PREPARATION FOR TEST 2 (MAT 112)

REVIEW QUESTIONS

MARKUP & MARKDOWN

a) Saleha Boutique purchased 50 dresses for RM 3,250. Saleha wanted a net profit of 40%
based on the selling price. If the operating expenses were 18% based on the cost,
determine:
i) the selling price of a dress
ii) the gross profit of a dress
iii) the breakeven price
iv) maximum markdown rate that could be offered without incurring any loss
v) if she sets the selling price at RM 6,500, what is the net profit?

b) The Strawberry Candy Computer wants to produce limited edition special candy for the
New Year celebration. The company decides to produce only 1,000 the limited edition
candy at a cost of RM 12,500. The net profit for each candy is 15% based on cost and the
total operating expenses for the candies is RM 555.50.
i) What is the selling price for each candy?
ii) Calculate the total gross profit for the candies.
iii) Find the breakeven price for the candies.
iv) What is the maximum percentage of markdown that can be offered without incurring
any loss?

c) A seller bought 50 pairs of earing for RM 750. He then sold 35 pairs of earing at RM 25
each. What should the selling price of each unsold earrings be if the seller wants to
maintain a gross profit of 50% based on cost?

INSTALLMENT PURCHASE

a) Farid bought a set of sofa at RM 5,000 using installment plan without down payment and
made equal monthly payments in three years. If the interest charged was 8.5% based on
the reducing balance, find
i) the total interest charged on him.
ii) the installment price.
iii) the monthly payment.
iv) the outstanding balance if he decided to settle the balance immediately after making
the 28th payment using the rule of 78.

b) Sheena bought a computer notebook at RM 1,700 through an installment plan. She paid a
RM 500 down payment and the balance was settled by making 12 monthly installments.
If the interest rate charged was 7.5% per annum on the original balance, calculate
 i) the total interest charged
ii) the monthly payment
iii) the outstanding principal balance if she decided to settle the balance immediately after
making the 5th payment using the Rule of 78
c) After paying RM 400 as a down payment for a kitchen cabinet, Sharon paid RM 125 a
month for 2 years for the balance. The interest charged on the original balance was 4%.
i) Determine the cash price of the kitchen cabinet and total interest paid.
ii) Calculate the amount of outstanding balance just after the 15th payment using the
Rule of 78.
iii) Find the interest rate using the constant ratio formula.

DEPRECIATION

a) The cost of a new machine is RM 75 000. It is estimated to have a useful life of five years
with a scrap value of RM 15 000. Calculate the book value and the accumulated
depreciation of the machine at the end of three years using
i) The declining balance method
ii) The straight line method

b) A sewing machine has a scrap value of RM 3,000 at the end of 5 years. The book value at
the end of the third year is RM 4,500. Using the straight line method, find the cost of the
sewing machine.

c) The manager of a transport company estimates that the value of its vehicles will
depreciate at an annual rate of 15% based on declining balance. How long does it take a
vehicle to have a book value of RM 5,000 if the cost was RM 60,000.

d) Motorbike.com bought a motorcycle for RM 30,000. The motorcycle has a life

expectancy of 10 years with a scrap value of RM 8,000. After 3 years, the motorcycle was
sold for RM 20,000. Calculate the difference between the book value and the amount
received from selling the motorcycle if Motorbike.com uses
i) the straight line method
ii) the reducing balance method.

e) The Wirama Company bought a machine which costs RM 25,000 and has a useful life of
10 years. At the end of its useful life, the machine is estimated to have a value of RM
8,000. After 5 years, the company wants to sell the machine. Calculate the price that
should be offered based on the book value using;
i) The straight line method
ii) The reducing balance method