Solve the Problem Using the Rule of 78

question 140

Multiple Choice

Solve the problem using the rule of 78.
-Dallas Wright took out a 48-month fixed installment loan of $6250 to purchase a new all-terrain vehicle (ATV) . He began making monthly payments of $212.50. Instead of making his 28th
Payment, Dallas decides to repay his loan in full. How much interest will Dallas save?

• A)$1821.43
• B)$665.34
• C)$32.25
• D)$705.36

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Definitions:

Contribution Margin Ratio

The percentage of sales revenue that exceeds variable costs, indicating the portion contributing to fixed costs and profit.

Selling Price

The amount a customer pays to purchase a product or service from a business.

Operating Leverage

A measure of how revenue growth translates into growth in operating income, due to fixed costs in a company's structure.

Net Income

This is the total profit of a company after all expenses, including taxes and operating costs, have been subtracted from total revenue.