ETS MAJOR FIELD TEST
Biggie Mart is a national chain of hypermarkets that carries a narrow
line of inexpensive, standard furniture items. Biggie Mart offers to
carry some of Fjord's furniture products if Fjord will provide several
other products at reduced prices that will be sold under Biggie Mart's
Home with Biggie brand name. Home with Biggie is which
of the following kinds of brands?
(A) Parent
(B) Private
(C) Flanker
(D) Corporate - ANSWERS-(B) Private
If Fjord's management installs new production technology, almost half
the current workforce could be transferred to the production of high-
quality, handcrafted wood furniture, a new line for the firm. Further,
the marketing manager has identified a potential retailer for the line.
Home Heritage sells only handcrafted wood furniture through its
chain of small, locally franchised stores. Which of the following best
describes Home Heritage?
(A) Specialty store
(B) Category killer
(C) Mass merchandiser
(D) Nontraditional retailer - ANSWERS-(A) Specialty store
,A state government office wants a special order of furniture. Fjord is
not currently operating at full capacity, but accepting the special order
would require a reduction in production for regular customers. The
state order is 10 percent less than Fjord normally charges. Fjord
should produce furniture for the state and reduce other production if
(A) the gross margin on the reduced amount of routine production is
less than the gross margin on the state order
(B) the profit margin on the reduced amount of routine production is
less than the profit margin on the state order
(C) the total revenue for the reduced amount of routine production is
less than the total revenue on the state order
(D) net income for the month would remain unchanged by accepting
the state order - ANSWERS-(A) the gross margin on the reduced
amount of routine production is less than the gross margin on the state
order
If Fjord implements the technology solution, it will have a capital
expenditure of $2.5 million. The technology will allow Fjord to
reduce significant variable costs, primarily in the area of labor.
Assuming it maintains its existing debt-to-equity ratio in financing
this acquisition, Fjord would be intending to make use of
(A) financial leverage
(B) operating leverage
(C) increased asset utilization
(D) lower fixed costs - ANSWERS-(B) operating leverage
Fjord is planning to implement a new cost accounting system
simultaneously with the technology solution. Which of the following
, cost drivers would work best to allocate overhead costs for this new
system?
(A) Units produced
(B) Sales dollars
(C) Labor hours
(D) Machine hours - ANSWERS-(D) Machine hours
Fjord makes the decision to implement the new technology at the cost
of $2.5 million. Fjord will use equity to finance part of this
investment. Fjord has decided to institute a dividend reinvestment
plan (DRIP). Stockholders will have the option of continuing to
receive cash dividends or of having the company use the dividends to
buy more of the company's stock. Fjord's management anticipates a
high participation rate in the DRIP. A high participation rate suggests
that Fjord stockholders
(A) may be better off if the company were to reduce its cash dividend,
which would save stockholders some personal incomes taxes
(B) are using the DRIP to lower their current personal tax liability
payments, since stock is received rather than cash
(C) prefer a high cash dividend payout policy
(D) place more value on expected dividends than on expected capital
gains - ANSWERS-(A) may be better off if the company were to
reduce its cash dividend, which would save stockholders some
personal incomes taxes
Bertha Sunshine entered the travel business after having traveled
regularly to the Caribbean and becoming familiar with the businesses
in the region. She discovered a market need, and in the 1960's started
Biggie Mart is a national chain of hypermarkets that carries a narrow
line of inexpensive, standard furniture items. Biggie Mart offers to
carry some of Fjord's furniture products if Fjord will provide several
other products at reduced prices that will be sold under Biggie Mart's
Home with Biggie brand name. Home with Biggie is which
of the following kinds of brands?
(A) Parent
(B) Private
(C) Flanker
(D) Corporate - ANSWERS-(B) Private
If Fjord's management installs new production technology, almost half
the current workforce could be transferred to the production of high-
quality, handcrafted wood furniture, a new line for the firm. Further,
the marketing manager has identified a potential retailer for the line.
Home Heritage sells only handcrafted wood furniture through its
chain of small, locally franchised stores. Which of the following best
describes Home Heritage?
(A) Specialty store
(B) Category killer
(C) Mass merchandiser
(D) Nontraditional retailer - ANSWERS-(A) Specialty store
,A state government office wants a special order of furniture. Fjord is
not currently operating at full capacity, but accepting the special order
would require a reduction in production for regular customers. The
state order is 10 percent less than Fjord normally charges. Fjord
should produce furniture for the state and reduce other production if
(A) the gross margin on the reduced amount of routine production is
less than the gross margin on the state order
(B) the profit margin on the reduced amount of routine production is
less than the profit margin on the state order
(C) the total revenue for the reduced amount of routine production is
less than the total revenue on the state order
(D) net income for the month would remain unchanged by accepting
the state order - ANSWERS-(A) the gross margin on the reduced
amount of routine production is less than the gross margin on the state
order
If Fjord implements the technology solution, it will have a capital
expenditure of $2.5 million. The technology will allow Fjord to
reduce significant variable costs, primarily in the area of labor.
Assuming it maintains its existing debt-to-equity ratio in financing
this acquisition, Fjord would be intending to make use of
(A) financial leverage
(B) operating leverage
(C) increased asset utilization
(D) lower fixed costs - ANSWERS-(B) operating leverage
Fjord is planning to implement a new cost accounting system
simultaneously with the technology solution. Which of the following
, cost drivers would work best to allocate overhead costs for this new
system?
(A) Units produced
(B) Sales dollars
(C) Labor hours
(D) Machine hours - ANSWERS-(D) Machine hours
Fjord makes the decision to implement the new technology at the cost
of $2.5 million. Fjord will use equity to finance part of this
investment. Fjord has decided to institute a dividend reinvestment
plan (DRIP). Stockholders will have the option of continuing to
receive cash dividends or of having the company use the dividends to
buy more of the company's stock. Fjord's management anticipates a
high participation rate in the DRIP. A high participation rate suggests
that Fjord stockholders
(A) may be better off if the company were to reduce its cash dividend,
which would save stockholders some personal incomes taxes
(B) are using the DRIP to lower their current personal tax liability
payments, since stock is received rather than cash
(C) prefer a high cash dividend payout policy
(D) place more value on expected dividends than on expected capital
gains - ANSWERS-(A) may be better off if the company were to
reduce its cash dividend, which would save stockholders some
personal incomes taxes
Bertha Sunshine entered the travel business after having traveled
regularly to the Caribbean and becoming familiar with the businesses
in the region. She discovered a market need, and in the 1960's started
