Select business and technology college

Part I. true or false

Write true if the statement is correct and false if it is incorrect on the space provided

1. Transition matrix is square matrix has no negative entries and the sum entry in each row
is equal to one.
Answer: True

2. Breakeven point have indirect relationship with the fixed cost

Answer: False

3. Rational functions are continues for all values of X except those that makes a
denominator one
Answer: False

4. The derivative of F will not be define where the group of F has a sharp corner

Answer: True

5. Ordinary annuity is an annuity for which the periodic payment is made at the end of each
payment interval
Answer: True

6. Future value is present value of an amount that will be received in the future
Answer: True

7. In installment purchase, the money paid at the time of purchase is called cash price
Answer: True

8. Limit of constant real number is the constant real number itself

Answer: True

9. The derivative of a constant number is zero

Answer: True

10. Average cost is the rate of change of total cost with respect to the number of unit
produced

Answer: True

Page 1
 Select business and technology college

Part II. Multiple choices

Choose the correct answer among the given alternative and write the letter of your
choice on the space provided

1. A small home business set up with an investment of 10,000 birr for equipment the
business manufactures a product at a cost of birr 0.64 per unit. If the product sales for birr
1.20 per unit. What will be the break even output level
A. 64,000
B. 17,857.14
C. 1275.56
D. None of the above

Answer: B

2. Suppose you borrowed birr 2000 at 10% simple interest for 42 months. The total amount
of money that you have to pay at the end of 42 months is ------------
A. 1300 Birr
B. 2700 Birr
C. 2070 Birr
D. None of the above

Answer: B

3. ( ) ------------- is

A. 1.5
B. 2.5
C. √
D. None of the above

Answer: D

Page 2
 Select business and technology college

4. An investor has an opportunity to purchase two different notes. Note X pays 15%
compounded monthly and note Y pays 15.2% compounded semi -annually, which of the
two notes makes the better off?
A. Note X
B. Note Y
C. Neither
D. Both X and Y

Answer: B

Based on the following information try to answer question 5, 6, and 7

Smart manufacturing company has started producing and selling a product, in its first year it has
the following operation. Assume linearity

Unit selling price = 2 birr

Unit variable cost = 1.25 birr

Total revenue = 600,000

Total cost = 70%of total revenue

5. Smart company fixed cost is ---------------

A. 75,000
B. 45,000
C. 275,000
D. 85,000

Answer: B

6. What is the amount of variable cost

A. 300,000
B. 75,000
C. 375,000
D. 450,000

Answer: C

Page 3
 Select business and technology college

7. Smart company break even quantity is--------------------

A. 60,000
B. 113,333
C. 100,000
D. 500,000

Answer: A

8. ABC Company buys a computer costing 10,000 birr, if it pay 20% down payment and the
rest with equal monthly payment over one year at 15% compounded monthly, what is the
monthly payments the company should pay?
A. 707.67
B. 722.07
C. 772.12
D. 700.72

Answer: B

9. A friend promise to pay you 600 birr two years compounded annually from now if you
loan him 500 birr to day. What interest rate is your friend offering?
A. 7.5
B. 8.5
C. 9.5
D. 11.5

Answer: C

10. If a person wants an amount of birr 30,000 after 12 years by making a single deposit in a
saving account which pay 16% interest compounded quarterly. What should the amount
of initial deposit.
A. 5354.75
B. 5256.82
C. 4151.71
D. 4565.85

Page 4
 Select business and technology college

Answer: D

Consider the following augmented matrix to answer question 11

X1 X2 S1 S2 P
1 2 1 0 0 44
3 4 0 1 0 80
-50 -80 0 0 1

11. The pivot element is ------------

A. 4
B. 3
C. 2
D. 1

Answer: D

12. Alazar has set up a sinking fund in order to have 60,000 birr in 5 years for his children’s
college education. How much should be paid semi-annually in to an account paying 10%
compounded semi – annually?
A. 903.09
B. 654.33
C. 854.75
D. 905.5

Answer: no answer the correct answer is 4, 770.27

A= 60,000(0.05/1+0.05)10-1)

A= 4,770.27

13. Which of the following condition should be satisfied for the function F to be continuous
at the point X=C
A. exist
B. F(c) exist
C. = f(c)
D. All of the above

Page 5
 Select business and technology college

Answer: D

14. The effective rate of an investment at a rate of 10% compounded quarterly is -------
A. 10.38%
B. 11.21%
C. 9.35%
D. 12.51%

Answer: A

15. A table which shows in detail payment number, the period payment into the fund, the
interest earned by the fund, the increase in the fund an accumulated balance is –
A. Amortization schedule
B. Sinking fund schedule
C. Annuity schedule
D. Interest schedule

Answer: B

Part III. Work out

Work out the following question and show the necessary steps on the space provided

1. A bank loan 118,500 Birr to a company for the development of two products if the loan for
product A was 34,500 Birr more than for product B. how much was loaned for each product.

Solution

A+B= 118,500
A= B+34,500
So
B+34,500+B= 118,500
2B+34,500=118,500
2B= 118,500-34,500
2B= 84,000
B= 42,000

Page 6
 Select business and technology college

Hence
A= B+34,500
A= 42,000+34,500
A= 76,500
2. Suppose we find the all customer(100%) who shopped at store on in a given week, 90%
remain loyal and 10%switched to store two and out of all customers who shopped at store 2
in a given week, 80% remain loyal for the next week and 20% switched to store one. Assume
the behaviors remain constant for any three successive weeks
A. Write the transition matrix

Solution

Let S1 – represent store1

S2 –represent store 2

V12= (1 0)

The next week shopping period

S1 S2

S1 0.9 0.1

S2 0.2 0.8

B. What will be the proportion of customers shopping at store one and two after one
week, second week and third week?

(0.8 0.2 0.9 0.1

0.2 0.8

(0.8) (0.9) + (0.2)(0.2) (0.8)(0.1)+ (0.2)(0.8)

0.72+0.04= 0.76 = 0.08+0.16= 0.24

V12= (0.76 0.24)

Page 7
 Select business and technology college

V12= (0.76 0.24) 0.9 0.1

0.2 0.8

(0.76)(0.9)+ (0.24)(0.2) (0.76)(0.1)+ (0.24)(0.2)

= 0.68+ 0.048= 0.732 = 0.076+ 0.192= 0.268

V12= (0.732 0.268)

0.9 0.1

V12= (0.732 0.268) 0.2 0.8

(0.732)(0.9) + (0.268)(0.2) (0.732)(0.1) + (0.268)(0.8)

= 0.6588 + 0.0536= 0.7124 = 0.0732 +0.2144= 0.2876

V12= (0.732 0.268)

3. Based on the following data answers question 3:

Given A= 5 4
3 5

Find the inverse of matrix A, A-1

Solution

A= 5 4

3 5

Augmentation  5 4 1 0

3 5 0 1

Page 8
 Select business and technology college

Divide first rows by 5

1 4/5 1/5 0
3 5 0 1

Multiplying the first rows by -3 and add R2 R2

1 4/5 1/5 0

0 13/5 -3/5 1

Divide R2 by 13/5

1 4/5 1/5 0

0 1 -3/13 5/13

Divide rows 2 by -4/5 and add row 1

1 0 5/13 -5/13
0 1 -3/13 5/13

Therefore, inverse of A

A-1 = 5/13 -5/13

- 3/13 5/13

4. A manufacturer of cassette tapes has a fixed cost of $ 60,000 and VC of 4 per cassette the
product. If the selling price is $7 per cassette
a. Write the revenue and cost equations in terms of quantity produced

Given

FC= 60,000

VC= 4

Selling price (SP) = 7

Page 9
 Select business and technology college

TR = PQ TC = VQ.C + FC
TR = 7Q TC=4Q+ 60,000

b. Compute the break even quantity

At breakeven point TR = TC

PQ = VC.Q + FC

7Q = 4Q+ 60,000

3Q= 60,000

60,000
Qe =
3
Qe = 20,000 units
There for Breakeven Quantity are 20,000 units

c. Compute the revenue /sales of break even

At breakeven the sales is

Sales volume = 20,000 X 7 = 140,000

Page 10