Question

1. Brissett Corporation makes three products that use the current constraint, which is a particular type of machine. Data concerning those products appear below:

	GK		LQ		XK
Selling price per unit	$	326.07	$	543.33	$	517.00
Variable cost per unit	$	252.03	$	420.84	$	397.69
Time on the constraint (minutes)		4.20		8.10		8.00

Required:

a. Rank the products in order of their current profitability from the most profitable to the least profitable. In other words, rank the products in the order in which they should be emphasized.

b. Assume that sufficient constraint time is available to satisfy demand for all but the least profitable product. Up to how much should the company be willing to pay to acquire more of the constrained resource? (Round your answer to 2 decimal places.)

2. Financial data for Beaker Company for last year appear below:

Beaker Company
Statements of Financial Position
	Beginning Balance			Ending Balance
Assets:
Cash	$	273,000		$	336,920
Accounts receivable		191,000			200,000
Inventory		313,000			251,000
Plant and equipment (net)		438,000			398,000
Investment in Cedar Company		255,000			277,000
Land (undeveloped)		305,000			305,000
Total assets	$	1,775,000		$	1,767,920
Liabilities and owners' equity:
Accounts payable	$	192,000		$	171,000
Long-term debt		839,000			839,000
Owners' equity		744,000			757,920
Total liabilities and owners' equity	$	1,775,000		$	1,767,920

Beaker Company
Income Statement
Sales				$	2,440,000
Less operating expenses					2,074,000
Net operating income					366,000
Less interest and taxes:
Interest expense	$	102,000
Tax expense		139,080			241,080
Net income				$	124,920

The company paid dividends of $111,000 last year. The "Investment in Cedar Company" on the statement of financial position represents an investment in the stock of another company.

Required:

a. Compute the company's margin, turnover, and return on investment for last year.

b. The Board of Directors of Beaker Company has set a minimum required return of 26%. What was the company's residual income last year?

Answer 1