Financial Math Answers

5. A contractor purchases a piece of equipment for birr 30,000. The equipment requires an average expenditure

of birr 6 per hour for fuel and maintenance and the operator is paid birr 10 per hour. The customers are

charged birr 20 per hour for the use of the equipment. Required:

(a) Write the total cost, total revenue and total profit functions in terms of the number of

hours the machine is used.

(b) Find the number of hours the equipment must be operated for the contractor to breakeven.

(c) What will be the profit (loss) level if the machine is operated for 8,000hours?

4. A manufacturing Co. has a Total Fixed Cost of Br. 20,000 & a Unit Variable Cost of Br.10. if the co. can

sell .What it produces at a price of Br. 20,

(a) Write the Revenue, cost & Profit functions

(b) Find the breakeven point in terms of quantity and sales volume

(c) Show diagrammatically the Total Revenue, Total Cost, Total Profit, Fixed Cost and

Variable Costs.

(d) Interpret the results

Suppose we have birr 36 to spend on pork and chicken. If we buy P pounds of pork at birr 3per pound and C

pounds of chicken at birr 2 per pound.

(a) What would be our total expenditure equation?

(b) Write the above equations in (a) for C in terms of P and interpret the slope and

Y-intercept.

1. The chairman is trying to forecast the number of tourists who would be visiting the city of Adama in the coming year. Some students from Royal College have examined the problem as part of course project. They estimated the current year’s volume as 110,000 tourists. They have also projected that the volume in the next year will be 120,000 and the volume in the future will continues to grow at the same rate. Determine equation of a line which relates the number of tourists, P, to year’s t as measured from this current year?

Edwill just purchased a new home costing R1 107 900,00 by paying R120 000,00 cash on the purchase date,

and agreeing to make payments at the end of the following eight years for the remainder owed; the first

payment is due one year after the purchase date. The interest rate is 7,4% per annum, compounded yearly.

Considering the amortisation schedule, the percentage, rounded to two decimal places, of the total payments

made the first two years that will go toward repayment of interest, is

[1] 43,51%.

[2] 41,42%.

[3] 58,58%.

[4] 70,71%.