Exhibit 19-1
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S)

question 51

Multiple Choice

Exhibit 19-1
USE THE FOLLOWING INFORMATION FOR THE NEXT PROBLEM(S) $\begin{array}{c} \text { BMC CORPORATION INCOME STATEMENT } \\ \text {FISCAL YEAR ENDING 12/31/2009 } \\ \text { (DOLLARS IN THOUSANDS') } \\\begin{array}{lr}\text { Net Sales } &\quad\quad\quad\quad\quad\quad\quad \$ 1025 \\\text { Cost of Goods Sold } & \underline {682 }\\ \text { Gross Profit Margin } & 343 \\\text { Depreciation } & 31 \\\text { Operating Expense } & 103 \\\text { Administrative Expense } & \underline {127} \\\text { Operating Profit } & 82\\\text { Interest }\\ \text {Profit Before Taxes}&\frac{27}{55} \\ \text { Taxes } \\ \text {Net Income }&\$\frac{17}{38} \\\end{array}\end{array}$ $\begin{array}{c} \text { BMC CORPORATION BALANCE SHEET } \\ \text { FISCAL YEAR ENDING 12/31/2009 } \\ \text { (DOLLARS IN THOUSANDS) } \\\begin{array}{lll}\text { ASSETS }\\\hline\text { Cash } & \$ 61 \\\text { Accounts receivables } & 286 \\\text { Inventory } & \underline { 354} \\\text { Total current assets } & 701 \\\text { Net fixed assets } & \underline { 802} \\\\\\\\\\\text { Total assets }& \$ 1503\\\end{array}\begin{array}{lll}\text { LIABILITIES }\\\hline\text { Notes payable } & \$ 223 \\\text { Accounts payable } & 152 \\\text { Accruals } & \underline { 32} \\ \text { Total current liabilities } & 407 \\\text { Long term debt } & 306 \\\text { Common stock ( } \$ 1.50 \text { par) } & 102 \\\text { Paid in surplus } & 226 \\\text { Retained earnings } & \underline { 462} \\\text { Total liabilities and } & \\\quad \text { Stockholders' equity } & \$ 1503\end{array}\end{array}$
-Refer to Exhibit 19-1. What was BMC's fixed asset turnover ratio?

• A) 0.680
• B) 0.780
• C) 1.278
• D) 1.874
• E) 8.220

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Definitions:

Efficiency Wage Rate

A wage rate set above the market-clearing level by employers to boost worker productivity, discourage shirking, and reduce turnover.

Wage Rigidity

Wage rigidity refers to the phenomenon where wages do not adjust quickly or easily to changes in labor market conditions, often due to contracts, norms, or regulations.

No Shirking Constraint

An economic principle suggesting that wages must be set at a level that discourages employees from shirking their duties.

Supply of Labor Curve

A graphical representation showing the relationship between the wage rate and the quantity of labor that workers are willing to supply.