Chapter 1 Review Questions

Click on the question number to get to the solution.

Unless otherwise stated, round the final answer to 2 decimal places.  

^[1] A jewelry store’s sales and expenses are given below for the months of October, November and December:

1. Find the profits for each
2. Find the percent net margin for each

^[2] FST Computer Stores has decided to give a total bonus of $10,000 to its outlets. The bonus will be proportional to the monthly sales (given below) for each outlet. Find the bonus for each outlet.

^[3] A-Plus Appliances two branches reported the following results for a one week period:

1. Find the gross and net profits for each branch.
2. Find the percent gross margin and percent net margin for each

^[4] Joan’s Co. knows that, nationwide, companies in its industry earn, on average, a percent gross margin of 38% and a percent net margin of 11%.  Joan’s Co. forecasts sales of $730,000 next year. If it aims at the same profit ratio as the nationwide average, estimate Joan’s cost of goods, gross profit and net profit.

^[5] Jim’s Co. sees that its competitor sells an article for $42.00. It knows that the competitor pays $30.00 for the article.

1. What is the competitor’s markup (dollar amount)?
2. What is the competitor’s percent markup?
3. What is the competitor’s percent gross margin?

^[6] At one time the exchange rate for the Canadian dollar was: 1 CAD = 0.76 USD

For the Danish krone the rate was: 1 krone= 0.155 (USD)

1. Find the value of $1 USD in terms of Canadian dollars (4 decimal places).
2. Find the value of one Danish krone in terms of Canadian dollars (6 decimal places).
3. How much would it cost (in Canadian dollars) to purchase 10,000 krones (2 decimal places)?
4. How many krones can be purchased for $500 Canadian (2 decimal places)?

^[7] JB Appliances received an invoice which contained the following information:

• Date, June 17, 2018 Items:
• 10 Refrigerators; list $710 each, less 25%, 20%
• 5 Dryers; list $420 each, less 25%, 20%, 5% (special sale)
• Freight charge $208
• Payment terms 3/10 net 60

Find:

1. 1. The last day for
   2. The amount due if the invoice was paid on the last day.
   3. The last day at which the cash discount
   4. The amount of discount allowed on the day in (c).

1. The amount to pay off the invoice on the day in (c)

^[8] Mac’s Wholesale buys from a distributor which allows discounts of 25%, 20% and 5%.

1. What single discount (called the single equivalent discount) would be equivalent to the above discounts?
2. Compare the above discounts to discounts of 30%, 20%.

^[9] A branch of Jack’s Hardware has been told by its head office to sell goods at a percent gross margin of 40%. What percent markup should the branch use?

^[10]  CHMCO sells a product with discounts of 25%, 15% to its distributors. It plans to allow a seasonal discount to make the overall discount equal to 45%. What additional (chained) discount should CHMCO allow?

^[11] Wilson Co. has received an invoice dated October 17 for 5 items with list price $900 each, and for freight of $170. The terms were:

• Trade terms: list less 20%,15%.
• Payment terms: 3/10, n/30.

Find:

1. The last day for payment
2. The amount due if payment is made on the last day
3. The last day for taking a cash discount
4. The amount needed to pay the invoice on the day in (c).
5. If the seller agrees to give a cash discount on a partial payment, how much credit would be applied to the account if $1,500 were paid immediately?

^[12] Three companies, Alpha, Beta and Gamma, are the only suppliers to a specialized market. Last year Alpha’s sales were $700,000, Beta’s $1,200,000 and Gamma’s $1,600,000.

1. What was the market share (percent of market) of each company?  Note: retain all decimal places calculated in (a) to solve (b) and (c).
2. If next year’s total market is expected to be $5,000,000 and each company’s share remains the same, what would be the sales of each company?
3. Alpha has an aim of making its sales 75% of Beta’s. With total sales as in (b) and Gamma’s as in (b) what would have to be the sales of Alpha and Beta if Alpha were to make its aim?

^[13] Janet’s Co. has sales of $90,000, COGS of 80% of sales and operating expenses of $5,000.

1. Find the gross and net profits.
2. Find the rate of markup (based on cost).
3.  Find the percent net margin.

^[14] Jim’s Co. has set a requirement on stock items of a turnover ratio of 2.6 per year. It is examining three stocked items, A, B and C, which have to be bought in large amounts. As a result of the purchasing requirements, the maximum stock for A is $1,000, for B $1,200 and for C $2,500.   If the average stock is assumed to be one-half the maximum stock, what would be the required annual sales of each of these items?

^[15] Majjor Oil Co. allocates its maintenance budget to three of its branch offices on the basis (i.e., proportional to) of total floor space. Branch I has 9,000 sq. ft., Branch Il has 20,000 sq. ft. and Branch III has 15,000 sq. ft. If $880,000 is to be allocated, how much should each branch receive?

^[16] A paint is advertised for sale with a price of $11.00 USD per gallon. Find the price in CAD/liter if 1 CAD = 0.73 USD

Given:

• 1 liter = 1.0567 quarts
• 1 gallon = 4 quarts

^[17] The wellhead price of a certain grade of oil is $69.00 USD per barrel. What is the price in CAD per liter?

• 1 CAD = 0.73 USD
• 1 Barrel = 31.5 US Gallons
• 1 liter = 1.0567 quarts
• 1 US Gallon = 4 quarts

^[18]  An invoice arrives from the Home Shopping Network. The invoice is dated May 28th, and the invoice amount is $600. Calculate the net payment of the invoice if the te1ms are 2/10, n/30 and the invoice is paid on June 6.

^[19] An invoice dated Aug. 12th for $745 containing the terms “3/15, n/60” was paid on Aug. 25th  How much should the cheque be to pay this invoice?

^[20] An invoice dated May 4th for $1,200 has terms 3/10, 2/30, n/60. How much should be paid on May 31st to fully pay off the invoice?

^[21] An invoice dated May 1st for $4,000 has terms 3/10, 2/20, n/45. It was partially paid by a $1,000 payment on May 10th and a second payment of $1,500 on May 20th. What is the outstanding balance after the May 20th payment?

^[22] A dealer purchased 10 DVD players at $300 each less discounts of 25% and 5%, and 5 TV’s at $450 each less 30%, 10% and 2%. The invoice for these items was dated June 5th and had terms 2/10, n/30.

1. If the dealer wishes to take advantage of the cash discount, what would be the last day for payment?
2. What amount must be paid on the day found in part a) to fully pay it off?
3. If the dealer only sent in $2,500 on June 15th what would be the outstanding balance?

^[23] An invoice for $12,000 has payment terms 3/10, 2/20, n/45. Discounts are allowed for partial payments. The company made of payment of $4,000 9 days after the date of invoice, and a second payment 18 days after the date of the invoice that reduced the balance owing to $2,000. What is size of the second payment?

^[24]  An invoice for $2,500 has terms 2/10, n/30. The invoice is dated April 27th and half of the invoice amount is paid on May 1st and the rest is paid on May 20th. If the seller grants discounts for partial payments, by how much is the balance reduced by the 1st payment? What is the total amount paid?

^[25] A seller grants discounts for partial payments. An invoice for $1,200, dated May 1st, has terms 2/10, 1/15, n/60 and $400 is paid on May 5th, $400 on May 14th and the rest is paid on June 5th• How much is the balance reduced by the two early payments? How much is paid on June 5th?

^[26] Chan Enterprises sent CK Air an invoice dated Sept. 14th for $5,400 with terms 3/10, 1.5/20, n/45. CK Air made a payment of $2,000 on Sept 24th and a second payment on Oct 3 that reduced the balance owing to $1,000. What was the size of the second payment?

^[27] You receive an invoice from AG Electronics dated Feb. 10th for:

• 20 TV sets at $500 per set less 20% and 15%.
• 30 DVD players at $200 each less 25% and 10%.

AG Electronics has payment terms 2/10, 1/20, n/45. Cash discounts are allowed for partial payments. They make of payment of $4,900 on Feb 18th and a second payment on Feb 26th that reduced the balance owing to $1,500. What is the size of the second payment?

^[28].    The Harrison Lake Corporation likes to maintain a capital structure of 5:4:2 (dollar value of debt to common shares to preferred shares). The company is considering a new project and will need to raise $3,300,000. If the company wishes to maintain its existing capital structure, how much debt, common stock and preferred stock should they issue?

^[29] The Ministry of Education allocates its budget in proportion to student enrollments. The Ministry has $1,500,000 to allocate and the student enrollments are as follows:

1. Allocate the budget in proportion to
2. The following year total enrollment is expected to reach 65,000. High Knowledge Institute is expected to have 3,000 more students and the ratio of students at The Institute of Technology to Students at Hard Knocks will remain the same at 15:13. Give the new estimate for enrollment at each

^[30] An engineering firm is owned by three partners (Alan, Barbara, and Chuck) with 4,000, 3,000 and 1,000 shares respectively. The company’s net income for the year is $4,500,000 and 10% of that income has been set aside as a performance bonus. The bonus will be allocated in the following way:

• $70,000 to be distributed amongst all staff excluding the partners.
• Each partner will get $80,000.
• The remainder is to be divided among the partners in proportion to the number of shares held.

What was the total amount of bonus received by each partner?

^[31] The $300,000 yearly rent of a four-story building is to be expensed to the four departments using it according to the number of floors occupied. Sales occupies two floors, Finance one floor, Administration and Research and Development (R & D) share one floor equally. How much of the rent expense is allocated to each department?

^[32]  Last year, Reliable Securities established a sales achievement bonus fund of $10,000 to be distributed at the year’s end among its four-person mutual fund sales force. The distribution is to be made in the same proportion as the amounts by which each person’s sales exceed the basic quota of $500,000. How much bonus will each salesperson receive from the fund if the sales figures for the year were $910,000 for Alicia; $760,000 for Bob; $460,000 for Charles; $630,000 for Diana?

^[33] For the past seven years the sales of Departments A, B, and C have maintained a relatively stable ratio of 4:3:2. Department A is predicting that their sales will be $500,000 next year. Based on their past sales ratio, what sales would be predicted for Department B?

^[34]  If the chain discount on an item listed at $2,200 is 40%, 15%, 5%, what is the net price? What single rate of discount is equivalent to this series of discounts?

^[35] The Ray department store is selling all summer clothes at 50% off the regular retail price during the month of September. On Saturdays only, they are offering an additional 20% off the already discounted price. What is the single equivalent discount rate on Saturdays?

^[36] A publisher sells its romance novels with chained discounts of 20% and 10%. The publisher would like to add a third discount to bring the overall discounts to 31.6%. Find the third discount rate.

^[37]  If the net price of a typewriter was $425.59 after chain discounts of 25%, 10% and 3%, what was the list price? What is the equivalent single discount rate?

^[38]  A patio set is listed at $350. What is the size of the discount (in dollars) if the buyer is eligible for discounts of 30%, 15% and 5%? Convert the chain discount into a single equivalent discount rate.

^[39] Which offers the larger discount? Manufacturer A offering chain discounts of 30%, 20%, 5%, 2% or Manufacturer B giving 45%, 13%?

^[40] Island Remanufactured Wood Products Inc. sells its products at trade discounts of 30%, 10%. A competitor has been offering products at the same list prices but with trade discounts of 25%, 20%. Island Reman wishes to beat the competitor’s prices by offering a third trade discount. At least how big must the additional discount rate be to meet this objective?

^[41] Toys-R-Costly sells Barbie Computers for $840 less 20% and 15%. A competitor sells a similar computer for $800 less 25%. What further discount (second discount) must the competitor allow so that its net price is the same as Toys-R-Costly’s?

^[42] In order to stimulate sales of file cabinets, a manufacturer had to offer a temporary additional discount to its present rate of 25%. The list price is $300. What additional temporary discount would have to be given in order to achieve a net price of $150?

^[43] Wadi Air Conditioners Ltd. sells one model at a list price of $500. Retailers are offered discounts of 15% and 10%.

1. Find the net price of an air conditioner.
2. Find the single equivalent discount rate
3. Wadi would like to add a third chained discount to bring the total discount to 27%. Calculate the rate of the third discount.

^[44] A company manufactures Bluetooth Speakers. The Speakers retails for $400 and are offered to the wholesaler with chained discounts of 10% and 15%.

1. Find the net price after discount.
2. What is the single equivalent discount rate?
3. The manufacturer would like to add a third discount to bring the total discount to 30%. Calculate the rate of the third discount.
4. A competitor offers a single discount of 25%. This amounts to a discount of $87.50 off the list price. What is the list price?

^[45]  After graduation you decide to start up a business selling spices imported from Colombia. The main product you import, saffron, sells for 95,149.87 Pesos for a 4-ounce jar. In Canada, you sell the product in 125 gram bags. Find the selling price in Canadian dollars per 125 gram bag. Use the following:

• 1 pound = 454 grams
• 1 USD = 1.5644 CAD
• 125 grams = 1 bag
• 16 ounces = 1 pound
• 0.000427 USD = 1 COP (Columbian Peso)

^[46] You are taking a holiday in Britain. You are taking $750 USD with you. How many British pounds can you buy with this money?

Rates:

• $1 USD= $1.5644 CAD
• 1 British pound (£) = $2.1356 CAD

^[47] You are thinking of expanding your bottled  water  company to the US. Your company bottles pure Fraser River water collected near the Oak Street Bridge. Your water currently sells for $0.85 per 600 ml bottle.  The water shipped  to the US would be sold in quart bottles. What price, in US dollars, should you charge for a quart of your water? (Convert the Canadian price per 600 ml to a US price per quart).

Rates:

• $1 USD= $1.5644 CAD
• 1 Gallon = 3.7853 Litres
• 4 Quarts = 1 Gallon
• 1,000 ml = 1 Litre

^[48] You missed the Back Yard Boys concert at GM Place, and have decided to drive to Seattle to see them. After driving through customs, you stop at the Thrifty market in Blaine. You see a quart size bottle of Duff Cola selling for $1.89 USD. You would like to compare this price to the price of a Canadian can of Cola. Convert the price to Canadian dollars per can.

Rates:

• $1 USD = $1.5644 CAD
• 1.0567 Quarts = 1 Litre
• 1 Litre = 1,000 ml
• 1 can = 355 ml

^[49] In California gasoline sells for $1.99 USD per gallon. In British Columbia gasoline is currently selling for $0.729 CAD per liter. Convert the Canadian price per liter to US dollars per gallon. Is the price of gasoline cheaper in California or in BC?

Rates:

• $1 USD= $1.5644 CAD
• 1 Litre = 1.0567 Quarts
• 4 Quarts = 1 Gallon

^[50] You purchase gasoline for your gas stations from local refineries. A number of labour disruptions and increasing costs have motivated you to consider importing gasoline from the Emirate of Abu Dhabi. Refined gasoline sells for 91.30 Dirhams per barrel. Calculate the equivalent Canadian price in liters given:

Rates:

• 3 Dirhams =  1 USD
• 0.638 USD =  1 CAD
• 1 Barrel = 42 Gallons
• 1 Gallon = 4 Quarts
• 1 Quart = 0.9464 Liters

^[51]  Fill in the Following Table:

^[52] A computer dealer buys NADIR brand VR headsets for $3,500 less 10%, 5% and sells them for $3,299.

1. What is the Cost?
2. What is the rate of markup?
3. What is the percent margin?

^[53] An outboard motor costs the retailer $500 less chain discounts of 30%, 25% and 5%: The company maintained a margin of 40% on all items. The motor was sold after it had been marked down 25%.

1. What was the regular selling price?
2. What was the actual selling price (sale price)?
3. What rate of markup did they use? (based on part b)

^[54] A souvenir stand bought 300 hockey sweaters for $15 each. They sold 170 at the regular selling price of $30 each but had to sell another 70 sweaters at a 35% discount (markdown) near the end of the hockey season and the remaining sweaters were cleared by selling them at a breakeven price which exactly covered the cost of the sweaters plus overhead. Overhead (operating expenses) are roughly 25% of cost.

1. What was the selling price per sweater for the 70 sweaters sold near the end of the season?
2. What was the selling price per sweater for those sweaters sold at the breakeven price?
3. What was the gross profit (loss) and net profit earned from the sale of the 300 sweaters?

^[55] Wilma Inc. prices its products to provide a 25% margin. What rate of markup do they use?

^[56] You know that a TV retailer makes $50 on the sale of a certain model of television set and the retailer has a markup policy of 20% of cost.

1. How much did this TV set cost the retailer?
2. What is the selling price of the TV set?
3. Find the percent margin.

^[57] A diamond ring sells for $4,500. If the rate of markup is 110%, what did the ring cost the retailer? What is the percent margin?

^[58] An item that cost the dealer $350 less 35% and 12.5% carries a price tag at a markup of 150% of cost. For quick sale, the item was reduced 30%. What was the sale price?

^[59] The selling price of an automobile is $9,500. If the markup is 15% of cost and the operating expenses are 2% of the selling price, how much is the gross profit (markup in $)? What is the net profit?

^[60] ABC Co. prices its products to provide a 43.5% margin. What rate of markup do they use?

^[61] A bookstore has a policy of maintaining a margin of 20%.

1.  If an item costs $90, how much should it sell for?
2. If another book sells for $120, how much did it cost?

^[62] The regular selling price of merchandise sold in a store includes a margin of 40%. During a sale, an item that costs the store $180 was marked down 20%. For how much was the item sold for?

^[63] An item sells for $500. If the company uses a 100% rate of markup, what is the cost of the item?

^[64] Scoopy-Doo Pet Foods prices its pet food to maintain a 45% margin. A 7-kg bag of Woof-Woof dog food costs $27.50. Calculate the selling price.

^[65] CK Winery sells its merlot red wine for $21.00. If the rate of markup is 200%, what did the wine cost the retailer? What is the percent margin?

^[66] If you knew that an appliance dealer makes $100 on the sale of a certain model of washing machine and the dealer has a markup policy of 20% of cost, how much did this washer cost the dealer? What is the selling price of the washer? Find the percent margin.

^[67] Find the cost of an item sold for $1,904 to realize a rate of markup of 40%.

^[68]  A retailer bought an article for $78 and his rate of markup is 32%. He sold this article in a sale after having marked it down by 30%. What is the sale price?

Solutions