1. Diminishing returns is an important concept to be aware of when playing Mike's Bikes. Which of the following statements best represents this concept?

		Spending $1 million on internet advertising is very good, but spending $3 million is likely a waste of your money
		If spending a little on preventative maintenance is good, then spending a lot must be better
		For every $50,000 spent on quality systems, perceived quality will go up .05
		Don't spend any money on public relations because you won't get your money back
		None of the above

1. If a bike has a prime cost of $300 and a company sells 15,000 of the bikes at a retail price of $1,400 with a retailer margin of 50%, what is the gross margin per bike?

		$700
		$400
		$10.5 million
		$6 million
		$800,000

1. In Mike's Bikes one of the most important metrics to evaluate a company's performance is shareholder value (SHV). All other things being equal, what effect does paying down long-term debt have on SHV?

		Decrease SHV due to a decrease in the "riskiness" of the company
		Increase SHV due to an increase in the "riskiness" of the company
		Increase SHV due to a decrease in the "riskiness" of the company
		Decrease SHV due to an increase in the "riskiness" of the company
		It has no effect on SHV

1. One way to increase quality is to increase the inspection rate of finished products before they leave the factory. What are some of the disadvantages of this?

		Increased inspection costs
		Increased rework
		Decreased effective capacity (due to rework)
		All of the above