12) A new machine comes with 100 free service hours over the first year. Additio
ID: 1092248 • Letter: 1
Question
12) A new machine comes with 100 free service hours over the first year. Additional time costs $75 per hour. What is the average cost per hour for 175 hours?
13) A realtor sold a house on August 31, 2011 for $175,000 to a buyer in which a 20% down payment was made. The buyer took a 15-year mortgage on the property with an effective interest rate of 6% per annum. The buyer intends to payoff the mortgage owed in yearly payments starting on August 31,2012. How much of the mortgage will still be owed after the payment due on August 31, 2018, has been made?
14)A friend was left $50,000 by his uncle. He has decided to put it into a savings account for the next year or so. He finds there are varying interest rates at savings institutions: 8.375% compounded annually, 8.25% compounded quarterly, and 8.125% compounded continuously. He wishes to select the savings institution that will give him the highest return on his money. What interest rate should he select?
15) What is the present value at time zero of $10,000 paid into an account at the end of year one and annual deposits are increased each year by 5% for a total of 30 years. ( paid $10,500 end of year 2, $11,025 end of year 3, etc.) The account pays 8% per year.
16)
At what number of items is the manufacturer indifferent (breaks even) to making or buying given the following costs and purchase price?
Variable cost per unit to make= $5
Fixed cost to make=$500
Purchase price per unit=$12
Explanation / Answer
1. Free service hour = 100
Additional cost = $75
Total additional cost for 75 hours = $75*75 = $5625
Therefore, average cost per hour for 175 hours = 5625/175 = $32.14 per hour
2.
Date
Total paymets
principal part
Intrest
Ending Pricipal
$ 140,000.00
31-08-2012
$ 14,176.80
$ 5,938.35
$ 8,238.45
$ 134,061.65
31-08-2013
$ 14,176.80
$ 6,304.63
$ 7,872.17
$ 127,757.02
31-08-2014
$ 14,176.80
$ 6,693.45
$ 7,483.35
$ 121,063.57
31-08-2015
$ 14,176.80
$ 7,106.29
$ 7,070.51
$ 113,957.28
31-08-2016
$ 14,176.80
$ 7,544.58
$ 6,632.22
$ 106,412.70
31-08-2017
$ 14,176.80
$ 8,009.94
$ 6,166.86
$ 98,402.76
31-08-2018
$ 14,176.80
$ 8,503.97
$ 5,672.83
$ 89,898.79
31-08-2019
$ 14,176.80
$ 9,028.48
$ 5,148.32
$ 80,870.31
31-08-2020
$ 14,176.80
$ 9,585.33
$ 4,591.47
$ 71,284.98
31-08-2021
$ 14,176.80
$ 10,176.55
$ 4,000.25
$ 61,108.43
31-08-2022
$ 14,176.80
$ 10,804.20
$ 3,372.60
$ 50,304.23
31-08-2023
$ 14,176.80
$ 11,470.59
$ 2,706.21
$ 38,833.64
31-08-2024
$ 14,176.80
$ 12,178.06
$ 1,998.74
$ 26,655.58
31-08-2025
$ 14,176.80
$ 12,929.16
$ 1,247.64
$ 13,726.42
31-08-2026
$ 14,176.61
$ 13,726.42
$ 450.19
$ 0.00
Therefore total owed after the payment due on August 31, 2018, has been made = $113414.21
3.
Effective Intrest Rate
8.375% compounded annually
8.38%
8.25% compounded quarterly
8.51%
8.125% compounded continuously
8.46%
Therefore, 8.25% compounded quarterly is the best option.
4
5.
Units Sold
Sales Revenues
Variable Costs
Fixed Costs
Operating Profit
0
$ 0
$ 0
$ 500
$ -500
17
214
89
500
-375
35
429
179
500
-250
53
643
268
500
-125
71
857
357
500
0
89
1,071
446
500
125
107
1,286
536
500
250
125
1,500
625
500
375
142
1,714
714
500
500
160
1,929
804
500
625
You would need to sell 71 units in order to cover your fixed costs. If you sell your anticipated 0 units then your profit/loss would be $-500.
Date
Total paymets
principal part
Intrest
Ending Pricipal
$ 140,000.00
31-08-2012
$ 14,176.80
$ 5,938.35
$ 8,238.45
$ 134,061.65
31-08-2013
$ 14,176.80
$ 6,304.63
$ 7,872.17
$ 127,757.02
31-08-2014
$ 14,176.80
$ 6,693.45
$ 7,483.35
$ 121,063.57
31-08-2015
$ 14,176.80
$ 7,106.29
$ 7,070.51
$ 113,957.28
31-08-2016
$ 14,176.80
$ 7,544.58
$ 6,632.22
$ 106,412.70
31-08-2017
$ 14,176.80
$ 8,009.94
$ 6,166.86
$ 98,402.76
31-08-2018
$ 14,176.80
$ 8,503.97
$ 5,672.83
$ 89,898.79
31-08-2019
$ 14,176.80
$ 9,028.48
$ 5,148.32
$ 80,870.31
31-08-2020
$ 14,176.80
$ 9,585.33
$ 4,591.47
$ 71,284.98
31-08-2021
$ 14,176.80
$ 10,176.55
$ 4,000.25
$ 61,108.43
31-08-2022
$ 14,176.80
$ 10,804.20
$ 3,372.60
$ 50,304.23
31-08-2023
$ 14,176.80
$ 11,470.59
$ 2,706.21
$ 38,833.64
31-08-2024
$ 14,176.80
$ 12,178.06
$ 1,998.74
$ 26,655.58
31-08-2025
$ 14,176.80
$ 12,929.16
$ 1,247.64
$ 13,726.42
31-08-2026
$ 14,176.61
$ 13,726.42
$ 450.19
$ 0.00
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