2) On the Income Statement, which of the following would be classified as a variable cost?
Select: 1
Promotion Expense
Depreciation Expense
Direct Labor Expense
R&D Expense

3) It is January 2nd. Senior management of Jones 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
yesterdays stock price ($39.45). Which of the following statements are true? Check all that apply.
Select: 3
The Jones bond issue will be $3,353,250
Jones will issue stock totaling $1,972,500
Total investment for Jones will be $5,325,750
The Jones Working Capital will be unchanged at $15,188
Long term debt will increase from $84,887,453 to $86,859,953
Total Assets will rise to $228,662,000

4) The Browns workforce complement will grow by 10% (rounded to the nearest person) next year. Ignoring downsizing from
automating, what would their total recruiting cost be? Assume Brown spends the same amount extra above the $1,000
recruiting base as they did last year.
Brown
Needed Complement

547

Complement

547

1st Shift Complement

383

2nd Shift Complement

164

Overtime%

0.0%

Turnover Rate

6.3%

New Employees
Separated Employees
Recruiting Spend
Training Hours
Productivity Index
Recruiting Cost
Separation Cost
Training Cost
Total HR Admin Cost

121
0
$5,000
80
123.0%
$725
$0
$876
$1,601

Labor Contract Next Year
Wages

$3,612,000
$3,010,000

2.0%

Annual Raise

$330,000

2,500

Profit Sharing

$275,000

$28.15

Benefits

5.0%

5) Company Baldwin invested $57,612,000 in plant and equipment last year. The plant investment was funded with bonds at a face value of $35,038,817 at 13.8% interest, and equity of $22,573,183. Depreciation is 15 years straightline. For this transaction alone which of the following statements are true? Select: 5
Cash went down by $57,612,000 when the plant was purchased.
Cash went up when the Bond was issued by $35,038,817.
Buying the plant had no net effect on the Cash account, because the plant was paid for by the bond plus retained earnings.
On the Balance sheet, Long Term Debt changed by $35,038,817.
Cash was pulled from retained earnings to cover the $22,573,183 difference between the plant purchase and bond issue.
Since the new plant was funded with debt and equity, on the Balance sheet Retained Earnings decreased by
$22,573,183, the difference between the investment $57,612,000 and the bond $35,038,817.
Depreciation increased by $3,840,800.
On the Balance sheet, Plant & Equipment increased by $57,612,000.