BUS 249 Introduction to Finance
Fall 2023
Prepared by: Dr. Felicia Chong
Tutorial 2
Chapter 5 and 6
Note: Refer to Jerome, F.E., & Worswick, T. (2023). Business Mathematics in Canada, 11th Canadian
Edition. McGraw-Hill Canada.
Chapter 5: Mathematics of Merchandising
Question 1
An invoice shows a net price of $176.72 after trade discounts of 30%, 10% and 2% have been deducted.
a) What is the list price of the goods?
b) What single rate of trade discount would be equivalent to the discount series?
Question 2
An invoice for $2365, dated September 25, has terms of payment 2/20, n/30. What amount on
October 5 will pay the invoice in full?
Question 3
Payments of $1000 on January 5 and $800 on January 16 were made on a $2500 invoice dated
December 27. The terms on the invoice were 4/10, 2/20, n/45. What was the balance owed after the
second payment?
Question 4
A payment of $3000 on a $6000 invoice qualified for the larger cash discount in 3/10, 1/20, n/30. What
additional payment 18 days after the invoice date will settle the invoice?
Question 5
A merchant prices his inventory to allow for operating expenses at 30% of selling price and an
operating profit of 20% of selling price. If an item is priced at $49.98, determine:
a) The rate of markup on selling price.
b) Its cost.
c) The rate of markup on cost.
Question 6
Bath ‘n Bedroom sets its process to allow for overhead expenses that average 50% of unit cost and a
normal profit of 30% of cost. For towel sets priced at $39.89, determine:
a) The wholesale cost.
b) The rate of markup on selling price.
Question 7
Pet Mart purchased a litter of six puppies form a reputable breeder for $121 each. If the rate of markup
on selling price is 45%:
a) What is the selling price of each puppy?
b) What is the rate of markup on cost?
Question 8
Workers World buys rubber boots from the manufacturer for $15 per pair. The manager applies a 90%
rate of markup on cost when pricing footwear. What is the operating profit per pair if overhead
expenses work out on average to be 20% of the selling price?
Question 9
Morgan’s Department Store mailed out 15%-off coupons for its 20th Anniversary Sale. The coupons
may be used for any products in the store. For items already on sale, the coupon applies to the sale
price.
a) What price would a coupon-holder pay for a bedspread (regular price $295) already pm sale
at 20% off?
b) What single rate markdown would have the same effect as the two price reductions?
Question 10
A discount furniture store bought a memory foam mattress at the wholesale price of $665. The
“regular price” of the mattress is set so that, in a “20% off” sale, the rate of markup on selling price is
30%.
a) What is the price of the mattress in a “20% off” sale?
b) What is the “regular price” of the mattress?
Chapter 6: Applications of Linear Equations
Question 11
The Armor Company had the following revenue and costs in the most recently completed fiscal year:
Total revenue
$10,000,000
Total fixed costs
$2,000,000
Total variable costs
$6,000,000
Total units produced and sold
1,000,000
a) What is the unit sales volume at the break-even point?
b) How many units must be produced and sold for the company to have a net income of
$1,000000 for the year?
Question 12
Norwood Industries has annual fixed costs of $1.8million. unit variable costs are currently 55% of the
unit selling price.
a)
b)
c)
d)
What annual revenue is required to break-even?
What revenue would result in a loss of $100 000 in a year?
What annual revenue would produce a profit pf $300 000?
Market research indicates that if prices are increased by 10%, total revenue will remain at
the part (c) amount because the higher prices will be offset by reduced sales volume. Will
the operating profit remain at $300 000? Present calculations to justify your answer.
END OF TUTORIAL 2