You Pay 20% Down on a Home with a Purchase

question 33

Essay

You pay 20% down on a home with a purchase price of $180,000.Your bank will loan the remaining balance of $144,000 at 7% APR.You have an option to make annual payments or monthly payments on the loan.Both options have a 30-year payment schedule.What is the annuity payment under the annual plan? What is the annuity payment under the monthly plan?

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Definitions:

Variable Costing

An accounting method that includes only variable production costs (direct materials, direct labor, and variable manufacturing overhead) in product costs.

Variable Production Costs

Costs that vary directly with the level of production output, such as raw materials and direct labor.

Absorption Costing

An accounting method that includes all manufacturing costs, both variable and fixed, in the cost of producing each unit of a product.

Variable Costing

An accounting method that only allocates variable costs to the inventory; fixed manufacturing overhead is expensed as incurred.