The Store Where You Bought New Home Furnishings Offers You

question 141

Multiple Choice

The store where you bought new home furnishings offers you two alternative payment plans.The first plan requires a $4,000 immediate up-front payment.The second plan requires you to make monthly payments of $137.41, payable at the end of each month for 3 years.What nominal annual interest rate is built into the monthly payment plan?

• A) 12.31%
• B) 12.96%
• C) 13.64%
• D) 14.36%
• E) 15.08%

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Definitions:

Contribution Margin

The amount remaining from sales revenue after variable expenses have been deducted, indicating how much revenue is contributing to fixed expenses and net income.

Variable Costing

An accounting method that only considers variable costs (costs that vary with the level of output) when calculating the cost of goods sold and production.

Absorption Costing

An accounting method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed manufacturing overhead - in the cost of a unit of product.

Net Operating Income

Represents the difference between operating revenues and operating expenses.