Points : 5)

SWOT analysis
maturity stage
marketing matrix
promotional mix
target audience

Question 11. (TCO 7) Which of the following statements about the terms used for marketing intermediaries is true? (Points : 5)

The most precise terms used to describe marketing intermediaries are dealer and distributor.
A retailer sells to consumers.
An agent has no legal authority to act on behalf of a manufacturer.
A wholesaler is an intermediary who sells to consumers.
Broker is a synonym for a dealer.

Question 12. (TCO 7) Which of the following statements about the legal and regulatory aspect of pricing is true? (Points : 5)

The Robinson-Patman Act deals with predatory pricing.
The Consumer Goods Pricing Act is the only federal legislation that deals directly with pricing issues.
The Sherman Act deals only with vertical price fixing.
The Federal Trade Commission Act deals with predatory pricing, deceptive pricing, and geographical pricing issues.
The Consumer Goods Pricing Act and the Robinson-Patman Act deal with price discrimination.

Question 13. (TCO 2) Which of the following is not one of the six major pricing objectives? (Points : 5)

Unit volume
Market share

Question 14. (TCO 3) The ratio of _____ to price is called value. (Points : 5)

perceived benefits
prestige value
value-added pricing
perceived revenue
perceived costs

Question 15. (TCO 6) Market segmentation involves aggregating prospective buyers into groups that will respond similarly to a marketing action and (Points : 5)

will pay attention to marketing messages.
have common needs.
be responsive to marketing research.
use the same payment methods.
go shopping on a regular basis.

Question 16. (TCO 5) Which of the following statements about environmental scanning is true? (Points : 5)

Environmental scanning changes the marketing environment.
Environmental scanning identifies and interprets potential trends.
Environmental scanning is an annual event.
Environmental scanning focuses primarily on geographical factors.
All of the above

Question 17. (TCO 1) The marketing department helps keep the organization focused on creating value both for it and for customers. This is accomplished by (Points : 5)

listening to customers.
developing offerings.
producing offerings.
implementing marketing program activities.
All of the above

Question 18. (TCO 1) Which of the following acts as a barrier to the development of relationship marketing? (Points : 5)

The large number of one-to-one relationships that customers are asked to sustain
The large number of products on the market
The increasing number of retail stores that are closing
The changing regulatory environment
Diluted cultural diversity

Question 19. (TCO 1) A local university in Lynchburg, VA offers an outstanding business school education. Cali pays the tuition to attend Daniels and earns her MBA with a concentration in supply chain management. Upon graduating, she is offered a high-paying, fulfilling position. Was this a marketing exchange? (Points : 5)

No, because the university is a private one.
Yes, because the university is profitable.
Yes, because paying tuition was exchanged for knowledge that directly led to Cali’s fulfilling new job.
No, because money was exchanged.
No, because the school did not provide Cali with a product.

Question 20. (TCO 6) Which of the following is the best description of the target market for the latest Disney animated movie? (Points : 5)

Everyone who can afford to buy a movie ticket
Everyone who likes movies
Professionals who are parents of children between the ages of 6 and 12
People who collect movie memorabilia
People who live near a movie theater

Question 21. (TCO 3) The owners of Old School Brand Authentic Antique Foods researched Civil War records to come up with recipes for the old-fashioned products it markets. Concern about the _____ element of the marketing mix would make it eager to be featured in an upcoming edition of Taste of Home magazine. (Points : 5)


Question 22. (TCO 5) The Lemon Tree is a high-fashion boutique selling top-of-the-line women’s clothing and accessories. The keys to its success include knowing the customers’ changing tastes and providing something different from other retailers. In addition, because of the high value of the merchandise, The Lemon Tree’s management is exploring the use of computerized inventory controls and sales order processing. From this description, one can infer that the environmental category of least importance to The Lemon Tree is (Points : 5)


Question 23. (TCO 7) Recently, a federal appeals court rendered a unanimous decision that Microsoft Corp. does not have an automatic right to put whatever features it wants into its Windows operating system; rather, each new feature needs to be evaluated separately. Many of these features are also made by much smaller companies. This ruling grew out of the power that Microsoft holds in the software market, because it owns a major share of the marketplace. What purpose did this ruling have? (Points : 5)

Protecting companies from one another
Protecting consumers from unfair trade practices
Protecting the future interests of society from dangerous business practices
Protecting consumers from one another
Protecting businesses from unfair consumer practices

Question 24. (TCO 6) Archer Daniels Midland (ADM) Co. is the world’s largest cocoa bean processor. It buys cocoa beans and converts the beans into cocoa powder and cocoa butter, which it sells to companies that manufacture consumer products that contain chocolate. The cocoa bean processor is operating in a(n) _____ market. (Points : 5)


Question 25. (TCO 1) Several years ago, SwissAir made some unwise investments to pay for a planned expansion. As a result, the company had to make some cost-cutting moves that alienated its customers. Eventually the company declared bankruptcy, regrouped, and found itself able to resume business. Its board of directors recently announced that the company would like to resume flying. Before resuming flying, SwissAir needed to determine what percentage of its former customers it could expect to return to the airline. If not enough former customers were willing to use SwissAir again, the resumption of flights would not be profitable. The determination of the percentage of returning patrons that would be needed to resume operation is an example of a (Points : 5)

research risk.
research objective.
research uncertainty.
research decision.
research definition.

Question 26. (TCO 3) Direct Protect is an insurance provider that uses telemarketers rather than insurance agents to sell its insurance and to deal with claims. It wants to introduce its product into new markets, but before it does so, it wants to have a prediction of how successful its sales efforts will be. One of the first things researchers did was to invite a group of eight people with insurance to talk about home and auto insurance with a moderator. One of the purposes of this exploratory research was to gather information about the group members’ attitudes toward insurance and their awareness of Direct Protect. Although additional research still needs to be done, the marketing researchers were able to use a focus group to gather _____ data. (Points : 5)


Question 27. (TCO 4) Sara Burns is the owner of a company called Spice and was looking for a new product to go with her company’s line of food condiments when a customer suggested combining spices with tea. This is an example of (Points : 5)

accidental invention.
idea generation.
bootlegging ideas.
serendipitous management.
serendipitous innovation.

Question 28. (TCO 4) In the 1960s, television westerns were extremely popular. The shows were adventure shows with settings and costumes that were very unlike what really existed. There were Bonanza, Wagon Train, The Virginian, Laramie, and so on. When viewers gradually stopped watching this category of programs, production companies found that the networks no longer wanted to televise such shows. The television western as a product category entered the _____ stage. (Points : 5)


Question 29. (TCO 7) When an Avon representative sells cosmetics door-to-door, it is an example of which type of marketing channel? (Points : 5)

Direct channel
Indirect channel
Strategic channel alliances
Marketing channel
Dual distributive channel

Question 30. (TCO 2) Disney is using an integrated marketing communications program (IMC) to promote group travel to its theme parks, because (Points : 5)

its strategy includes using all types of promotional activities that deliver a consistent message.
it does not want to reach any member of its target audience more than once.
IMC is less expensive than other forms of promotion, such as public service announcements.
if it didn’t, Disney would have to use indirect personal selling.
it is more concerned about frequency than reach.

Question 31. (TCO 2) When a news story covers a terrible disaster and viewers are asked to send donations to the American Red Cross, the American Red Cross is receiving (Points : 5)

direct marketing.
personal selling.
a public service announcement.

Question 32. (TCO 7) For several years, advertisements for Arm & Hammer Baking Soda have prompted consumers to place an opened box of the product in the refrigerator to lessen food odor and to replace that box monthly. The same ads advise customers to pour the used box down their kitchen sinks to freshen drains. Arm & Hammer employed a _____ strategy in its attempt to sell more baking soda. (Points : 5)

market penetration
market development
product development
product penetration

Page 2

Question 1. (TCO 1) In China, many people are removing their money from the state banks and lending it out themselves. The interest rate earned in a state bank account is about one half the rate of inflation. On the other hand, loaning money to friends, relatives, and even unrelated entrepreneurs can often earn the investor double or more over the inflation rate. The gray market, an underground network of investors and private businesses, moves the cash from lenders to businesses. Judge whether marketing occurred in this situation, and justify your conclusions. Appraise the effectiveness of government regulation in controlling markets. (Points : 30)

Question 2. (TCO 3) Imagine that you are creating a marketing plan for a company that will sell motor scooters. As you consider the marketing program, what types of strategy should you consider including in the plan? Propose one specific example of each type of strategy that you are considering, and present your rationale (reasoning) for your strategy selections. (Points: 30)

Question 3. (TCO 4) You are the product manager responsible for a horrible product failure, but in your wisdom, you are evaluating why the product failed. What factors would you consider in your evaluation? What actions could you have taken to prevent the failure? Does product innovation need a willingness to accept failure? (Points: 30)

Here’s the SOLUTION

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POST IBA301 FINAL EXAM (A+ Guaranteed)


Question 1
Which of the following is not characteristic of globalization?

National economies are turning into independent economic systems.
Material culture is starting to look similar the world over.
Perceived distance is shrinking due to advances in transportation and telecommunications.
Barriers to cross-border trade and investment are declining.

Question 2
Globalization has _____ the opportunities for a firm to expand its revenues by selling around the world and _____ its costs by producing in nations where key inputs are cheap.

reduced, reduced
increased, increased
increased, reduced
reduced, increased

Question 3
Since the collapse of communism at the end of the 1980s, the erstwhile communist nations have transformed their economies by encouraging all of the following except:

privatizing state-owned enterprises.
regulating markets.
increasing competition.
welcoming investment by foreign businesses.

Question 4
Identify the incorrect statement concerning globalization.

It has been blamed for unemployment in developed nations, environmental degradation and the Americanization of popular culture.
It has created new threats for businesses accustomed to dominating their domestic markets.
It is transforming industries and is highly welcomed by those who believed their jobs were protected from foreign competition.
According to most economists it is a very beneficial process where gains outweigh the losses by a wide margin.

Question 5
In the U.S., _____ percent of firms that export are small companies employing fewer than 100 people.


Question 6
Interdependent political, economic, and legal systems of a country make up its:

administrative agenda.
socioeconomic fabric.
economic environment.
political economy.

Question 7
_____ is consistent with the notion that an individual’s right to do something may be restricted because it runs counter to “the good of society” or “the common good.”

Free enterprise

Question 8
According to _____, socialism can only be achieved through violent revolution.

social democrats

Question 9
_____ is/are best defined as shared assumptions about how things ought to be.


Question 10
_____ are social conventions concerning things such as the appropriate dress code in a particular situation, good social manners, eating with the correct utensils, neighborly behavior, and the like.


Question 11
Mores are:

the norms that are seen as central to the functioning of a society and its social life.
the routine conventions of everyday life.
abstract ideas about what a group believes to be right, good, and desirable.
the social rules and guidelines that prescribe appropriate behavior in particular situations.

Question 12
The theory of _____, developed by Michael Porter, focuses on the importance of country factors, in addition to factor endowments, such as domestic demand and domestic rivalry in explaining a nation’s dominance in the production and export of particular products.

new trade
absolute advantage
comparative advantage
national competitive advantage

Question 13
The theory of _____ makes a crude case for government involvement in promoting exports and limiting imports.

free trade
absolute advantage
comparative advantage

Question 14
By lowering production costs, _____ help domestic producers compete against foreign imports.


Question 15
In the United States, the only firms allowed to import cheese are certain trading companies, each of which is allocated the right to import a maximum number of pounds of cheese each year. Identify the trade restriction being imposed by the United States.

Import quota
Ad valorem tariff
Specific tariff

Question 16
A quota rent is:

a quota on trade imposed by the exporting country.
levied as a fixed charge for each unit of a good imported.
levied as a proportion of the value of the imported good.
the extra profit producers make when supply is artificially limited by an import quota.

Question 17
Which of the following is not a reason why firms prefer to acquire existing assets rather than undertake green field investments?

Foreign firms are acquired because those firms have valuable strategic assets.
Firms make acquisitions because they believe they can increase the efficiency of the acquired unit by transferring capital, technology, or management skills.
Even though green field investments are comparatively less risky for a firm, acquisitions always yield higher profits.
Mergers and acquisitions are quicker to execute than green field investments.

Question 18
The rise in FDI in the services sector is a result of all of the following except:

the general move in many developed countries away from manufacturing and toward services.
accelerating regulations of services.
many services cannot be traded internationally.
many countries have liberalized their regimes governing FDI in services.

Question 19
Identify the theory that seeks to explain why firms often prefer foreign direct investment over licensing as a strategy for
entering foreign markets.

Internalization theory
Internationalization theory
Perfect markets theory
Small markets theory

Question 20
An agreement between countries in a geographic region to reduce tariff and nontariff barriers to the free flow of goods, services, and factors of production between each other is referred to as:

regional economic integration.
socioeconomic integration.
political integration.
economic-political integration.

Question 21
In 1991, Argentina, Brazil, Paraguay, and Uruguay implemented an agreement known as:


Question 22
Which of the following is true of a common market?

All barriers to the trade of goods and services among member countries are removed and each country maintains its own policy toward nonmember countries.
It involves the free flow of products and factors of production between member countries and adoption of individual external trade policies.
It has no barriers to trade between member countries, includes a common external trade policy, and allows factors of production to move freely between members.
It eliminates trade barriers between member countries and adopts a common external trade policy and a common currency.

Question 23
The rate at which one currency is converted into another is the:

replacement percentage.
resale rate.
exchange rate.
interchange ratio.

Question 24
The _____ helps us to compare the relative prices of goods and services in different countries.

interest rate
customs rate
exchange rate
tariff rate

Question 25
When two parties agree to exchange currency and execute the deal immediately, the transaction is a:

point-in-time exchange.
temporal exchange.
spot exchange.
forward exchange.

Question 26
If lots of people want euros and euros are in short supply, and a few people want Japanese yen and yen are in plentiful supply, the euro is likely to _____ against the yen.


Question 27
If the demand for dollars outstrips its supply and if the supply of Japanese yen is greater than the demand for it, what will happen?

The dollar will appreciate against the yen
The dollar will depreciate against the yen
The exchange rates will remain the same
The yen will appreciate against the dollar

Question 28
A _____ means the value of the currency is fixed relative to a reference currency.

pegged exchange rate
dynamic exchange rate
floating exchange rate
fixed exchange rate

Question 29
The gold standard had its origin in the use of _____ as a medium of exchange, unit
of account, and store of value.

the U.S. dollar
the British pound
paper currency
gold coins

Question 30
The great strength claimed for the gold standard was that it contained a powerful mechanism for achieving _____ by all countries.

balance-of-trade equilibrium
economic stability
interest rate parity
equal tariff levels

Question 31
Market makers are:

financial service companies that connect investors and borrowers.
those who want to borrow money including individuals, companies, and governments.
nonbank financial institutions who want to invest money.
high net worth individuals with surplus cash to reinvest.

Question 32
All of the following are benefits of global capital markets, except:

they increase the supply of funds available to borrowers.
that the risk to the investment portfolio is reduced to below what could be achieved in a purely domestic capital market.
they provide a wider range of investment opportunities to investors.
they have higher cost of capital as compared to purely domestic capital markets.

Question 33
Which of the following statements is not true?

The way to increase the profitability of a firm is to create more value.
The amount of value a firm creates is measured by the difference between its costs of production and the value that consumers perceive in its products.
The more value customers place on a firm’s products, the higher the price the firm is able to charge for those products.
The price a firm charges for a good or service is typically more than the value the customer places on that good or service.

Question 34
The price a firm charges for a good or service is typically less than the value placed on that good or service by the customer. This is because:

the customer’s disposable income is significantly higher than what the market demands.
the customer captures some of that value in the form of a consumer surplus.
regulatory mechanisms ensure that the customer is not overcharged for products/services.
marketers implement psychological pricing tactics to ensure that customers perceive the prices to be low.

Question 35
Which of the following is an example of a primary activity in a firm’s value chain?

Information systems
Research and development
Human relations

Question 36
When companies disperse different stages of the value chain to those locations around the world where perceived value is maximized or where the costs of value creation are minimized, companies create:

a differentiated organization.
a location economy curve.
economies of scale.
a global web of value creation activities.

Question 37
For U.S. firms, the most comprehensive source of export opportunities information is the:

Small Business Administration.
U.S. Department of Commerce.
Federal Trade Commission.
foreign embassy.

Question 38
A “best prospects” list:

gives the names and addresses of potential distributors in the domestic market.
is provided by the United States and Foreign Commercial Service Agency.
can provide a firm free, customized market research survey on any product.
provides information gathering, technical assistance, and export subsidies.

Question 39
According to Levitt, which of the following statements is true?

Technology drives the world toward a converging commonalty.
There are accustomed differences in national preferences.
The multinational corporation operates in a number of countries at low relative costs.
The global corporation operates with resolute consistency at high relative costs.

Question 40
Which of the following statements is false?

Product reliability may be a more important attribute in most advanced countries.
Consumers in highly developed countries tend to build a lot of extra performance attributes into their products.
Consumers in the most developed countries are often not willing to sacrifice their preferred attributes for lower prices.
Consumers in the most advanced countries often shun globally standardized products that have been developed with the lowest common denominator in mind.

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DeVry ACCT 504 Week 4 Midterm Exam (A+ Guaranteed)

DeVry ACCT 504 Week 4 Midterm Exam

1. (TCO A, B, C) External users want answers to all of the following questions except: (Points : 3)

Is the company earning satisfactory income?
Will the company be able to pay its debts as they come due?
Did the company use a budget to plan its expenses?
How does the company compare in profitability with competitors?

2. (TCO C) Debt securities sold to investors that must be repaid at a particular date some years in the future are called: (Points : 3)

accounts payable.
notes receivable.
taxes payable.
bonds payable.

3. (TCO C) The statement of cash flows would disclose the payment of a dividend: (Points : 3)

nowhere on the statement.
in the operating activities section.
in the investing activities section.
in the financing activities section.

4. (TCO A) The cost of assets consumed or services used is also known as: (Points : 3)

a revenue.
an expense.
a liability.
an asset.

5. (TCO C) Edwards Company recorded the following cash transactions for the year:

Paid $45,000 for salaries.
Paid $20,000 to purchase office equipment.
Paid $5,000 for utilities.
Paid $2,000 in dividends.
Collected $75,000 from customers.

What was Edwards’ net cash provided by operating activities? (Points : 3)

6. (TCO A) On a classified balance sheet, prepaid insurance is classified as: (Points : 3)

an intangible asset.
property, plant, and equipment.
a current asset.
a long-term investment.

7. (TCO A) Which of the following should not be classified as a current asset? (Points : 3)

Short-term Marketable securities
Prepaid insurance that will expire next year.
A Note Receivable that will mature after 21 months.

8. (TCO A) These are selected account balances on December 31, 2010.

-Land (location of the corporation’s office building) $100,000
-Land (held for future use) 150,000
-Corporate Office Building 600,000
-Inventory 200,000
-Equipment 450,000
-Office Furniture 100,000
-Accumulated Depreciation 300,000
What is the total NET amount of property, plant, and equipment that will appear on the balance sheet? (Points : 3)

9. (TCO B) For 2010, Landford Corporation reported net income of $30,000; net sales $400,000; and average share outstanding 6,000. There were no preferred stock dividends. What was the 2010 earnings per share? (Points : 3)


10. (TCO B) Morten Corporation had beginning retained earnings of $764,000 and ending retained earnings of $833,000. During the year they issued common stock totaling $47,000. There were no dividends issued. What was their net income for the year? (Points : 3)


11. (TCO D) On March 1, 2010, Dillon Company hires a new employee who will start the work on March 6. The employee will be paid on the last day of each month. Should a journal entry be made on March 6? Why or why not? (Points : 3)

Yes, the company is now obligated to pay the employee, thus that event must be recorded on March 6.
No, hiring an employee is an important event; however, it is not an economic event that should be recorded on March 6.
Yes, failure to record the event on March 6 would cause the financial statements to be misleading.
No, the journal entry should be made on March 1 which is the date of hiring.

12. (TCO D) Which one of the following is not a part of an account? (Points : 3)

Credit side
Trial balance
Debit side

13. (TCO D) Which of the following describes the classification and normal balance of the retained earnings account? (Points : 3)

Asset, debit
Stockholders’ equity, credit
Revenues, credit
Expense, debit

14. (TCO D) In recording an accounting transaction in a double-entry system: (Points : 3)

the number of debit accounts must equal the number of credit accounts.
there must always be entries made on both sides of the accounting equation.
the amount of the debits must equal the amount of the credits.
there must only be two accounts affected by any transaction.

15. (TCO D) Which of the following accounts follows the rules of debit and credit in relation to increases and decreases in the opposite manner? (Points : 3)

Prepaid insurance and dividends
Dividends and medical fees earned
Interest payable and common stock
Advertising expense and land

Page 2

1. (TCO E) The time period assumption states that: (Points : 3)

a transaction can only affect one period of time.
estimates should not be made if a transaction affects more than one time period.
adjustments to the enterprise’s accounts can only be made in the time period when the business terminates its operations.
the economic life of a business can be divided into artificial time periods.

2. (TCO E) In a merchandising business, revenue may be considered earned when: (Points : 3)

cash is received from the customers
a product is delivered to a customer.
an order is received from a customer
a customer shows interest in a product

3. (TCO E) Expenses sometimes make their contribution to revenue in a different period than when the expense is paid. When wages are incurred in one period and paid in the next period, this often leads to which account appearing on the balance sheet at the end of the first period? (Points : 3)

Due from Employees
Due to Employer
Wages Payable
Wages Expense

4. (TCO E) The following is selected information from J Corporation for the fiscal year ending October 31, 2010.

Cash received from customers $75,000
Revenue earned 87,500
Cash paid for expenses 42,500
Expenses incurred 50,000
Based on the accrual basis of accounting, what is J Corporation’s net income for the year ending October 31, 2007? (Points : 3)


5. (TCO E) The general term employed to indicate an expense that has not been paid or revenue that has not been received and has not yet been recognized in the accounts is: (Points : 3)

contra asset.

6. (TCO A, B) Which of the following expressions is incorrect? (Points : 3)

Gross profit – operating expenses = net income
Sales – cost of goods sold – operating expenses = net income
Net income + operating expenses = gross profit
Operating expenses – cost of goods sold = gross profit

7. (TCO B) Hunter Company purchased merchandise inventory with an invoice price of $12,000 and credit terms of 2/10, n/30. What is the net cost of the goods if Hunter Company pays within the discount period? (Points : 3)


8. (TCO A, B) Zach’s Market recorded the following events involving a recent purchase of merchandise:

Received goods for $50,000, terms 2/10, n/30.
Returned $1,000 of the shipment for credit.
Paid $250 freight on the shipment.
Paid the invoice within the discount period.
As a result of these events, the company’s merchandise inventory: (Points : 3)

increased by $48,020.
increased by $49,250.
increased by $48,265.
increased by $48,270.

9. (TCO A) If goods in transit are shipped FOB destination (Points : 3)

the seller has legal title to the goods until they are delivered.
the buyer has legal title to the goods until they are delivered.
the transportation company has legal title to the goods while the goods are in transit.
no one has legal title to the goods until they are delivered.

10. (TCO A) When a perpetual inventory system is used, which of the following is a purpose of taking a physical inventory? (Points : 3)

To check the accuracy of the perpetual inventory records
To determine cost of goods sold for the accounting period
To compute inventory ratios
All are a purpose of taking a physical inventory when a perpetual inventory system is used.

11. (TCO A) A problem with the specific identification method is that: (Points : 3)

inventories can be reported at actual costs.
management can manipulate income.
matching is not achieved.
the lower of cost or market basis cannot be applied

12. (TCO A) Which of the following statements is true regarding inventory cost flow assumptions? (Points : 3)

A company may use more than one cost-flow assumption concurrently for different product lines.
A company must comply with the method specified by industry standards.
A company must use the same method for domestic and foreign operations.
A company may never change its inventory costing method once it has chosen a method.

13. (TCO A) In a period of rising prices, which of the following inventory methods generally results in the lowest net income figure? (Points : 3)

Average Cost Method
LIFO method
FIFO method
Need more information to answer

14. (TCO B) Which of the following is a true statement about inventory systems? (Points : 3)

Periodic inventory systems require more detailed inventory records.
Perpetual inventory systems require more detailed inventory records.
A periodic system requires cost of goods sold be determined after each sale.
A perpetual system determines cost of goods sold only at the end of the accounting period.

15. (TCO B) The primary source of revenue for a retailer is: (Points : 3)

investment income.
service revenue.
the sale of merchandise.
the sale of plant assets the company owns.

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Reveen Products sells camping equipment. One of the company’s products, a camp lantern

Break-Even and Target Profit  Analysis   

Reveen Products sells camping equipment. One of the company’s products, a camp lantern, sells for $90 per unit. Variable expenses are $63 per lantern, and fixed expenses associated with the lantern total $135,000 per month.


1.  Compute the company’s break even point in number of lanterns and in total dollars.
2.  If the variable expenses per lantern increase as a percentage of the selling price, will it result in a higher or lower break-even point? Why? (Assume that the fixed expenses remain unchanged).
3.  At present, the company is selling 8,000 lanterns per month. The sales manger is convinced that a 10% reduction in the selling price will result in a 25% increase in the number of lanterns sold each month. Prepare two contribution income statements, one under present operating conditions and one as operations would appear after the proposed changes. Show both total and per unit data on your statements.
4.  Refer to the data in (e) above. How many lanterns would have to be sold at the new selling price to yield a minimum net operating income (profit) of $72,000 per month.

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