Calculate the Finance Charge

question 26

Short Answer

Calculate the finance charge:
$$\begin{array} { | l | l | l | l | } \hline \begin{array} { l } \text { Sofa } \\\text { purchase } \\\text { price }\end{array} & \text { Down } & \begin{array} { l } \text { Number of } \\\text { monthly } \\\text { payments }\end{array} & \begin{array} { l } \text { Amount of } \\\text { monthly } \\\text { payments }\end{array} \\ & \text { Payment } & \text { payments } \\\hline \$ 1,600 & \$ 400 & 12 & \$ 190 \\\hline\end{array}$$

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Definitions:

Fixed Costs

Costs that do not change with the level of output or sales over a certain period, such as rent or salaries.

Contribution Margin

The contribution margin represents the portion of sales revenue that is not consumed by variable costs and is available to cover fixed costs and generate profit.

Variable Cost

Business expenditures that adjust based on the activity level of the enterprise.

Operating Cash Flow

The cash generated from a company's normal business operations, indicating whether a company can maintain or grow its operations.