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Business Math Quarter 3 Week 8
Business Math Quarter 3 Week 8
Student’s
Name Grade and Section
___________________________________ ________________________
Teacher Date Submitted
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Introduction
Did you know that break-even analysis is a very important factor in understanding the
financial health of a company? It helps determine the relationship among various elements
such as costs (variable and fixed), prices, and volume of sales that will make revenue and
total cost equal, which means that there is no profit nor loss.
This learning activity will explain the break-even point, the way it is computed, and
the formula in determining the break-even point. This packet also includes analyzing and
solving various problems which involve buying and selling of products that could enhance
the analytical and problem-solving skills.
Another important topic included is to help you understand how interest is applied on
either investment or obligation. As you go through, a scientific calculator is essential for
significant computations.
Let’s begin.
Learning Competencies
1. Determine the break-even point.
2. Solve problems involving buying and selling products.
3. Compute interest specifically as applied to mortgage, amortization, and on
services/utilities and on deposits and loans.
Activities
Lesson 1
Break-Even Points
Example 1:
Calculate the break-even point in sales units and sales in pesos from the following
information:
Unit price ₱20
Variable cost ₱8
Fixed costs ₱12,000
Solution:
Substituting the given values into the formula for break-even point in sales
units, we get:
FC
BEP∈Units(x)=
P−v
₱ 12,000
BEP∈Units ( x )=
₱ 20−₱ 8
x=1000 units
BEP∈Pesos=(Unit Price)( BEP∈Units)
¿( ₱ 20)(1,000)
BEP∈Pesos=₱ 20,000
Example 2:
Ace Merchandising’s variable cost per unit is ₱ 8.00. The company’s rent expense is
₱ 4,000; salaries expense is ₱ 8,000 and bank loan amortization is ₱ 4,000. If the company
sold a total of 20,000 units yielding total sales of ₱ 200,000, find the BEP in units and BEP
in pesos.
variable cost per unit ( v )=₱ 8.00
Rent expense ¿ ₱ 4,000
Then, we can now find the BEP in units and BEP in pesos
FC
a. BEP∈Units(x)=
P−v
₱ 16,000
BEP∈Units(x)=
₱ 10−₱ 8
₱ 16,000
BEP∈Units(x)=
₱2
BEP∈Units ( x )=8,000
Lesson 2
Buying and Selling
Example 1
Janine buys a girl’s cologne for P35. The rate of mark-up based on cost is 25%. Find
the selling price and the mark-up.
Solution: MU = 0.25 x 35
= ₱ 8.75
SP = ₱35 + ₱8.75
SP = ₱ 43.75
The selling price of girl’s cologne is ₱ 43.75 which includes a mark-up of ₱ 8.75
Find the cost and mark-up of one ream of white long bond paper being sold for P125
with a 20% mark-up based on selling price.
Solution:
MU = (MU%) (SP) C = SP – MU
= 0.20 x ₱125 = ₱125 – ₱25.00
=₱25.00 = ₱100.00
The cost price of one ream of long white bond paper is P100.00 and the mark-
up is ₱25.00.
Example 3
Mang Gorio, a meat vendor in Barangay San Isidro, supplies meat not only in his
own barangay but also in the neighboring barangays. He decided to increase the price of
meat by ₱5 per kilo. If the cost of pork is ₱270 per kilo with a 25% mark-up, what is its new
selling price with the additional increase of ₱5? By how much is the rate of mark-up based
on cost increased by adding ₱5 to the regular selling price of the pork?
Solution:
MU ¿ ( 0.25 ) ( ₱ 270 )
¿ ₱ 67.50
Lesson 3
Interests and Its Application
Solution
Given: P = ₱ 500,000
r = 6%
t = 8 years
I =?
I =Prt
= (₱ 500,000) (0.06) (8)
= ₱ 240,000
At the end of 8 years, you would have earned ₱ 240,000 worth of money. Add it to
your deposit, you would have ₱ 740,000 in your bank account.
Example 2 (Simple Interest on Loans)
Masha borrowed ₱950,000 from a bank. The bank charges 12% simple interest per
year. How much interest will be added to her loan after 3 years?
Solution:
Given: P = P950,000
R = 12%
T = 3 years
I =Prt
= (₱ 950,000) (0.12) (3)
= ₱ 342,000
After 3 years, Masha must pay ₱ 342,000 interest. Add it to her loan, she will have to
pay ₱ 1,292,000 worth of money.
Compound interest – the interest on the first compounding period is added on the
principal, which will then be the basis for the interest to be computed for the next period.
It is important that you get familiar with compounding frequency. You will use m to
denote the compounding frequency. See the table provided on the next page.
You will use this formula in order to compute for compound interest.
I =¿
Example 4
Pure Waters is the only distributor of potable water in the locality. Your family
received ₱ 678.40 water bill for May with due date on June 5. A 10% penalty is charged for
delayed payment. If you pay 3 days after the due date, how much is the penalty? How
much is your total expenditure on water consumption for the month?
Solution:
Penalty = (₱678.40) (0.10)
= ₱67.84
Mortgages
A mortgage loan uses property as collateral. The lender usually requires a down
payment for the loan. The down payment represents a certain percentage of the purchase
price of the property.
Example 1
Assume that you wish to purchase a second-hand motor bike worth ₱44,000 and the
seller requires 20% down payment. How much would your initial cash out be? Find the
amount of the mortgage?
Solution:
Remember that down payment is a percentage of the purchase price. To compute for
the down payment:
Solution:
Given:
P (loan’s initial amount) = ₱1,500,000
i (interest rate) = 7.5%
n (total number of payments) = 1
Find: F (total amount due after maturity) = ?
I (total amount of interest paid) = ?
F = P (1 + i)n
= ₱1,500,000 (1 + 7.5%)1
= ₱1,500,000 (1 + .075)1
= ₱1,500,000 (1.075)
= ₱1,612,500
The amount P1,612,500 must be paid by Mr. Guevarra after one year.
To compute for interest, we simply deduct the loan’s initial amount from the maturity
value.
I =F−P
I =¿₱1,612,500.00 - ₱1,500,000.00
I =₱ 112,500.00
Solution:
Before you proceed to the computation, it is important that you understand annual
percentage rate or APR. The 5% is APR. Since you will make monthly payments, you must
convert the 5% APR into a monthly rate.
You must divide 5% by 12 to get 0.416%. Your monthly rate is 0.416%. To determine
the monthly payment, use the following formula:
A=iP ¿ ¿
1. Equal Principal Payments- under this arrangement, the loan is repaid in equal amounts
of principal. The installments are unequal, however, because the interest payment is
largest in the first year and becomes smaller as the principal is gradually paid.
2. Equal Amortization- the loan is repaid in equal installments. The amount applied to
principal is smallest in the first year, then the same payments to principal gradually
increases through the payment years, the largest of which is made on the last year. The
decreasing payments on interests, however, equalizes the uneven payments on
principal.
Solution:
The amortization schedule will be constructed using the following steps:
Step 1. Determine the amount of principal repaid each period by dividing the principal by
the number of payments
For the above example, it would equal to ₱ 120,000 ÷ 12 years = ₱ 10,000.
Step 2. Multiply the periodic interest rate by the outstanding balance at the beginning of
year to determine how much of this payment will go toward interest.
For the first row, ₱ 120,000 x 8% = ₱ 9,600
Step 3. Add the principal portion to the interest portion to determine the total payment for
the period.
For the first row, ₱ 10,000 + ₱ 9,600 = ₱ 19,600
Step 4. Go to the next row and repeat only steps 2 through 4.
Solution:
The amortization schedule will be constructed using the following steps:
Step 1. Determine the amount of amortization payment for each period using this formula:
8%
A=iP ¿ ¿ ; i= =0.667 %
12
[ ( 0.667 % ) ( ₱ 120,000.00 ) ](1+0.667 %)(12)(1)
A=
(1+0.667 %)( 12)( 1)−1
For the above example, the monthly amortization is equal to ₱ 10,438.83. The
outstanding balance at the beginning of the month shall decrease by ₱ 10,438.83.
Step 2. Multiply the periodic interest rate by the outstanding balance at the beginning of
month
to determine how much of this payment will go toward interest.
For the first row, ₱ 120,000 x 0.00667 = P800.40
Step 3. Subtract the interest portion from the total payment at the end of the month to
determine the amount of principal paid for the period.
For the first row, ₱ 10,438.83 – ₱ 800.40 = ₱ 9,638.43
Practice Exercises
1. Find the break-even point in units and in peso given that the unit price of a certain
commodity is ₱ 15.00; variable cost, ₱ 5.00; and total fixed cost, ₱ 12,000.
2. Grace merchandising’s variable cost per unit is P8.00. The company’s rent expense
is P4,000.00; salaries expense is P8,000.00 and bank loan amortization is
P4,000.00. If the company sold a total of P20,000.00 units yielding a total sale of
P200,000.00, find the BEP in units and BEP in pesos.
3. A polo costs Mr. Moreno P150.00 and he decides to mark it up by 20% of the selling
price. Find the selling price and mark-up for the said polo.
4. During a Grand Sale, a Nike sneaker regularly priced at P5,000.00 was sold at 55%
discount. The cost of the Nike sneaker is P3,540.00 and expenses are 12% of the
regular selling price.
a. How much is the selling price of Nike sneaker?
b. What was the amount of the mark-down?
c. What was the rate of mark-down?
5. A ₱ 7,800,500 loan was granted to Hyae Photography. The loan carries 9% annual
interest compounded quarterly for 3 years. Prepare an amortization schedule using
the equal amortization payment program. Use the table below as your guide.
Answer Key
Practice Exercises
1. The break-even point BEP in number of units would be:
X= FC
(P-v)
BEP in Units (x) = P12,000.00 = P12,000.00 =1,200.00 units
P 15-5 P10
The break- even point BEP in pesos would be:
BEP in Pesos = Unit Price x BEP in Units
BEP in Pesos = 1,200 units x P15 = P18,000.00
2. The break-even point BEP in number of units would be:
X= FC
(P-v)
Unit Price = P200,000/20,000 units
= P10.00
BEP in Units (x) =P16,000 = P16,000 = 8,000 units
4. A. 100% - 55% = 45% (the sale price is 45% of the selling price)
SP = 0.45 X S
= 0.45 X P5,000.00
= P2,250.00
The sale price of the Nike sneaker is P2,250.00
B. CTOTAL =C+E
= 3,540.00 + 0.12 X P5,000.00
= P4,140.00
P = SP – CTOTAL
= 2,250 – 4,140
= P1,890.00 (Loss)
The loss made on the sale was P1,890.00
Reflection
Development Team