A Furniture Company Is Offering a Choice of Deals

question 15

Multiple Choice

A furniture company is offering a choice of deals. You can receive $100 cash back on the purchase, or a 2 percent APR, 2-year loan. The price of the dining room set is $3,750 and you could obtain a 2-year loan from your credit union at 6 percent APR. What is the cost per month of each deal?

• A) Cash back: $161.77, 2 percent APR: $159.53
• B) Cash back: $171.29, 2 percent APR: $179.02
• C) Cash back: $153.96, 2 percent APR: $181.09
• D) Cash back: $180.03, 2 percent APR: $166.17

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Definitions:

Cost-plus Pricing

A pricing strategy where a fixed percentage or amount is added to the cost of producing a product to determine its selling price.

Selling and Administrative Expenses

Costs not directly linked to the production of goods, including marketing, salaries of administrative staff, and other general expenses.

Split-off Point

The stage in a production process where joint products can be recognized as individual products.

Joint Processing Costs

Costs that are incurred up to the split-off point in a process that produces multiple products from a common input.