Joseph Buys a Hummer for $60,000,financing It with a Five-Year

question 109

Multiple Choice

Joseph buys a Hummer for $60,000,financing it with a five-year 6.5% APR loan paid monthly.He decides to pay an extra $50 per month in addition to his monthly payments.Approximately how long will he take to pay off the loan under these conditions?

• A)4 years 10 months
• B)4 years 9 months
• C)4 years 6 months
• D)4 years 4 months
• E)5 years

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Definitions:

Net Operating Income

A company's operating profit after subtracting operating expenses but before interest and taxes.

Absorption Costing

is an accounting method that includes all manufacturing costs (direct materials, direct labor, and both variable and fixed overhead) in the cost of a product.

Fixed Manufacturing Overhead

The set costs involved in the production process that do not change with the level of output, such as salaries and building leases.

Inventories

Items such as products, materials, and supplies held by a company for the purpose of resale or production.