SCHOOL OF BUSINESS AND MANAGEMENT

BACHELOR OF ACCOUNTING PROGRAM

BU521 BUSINESS MATHEMATICS

ASSIGNMENT ONE

WEIGHT: 15%

DUE DATE: 17/3/2016 (4.30pm)

QUESTION 1 (6 marks)
Real –estate agent fees are often calculated according to a set scale. In Honiara for instance, in 2016, the
fee was calculated as follows;
 5% on the first $15,000
 3% on the next $45,000
 2.5% on the subsequent $40,000
 2% thereafter
How much can a real-estate agent expect to earn from the sale of a one bedroom unit at $97,500 and two
houses sold at $435,000 and $218,250?

Solution:
To solve for total Commission -
1. Unit at $97,500:
Commission on first $15,000 =SxR
= $15,000 x 5% = $750.00
Commission on next $45,000 = $45,000 x 3% = $1,350.00
Commission on next $37,500 = $37,500 x 2.5% = $937.50
Total commission = $3,037.50

2. House at $435,000:
Commission on first $15,000 = $15,000 x 5% = $750
Commission on next $45,000 = $45,000 x 3% = $1,350
Commission on next $40,000 = $40,000 x 2.5% = $1,000
Commission on next $335,000 = $335,000 x 2% =$6,700

1
 Total commission = $9,800

3. House at $218,250:
Commission on first $15,000 = $15, 000 x 5% = $750
Commission on next $45,000 = $45,000 x 3% = $1,350
Commission on next $40,000 = $40,000 x 2.5% = $1,000
Commission on next $118,250 = $118,250 x 2% = $2,365
Total commission = $5,465

Therefore, from the sale of the 3 properties, the real-estate agent can expect to earn $18,302.5 ($3,037.50
+ $9,800 + $5,465)

QUESTION 2 (5 marks)
A local shop advertises all products at 20% off the recommended retail price. A further discount has been
applied to the shop’s last refrigerator. The refrigerator has a list price of $975; following the second
discount, it is advertised at $663. Calculate the second discount rate.

Solution:
First, find the discounted price after the 20% discount was applied to the list price of $975:
D = LP x R
= $975 x 20%
= $195
Discounted price (DP) = LP – D
= $975 - $195
= $780

As the second discount resulted in a final sale price of $663, an additional discount of $117 ($780 - $663)
must have been fixed. To determine the second discount rate, substitute into the equation:
D = Selling price (SP) X R
$117 = $780 x R
R = 15%

Thus, the chain discount rates were 20% and 15%. Check your answer!
After the first discount of 20% off the list price, the merchandise sells for 80% of the list price, thus:
Selling price = (100 – 20%) x List price
= 80% x List price
= .80 x $975
= $780
As the second discount resulted in a final price of $663, to find the additional discount rate, use the
formula:
nd
2 discount rate = Discounted Price
st
Selling price (after the 1 discount)

2
 = $663
$780
= .85
= 85%
Since the second discount resulted in the refrigerator being purchased for 85% off the selling price after
the first discount, this indicates a further 15% discount occurred. To check the answer, use the combined
discount rate equivalent.
CDR = 1 – (100% - 20%) (100% - 15%)
= 1 – (0.8) (0.85)
= 1 – (0.68)
= 0.32
The final selling price was 68% of the original list price, that is, $975 x 0.68 = $663, which corresponds with
the advertised amount.

QUESTION 3(8 marks)

A waku shop marks up all goods by 25%, but due to slow-moving, stock has been forced to have a sale
offering a discount of 10% on all goods.

(a) What would a good now retail for if it cost the proprietor $50?
(b) What was the final mark-up rate on cost following the sale of the discounted item?

Solution (a):
Selling price = Cost + Mark-up
= $50 + $50 (0.25)
= $62.50

Discount of 10% = $62.50 x 0.10

= $6.25

Final selling price = Selling price – Discount

= $62.50 - $6.25
= $56.25

Solution (b):
Mark-up rate = Sale price – Cost
Cost
= $56.25 - $50
$50
= 0.125
= 12.5%

3
QUESTION 4 (10 marks)
An electrical appliance was sold for $667 after being reduced by 33 on the selling price. The sales
representative received a commission of 7.5% on the sale and the delivery cost of $10 was borne by the
shop. The appliance originally cost the retail firm $625.

(a) What was the original selling price or the list price?
(b) What was the net profit/loss?

Solution (a):
$667 = 66.7% of selling price (as a 33.33% discount)
$667 = 0.667 x SP
SP = $1, 000

Solution (b):
Cost of appliance = $625.00
7.5% commission = $50.02 (7.5% x $667)
Delivery charge = $10.00
Total cost = $685.02

Profit/loss = Discounted price – Total cost

= $667 - $685.02
= -$18.02
Therefore, the net loss was $18.02

QUESTION 5 (6 marks)
The proprietor of a business found that twice as much is spent on salaries as on materials yet this amount
is 40% of the amount spent on leasing of the premises and all capital equipment. If $2,284,500 is spent in
total during the year, find the amount spent in each category.

Solution:
Let,
M = the amount spent on materials
2M = the amount spent on salaries
5M = the amount spent on leasing (2M = 40% of L, thus L = 5M)
Therefore,
M + 2M + 5M = $2,284,000
8M = $2,284,500
M = $285,562.50

Hence,
Amount spent on materials (M) = $285,562.50

4
Amount spent on salaries (2M) = $571, 125.00
Amount spent on leasing (5M) = $1,427,812.50
Total spent during the year = $2, 284,500.00

QUESTION 6 (5 marks)
Three months ago, the tennis pro shop ordered 150 tennis racquets and 50 pairs of tennis shoes for
$14,000 and last week ordered another 80 racquets and 30 tennis shoes at a cost of $7,650. What is the
cost of a tennis racquet and a pair of tennis shoes to the proprietor?

Solution:
Let r = cost of tennis racquet
S = cost of tennis shoes

Therefore,
150r + 50s = 14000 (1)
80r + 30s = 7650 (2)

S (cost of tennis shoes) = $55

R (cost of tennis racquet) = $75