ALCORCON ENGINEERING REVIEW CENTER Cebu Main: 4" floor Coast Pacific Downtown Center, Sanciangko St, Cebu City Tol #(032) 254-33-84 Manila: 3° floor JPD Bldg. 1955, C M Recto Comer N. Reyes St, Sampaloc, Manila Tel # (02) 736-4498 DAY 12 - MATHEMATICS SAMPLE PROBLEMS PROBLEM 1 ‘Abank charges 12% simple interest on a P300 loan. How much will be paid if the loan is paid back in one lump sum after three years? ‘A. P408.00 B. P4I5.00—C. PS51.00 i. P5000 SOLUTION: F=P (1 +i) F = 300(1 + (0.12)3] F = P408.00 PROBLEM 2 Its the practice of almost all bank in the Philippines that they grant a loan, the interest for one year is automatically deducted the principal amount upon release of money to a borrower. Let us therefore assume that you applied a loan with @ bank and the P80,000 was approved at an interest rate of 14% of which P11,200 was deducted and you were give a check of P68,800.00. Since you have to pay the amount of P80,000 one year after, what then will be the effective interest rate? A 1590% —B. 1628% —C. 16.30% © D. 16.20% Using simple interest formula P = P68 800.00 F = P80,000.00 F=P(1+in) 80,00 68,800{1 +1(1)] 6.28% PROBLEM 3 ‘A man borrowed P500,000.00 from a bank and agreed to pay the loan at the end of a months. The bank discounted the loan and gave him P450,000 in each. What isthe rate of discount? A 15% B. 10% ©. 12% D. 20% SOLUTION: Discount = 500,000 - 450,000 Discount = P50,000PROBLEM 4 Determine the exact simple interest on P5,500.00 for the period from January 10,1996 to October 28,1996 at 11% Interest ‘A P4268 —B P4985. 287.00 D. 532.88, SOLUTION: ‘Solving for number of days from January 10 to October 28 Month No. of days January 21 February 29 ‘March 31 ‘Apri 30 May 31 June 30 ‘ul 31 ‘August 31 ‘September__| 30 October 28 TOTAL 292 days Forleap year: 1 year = 366 days (exact interest) I= Pin 1 = 5,500(0.11)(292/966) | = pas2.63 PROBLEM 5 “The balance sheet of Oriental services Inc. are as follows: ‘ASSET TIABILITIES: Cash P 10,000.00 Payabies P17,000.00 Receivables 12,000.00 Noles due 6,000.00, Inventory 7,000.00, Long term debt | 3,000.00 Capital equipment | 20,000.00 ‘Owner's equity | P23,000.00 TOTAL 49,000.00. TOTAL, [49,000.00 ‘What is the acid test ratio? ‘A 0846 8. 0.592 ©. 1.115 D. 0.385 SOLUTION: ‘Acid test ratio = C88h + Accounts receivable Total Liabilties ‘Acid test ratio = 10.000 + 12000 __- po a4g 77,000 + 6000 + 3000 PROBLEM 6 P50,000.00 is borrowed for 75 days at 16% per annum simple interest. How much will be due at the end of 75 days? ‘A P6,16730 B. P5,164.38 C. P5,666.67 SOLUTION: F=P(1+in) F = 6,000[1 + 0.16(75/360)], F=P5,164.38 D. P6.666.67PROBLEM 7 ‘A manufacturing firm maintains one product assembly line to produce signal generators. Weekly demand for generators is 35 units. The line operates for 7 hours per day, 5 days per week. What maximum production time in hours required ofthe line to meet the demand? ‘A Thour B.O.75hours C, hours —D. 2.25 hours. SOLUTION: Time per unit = 7S, Sdays af hour day * week * 35units / week PROBLEM 8 An investor wishes to invest P40,000. Venue A, requiring P40,000, wil return 8%. Venture B, requiring P10,000, wll return 15%, What return on the remaining P30,000 is required to equal the overall profitability of venture A? A 423% B73 CC 1.23% ~~. 567% SOLUTION: Venture A= Venture B (0.08(40,000) = 0.15(10,000) + (30,000) 0.0567 = 5.67% PROBLEM 9 ‘Agnes Abanila was granted a loan of P20,000 by her employer CPM Industrial Fabricator & Construction Corporation with an interest of 6 percent for 180 days on the principal collected in advance. The corporation would accept @ promissory note for 20,000 non-interest for 180 days. If discounted at once, find the proceeds on the note. ‘®P1,200 B.P1,400 c.P18,800 D.P1,860 SOLUTION: Interest Interest 20,000(0.06) P1,200 Proceeds = 20,000 1,200 Proceeds = P18,800 PROBLEM 10 Fred wanted to buy refrigerator which will have a price of P13,000 for 90 days from now due to the increase in prices of 12 percent simple interest, What is the present worth of refrigerator? API2621 — B.PI3621 —C. P14.621 D.P15621 SOLUTION: F=P(1+in) 19,000 [1 + 0.12 (901360)] P=pi2621 COMPOUND INTEREST PROBLEM 1 If P5000 shall accumulate for 10 years at 8% compounded quarterly. Find the compound interest at the end of 10 years. ‘A P6,005.30 B. P6,000.00 C. P6,040.20D. P6,010.20SOLUTION: F e=2% t re 1044) Seemeeeseeanae 7 F=P+i) 4? s000 F = 5000(1 + 0,02)" F =P 11,040.50 Interest Interest = 11,040.50 - 5000 = 6,040.50 PROBLEM 2 AA sum of P7,000 is invested now and left for 8 years, at which time the principal is withdrawn. The interest that has accrued is left for another eight years. Ifthe effective annual interest rate Is 5%, what willbe the withdrawal amount at the end of the 16th year? ‘A. P706.00 —B. P500.00 C. P774.00 —_—D. P799,00 tre tre nee BEE coy frase fo Fre = Fo(1 +i)" 1,500.00 was deposited in a bank account, 20 years ago. Today itis worth P3,000.00. Interests paid semi-annually Determine the interest rate paid on this account? A 3% B. 2.9% ©. 3.5% D. 4% SOLUTION: fF =3000 po o tos 4s b YP 1500 n=20x2=40 Solving for the semi-annwal interest F=P(i+iy 3,000 = 1,500 (1 + iy 748% (semi-annual) 49% (annually) PROBLEM 4 If the nominal interest rate is 3%, how much is P5,000 worth in 10 years in a continuous compounded account? ‘A P5750.00 B. P6750.00 —C. P7500.00 _D. P6350.00 SOLUTION: F=Pe" F = 5000 f°]PROBLEM 5 ‘A merchant puts his P2,000 to a small business fora period of six years. With a given interest rate on the investment of 15% per year, compounded annually, how much will he colect atthe end of sixth year? ‘A.P4400.00 B. P4,390.15 C. P4,200.00 D. P4,626.00 SOLUTION: te F=P(itip F = 2000(1 + 0.15)° ee F = P4,626.00 YP 2000 PROBLEM 6 You are given the option to borrow P7,000 you need for one year. Which ofthis will you pay lesser interest. To borrow from a friend at an intrest rato of 1.5% month ora loan froma bank ata rato of 18% por year? ‘A. You will pay P108 more than if you borrow from a bank B. You will pay P108 less than if you borrow from a bank CC. You will save P'108 from borrowing from your friend D. Borrowing from a bank will give P108 less in interest SOLUTION: If borrowed from fiend: ‘Amount paid forthe loan after 1 year. 0.015, n= 1 yr = 12 months 1000 (1.016)"? = PB369.33 F Iborrowed from a bank: F = 7000(1.18)* = 8260.00 ‘Savings if borrowed from a bank ‘Savings = 8369.33 - 8260 = P109.33, Tnerefore the answer is: 8 PROBLEM 7 How much will be my PS,000 after 12 years in a bank with an interest rate of 8%. ‘A P12,69085 B. P12,32085 C. P12,200.00 D. P12,400.00 ‘SOLUTION: F = piri F = 5000(1.08)"? F = P12,590.85 PROBLEM 8 How mach do ! have to putin a bank that given an interest rate of 10% so that I can have a. bank balance of P100,000 after 10 years? ‘A. P38,654.40 B. P38,500.14 C. P38,530.40 D. P38,540.50 SOLUTION: F=Pcstiy 400,000 = P(1.10)"® P = P38,554.33PROBLEM 9 How much money should be deposited now in a savings account to yield P1,000 in 6 years? The annual interest rate Is 10% compounded semi-annually. ‘A.P556.85 —B. PA5.00 ©. P7900 —_—D. PST77.00 SOLUTION: F = P(eip (2) = 12 0.10/2 = 0.05 4,000 = P(1.05)" P= P556.85 PROBLEM 10 Find the compound amount and interest if P2,500 is invested at 8% compounded quarterly for 5 years and 6 months. AP7,200 — B P3600. P3,864.95D. P3,925 SOLUTION: (4) + 4(6/12) = 22 (quarters) o.08/4 = 0.02 Posi 5001.02) 3864.95 PROBLEM 11 ‘Mr Ayala borrows P1000. In 4 years the money become P1,608.44 compounded bimonthly. Find the nominal interest A1262% — B. 14.84% = C. 12% D. 15% SOLUTION: F=Pcsip n= 6(4) = 24 1608.44 = 1000(1 + i i = 0.02 (bimonthiy) vm = 0.02 (6)=0.12 12% (annually) PROBLEM 12 ‘A savings association pays 1.5% quartedy. What isthe effective annual interest rate? A 785% B.O55% CC. BS5% 6.10% SOLUTION: i= Geir (1+ 0.018) 1 = 6.14%PROBLEM 13 ‘A sum of money is deposited now in a savings account. The effective annual interest rate is 12% and interest is ‘compound monthly. How much money must be deposited to yield P500.00 atthe end of 11 months? ‘A.P153.00B. P4460 C. P4400. PAS1.00 SOLUTION: ‘Solving forthe equivalent interest per month: Gera (en 02 = 0.094888 F=P(isiy ‘500 = P(1 + 0.0094888)"* P = P450.55 PROBLEM 14 Abank offers 0.5% effective monthiy interest. What s the effective annual rate with monthly compounding? A 62% B. 7.2% ©. 6% D. 7% SOLUTION: asin (1+ 0.005)" = 1 = 6.17% PROBLEM 15 Ifyou born taney fom your fend wt snp interes of 12% find the present worth of P20,000 whichis due at he srt oti P8820 8 PIBSIB.SO C. P1860150 0. PtB348.60 SOLUTION: F = P(1+i) 20000 = P [1+ $0.12) P = P1g.348.62 PROBLEM 16 Find the nominal rate which f converted quarterly could be used instead of 12% compounded semi-annually A 1058% — B.1128% — C. 938% D. 11.82% SOLUTION: Effective annual interest quarterlyPROBLEM 17 ‘A businessman needs to have P100,000.00 in five years. How much must he put into his 10% savings account in the bank? ‘A. P62,092.50 B. P71,092.00 C. P72,088.00 D. P61,088.00 SOLUTION: F=pasiy 100,000 = P(1 + 0.10)° P = P62,092.13 PROBLEM 18 \What isthe worth of P54,000.00 due in 5 years if money is worth 11% and is compounded semi-annually? ‘A 31,613.00 B. P27,000.00 C. 30,613.00 D. 32,612.00 SOLUTION: F=pcsip 54,000 = P(1 +0.11/2)"" P= 31,613.25 PROBLEM 19 Its desired to convert a gradient cash flow ending at t= 9 to a future value at t= 49, Calculate the factor to be used ifthe effective annual interest rate is 10%, A614 8. 436 ©. 492 D. 45.3 SOLUTION: Factor = (1 +i where: n= 49-9 = 40 Factor = (140.10) = 45.30 PROBLEM 20 ‘Abusinessman needs to have P100,000,00 in five years. How much must he put into his 10% savings account in the bank? ‘A. P61,088.00 8B, P62,092.50 C. P72,088.00 D. P71082.00 SOLUTION: F = P(stip 100,000 = P(1 +0.10)° P = P62,092.13 PROBLEM 21 When will an investment of P40,000.00 double ifthe effective rate is 8% per month? A 84 B. 9.01 cas D. 102 SOLUTION: Fs P(tip where: 'S = 2(4000) = 8000 '8000'= 4000(1 + 0.08)" 2 = (1.08) Ina int.08 01 yearsPROBLEM 22 What amount of money would have to be invested to have P40,000.00 at the end of 3 years at a 10% compounded Interest rate? ‘A. P30,052.60 8B. P31,000.60 C. P32,050.59 D. P28,502.60 SOLUTION: F = P(+ip 40,000 = P(1 + 0.10)? P = P30,052.59 PROBLEM 23 AA bank offers 1.2% effective monthly interest. What isthe effective annual rate with monthly compounding? A 18.4% B. 14.8% ©. 89% D. 7.9% SOLUTION: s(t 2% = 0.012 '2 (monthly) (1+0.012)"—1 = 15.39% PROBLEM 24 What isthe present worth of P27,000.00 due in 6 years if money is worth 13% and is compounded semi-annually? ‘A. P12,681,00 B, P15,250.00 C. P13,500.00 D. P21,931.00 SOLUTION: F=pisiy P=p12.681.43, PROBLEM 25 ‘A ssavings association pays 4% interest, compounded quarterly. What is the effective annual interest rato? ‘A 18.045% — B. 16.98% C. 17.15% —D. 17.230% SOLUTION: (quertery) (1+0.04)'—1 = 16.985% PROBLEM 26 A student deposits P1,500.00 in a 9% account today. He intends to deposit another P3,000,00 at the end of two years. He plans to purchase in five years his favorite shoes worth P,000,00. Calculate the money that will be left in his ‘account one year after the purchase. ‘A. P1,280.00 B. P1,300.00 ©. P1,250,00 _D. P1,260.00 ‘ts 3000 tr oT ttt 7 Sea SOLUTION: 5000 F = 1500(1 + 0.09)° + 3000(1 + 0.09}¢ - 5009/1 + 0.09)" F=P1300.39PROBLEM 27 Funds are deposited in a savings account at an interest rate of 8% per annum. What isthe initial amount that must be deposited to yield a total of P10,000 in 10 years? ‘A P4,894.00 B. P4,590.00 C. P6,720.00 _D. P4,632.00 SOLUTION: F=P(i+ip 10,000 = P(1 + 0.08)'° P = P4.632.00 PROBLEM 28 ‘Amachine costs P20,000 today. If inflation rate is 6% per year and intorestis 10% per year, what willbe the appropriato future value of the machine, adjusted for inflation, in five years? ‘A. P36,300.00 8. P42,000.00 C. P28,500.00 D. P43,100.00 SOLUTION: ‘Solving forthe future amount due to interest rate of 10%: F=P(1+ip F = 20,000( 1 + 0.10)° 32,210.20 ‘Solving forthe future amount due to 6% inflation rat: F F (eip 32,210.20 (1 + 0.06)° = 43,104.81 PROBLEM 29 ‘A Mechanical Engineer wished to accumulate a total of P10,000 in a savings account at the end of 10 years. Ifthe bank pays only 4% compounded quarterly, what should be the inital deposit”, ‘A PA87694 B. P4,995.86 | C. P6,716.53 D. P5,890.11 SOLUTION: F=P(1+ip 10,000 = P(1 + 0.01)" P=P6716.73 PROBLEM 30 What isthe expected maintenance cost for a machine whose possible maintenance cost has the following distribution? 'P{P2000.00) = 0.20; p(P3000.00) = 0.3; p(P4,000.00) = 0.3; p(PS,000.00) = 0.10; p(PS,000.00) = 0.10. ‘A. P3,600.00 B. P3,100.00 CG. P4,000,00 D0. 'P4,600.00 SOLUTION: Expected Maintenance Cost = (2000 x 0,20) + (3,000 x 0.30) + (4,000 x (0.30) + (6000 x 0.10) + (6,000 x 0.10) = P3,600.00PROBLEM 31 ‘A product has a current selling price of P325.00. Its selling price is expected to dectine at the rate of 10% per annum because of obsolescence, what willbe its selling price four years hence? AP21323° |B. P20275 —C. P30275 OD. P156.00 SOLUTION: For decreasing amount: F=P(-iP F=325(1 -0.10)' = P213.25 BREAK-EVEN ANALYSIS PROBLEM 1 XYZ Corporation manufactures bookcases that it sells for P85.00 each. It cost XYZ P35,000 per year to operate its plant. The sum includes rent, depreciation charges on equipment, and salary payments. Ifthe cost to produce one bookcase is P50.00, how many cases must be sold each year or XYZ to avoid taking a loss? ‘A 2334cases B. 539cases C. 750cases D. 2333 cases, SOLUTION: Let 10. of cases to be produced to break-even To break-even, Income = Expenses Income = Variable cost + Fixed cost 65x = 50x + 35,000 x= 2333.33 say 2334 cases PROBLEM 2 ‘A company which manufactures electric motors has a production capacity of 200 motors a month. The variable costs are P150.00 per motor. The average selling price of the motor is P275.00. Fixed costs of the company amount to 20,000.00 per month which includes taxes. The number of motors that must be sold each month to break-even is closed to: A 40 B. 150 ©. 80 D. 160 SOLUTION: Let x=no, of units to break-even To break-even, Income = Expenses 278x = 150x + 20,000 x= 160 units PROBLEM 3 A factory is running 80% efficiency with a fixed cost of P78,000.00, variable cost per unit of 130.00, selling price per Unit of P416.00, and production capacity of 5000 units. What is the current profit of the factory if all products ‘manufactured are sold? ‘A. P1,352,000.00 CC. P1,086,000.00 B. P1,430,000.00 . P1;144,000.00 SOLUTION: Income = (5000 x 0.80)(P416.00) Income = P1,644,000.00 Expenses = (5000 x 0,80)(130) + P78,000Expenses = 598,000.00 Profit Profit Income - Expenses 1,644,000 - 598,000 = P1,066,000.00 PROBLEM 4 ‘A machine with an eight year fe and P5000 salvage is purchased for P40,000. Annual costs of operation are P800 ‘The machine operator is paid P12.90 per hour. Power is consumed by the machine atthe rate of P2.15 per hour. 2000 Units are produced each year on the machine, which requires 48 minutes per unt. Use a 10% interest rate to find the Unit cost A PI234 = B. P2345. PIS97 ©. 39.22 SOLUTION: p = (40000 - 500010.10) _ prey 54 (1+ 0.10% —1 Let x= price per unit ‘Solving for annual expenses: ‘Annual cost ‘Annual cost 3060.54 + (12.9 + 2.15)(48/60(2000) + 40,000(0.1) + 800 31,940 PROBLEM 5 A factory with capacity of 700,000 units per year operates at 62% capacity. The annual income is P430,000 annual fixed costs are P190,000, and the variable costs are PO.348 per unit. What isthe break-even point in units? ‘A. 324,234 units B. 112,456 units C. 295,590 units D. 323,456 units SOLUTION: Lot x = no. of units to break-even Income = Expenses 4300000 __ = 0.948 x + 190,000 0.62(700,000) x= 295,589.45 units ‘Thorofore the answer is: C PROBLEM 6 In determining the cost involved in fabricating sub-assembly B within a company, the following data have been gathered: Total Cost of Manufacturing Sub-assembly B Item Cost Direct material PO.30/unit Direct Labor Po.sojunit ‘Tooling set up 300 per set up Itis decide to sub-contract the manufacturing of assembly B to an outside company. For an order of 100 units, which Of the following unit price bids is unacceptable to the company? ‘A. P3.50 per unit C. P3.65 per unit B. P3.75 per unit D. P4.10 per unit SOLUTION: Let x= price per unitIncome = Expenses 4100 x = 0.3(100) + 0.5(100) + 300 x= P380 Therefore P4108 not acceptable tothe company since itis greater than P3.60, PROBLEM 7 The cost of producing an item is represented by the following equation: C = P25,000 + 0.03 P represents the numberof Rms produced. ithe tome ao sl for PHO bach, Row many must be solo break oven? A. 1100 B. 16,700 c. 17,000 D. 17,500 soLUTION: To Breakeven, Income = Expenses 4.5 =25000+ 003 P= 17006.8 units P= 17,007 units PROBLEM 8 A factory is running at 80% efficiency with a fixed cost of P3000, variable cost per unit of P5, seling price per unit of P16, and production capacity of 5000 units. What is the current prof ofthe factory if all the products manufactured are Sold? ‘A P4100 B, P44,000—C. P52,000 —_—D. P55,000 SOLUTION: Income = (0.80 x 5000)(16) Income = P64,000 Expenses = (0.8 x 5000)5) Expenses = P20,000 Profit = 64,000 - 20,000 = P44,000.00 PROBLEM 9 ‘Asteel drum manufacturer incurs a yearly fixed operating cost of P200,000. Each drum manufactured cost P160.00 to produce and sell for P200.00. What is the manufacturer's break-even sales volume in drums per year? A 1250, B. 2500 ©. 1000 . 5000, SOLUTION: Let _x= number of drums per year to break-even Income = Total expenses 2.00x = 160x + 200,000 x= 5000 units