A Conditional Sale Contract Between Classic Furniture and the Purchaser

question 222

Short Answer

A conditional sale contract between Classic Furniture and the purchaser of a dining room set requires month-end payments of $250 for 15 months. Classic Furniture sold the contract to Household Finance Co. at a discount to yield 19.5% compounded monthly. What price did Household pay Classic Furniture?

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Definitions:

Variable Costing

A bookkeeping procedure that adds only variable production fees (including direct materials, direct labor, and variable manufacturing overhead) into the costs associated with products.

Unit Product Cost

The total cost to produce a single unit of product, including direct materials, direct labor, and allocated overhead.

Direct Labor Cost

The expense of labor that can be directly attributed to the production of goods or services.

Net Operating Income

A company's revenue minus its operational direct and indirect costs, excluding taxes and interest.