Unit# 2
Business Arithmetic -II
(Solved Exercises)
Note : Before copying or learning numerical questions of chapter#2 you need to memorize the following formulas so it will become easier for you to learn and understand all numerical questions . Here is the short list of formulas .
Formulas
- Discount Rate =(AD/SP *100)%
- DP=SP-AD
- DP=SP(1-AD)
- R=(P/C *100)%=(S-C/C *100)%
- R' = (L/C *100)%=(C-S/C *100)%
(Where AD=amount of discount , DP=discounted price , SP = selling price , CP=cost price , P=profit , L=loss)
Q.1 Fill in the blanks .
- Profit is a business tactics used to attract customers.
- Amount of discount is the amount that is deducted from the Selling price .
- Stated price is known as Selling price .
- Discount on Specific amount is quantity discount .
- The amount of payment paid to person on his good service is known as
- Commission is based on value of goods bought and sold .
- Markdown or rate of loss is known as percentage ratio of loss and cost.
- Calculation of profit and loss depends on selling price rather than on cost price .
- Depreciation is Continual loss appeared in the value of fixed properties .
- Method to charge depreciation is Fixed Installment and Reducing balance method
Q.2 Choose the correct answer .
1.Discount is defined as the _________in the price of an item .
a) Reduction b ) addition c) Accession d) none
2.DR is known as __________
a) deduction Rate b) Discount Rate c) Decreasing rate d) All
3.More than one discount given to the customer is known as ____________
a) Inconsecutive b) Inconsequent c) nonconsecutive d) Successive
4.Buy one get one free is an example of ___________
a) Quantity discount b)Quality discount c) both a and b d) none
5.___________is a person who gives his services for others .
a)Manager b)Agent c) dealer d) none .
6.The positive difference of selling an item is _________
a) Profit b) Loss c)Profit and Loss d) nothing
7. In relative term profit is known as __________
a) Mark Down b)Mark In c) Markup d) Markup-down
8.The profit in terms of selling price in accounting is known as __________
a)Complex b)Margin c)Interior d) None
9.Mark Down is opposite to the ___________.
a)Profit b) Loss c)Markup d) All
10.Diminishing balance is calculated by using fixed percentage on the __________value of the asset every year .
a) Increasing b)Decreasing c)Profit d) Loss
Q.3 Mark These True / False
- Discount is the increase in the price of an item T/F
- In discount stated price is reduced T/F
- Stated price is the price of an item without having any discount T/F
- Discounted price is greater than the original price of quantity T/F
- The percentage involved in breakage is called rate of commission T/F
- Profit and loss cannot be defined in relative terms of percentage T/F
- There are two major methods to charge depreciation T/F
- profit=(selling price -cost ) > 0 T/F
- loss=(selling price-cost )>0 T/F
- Fixed installment is the ratio of the difference of the cost of the assets and its scrap value by the expected life of the asset T/F
Q.4 Numerical questions .
1. Price of one kg oranges is Rs.50 . Find the selling price if they all are sold at the profit of 14%.
Solution:
Cost of 1kg oranges =Rs.50
Markup or rate of profit=R=14%
selling price =SP=?
R=((S-C)/C *100)%
=(S-50)/50 *100)%
14%=((S-50) *2)%
14/2=S-50
S-50=7
S=50+7=RS.57
2. A person sold house at Rs.3,00,000 . On the profit of 20% calculate the cost of the house .
Solution :
Selling price of house =SP=3,00,000
Rate of profit=R =20%
cost of house =CP=?
R=((S-C)/C *100)%
20%=((3,00,000-C)/C *100)%
20C =(300000-C)*100
20C/100=300000-C
C/5=300000-C
C=5*300000-5*C
C=1500000-5C
5C+C=1500000
6C=1500000
C=250000
3. A ring was sold for Rs.980 on 2% loss. Find the cost price of the ring .
selling price of ring =SP=Rs.980
loss=2%
cost price of ring =CP =?
R'=((C-S)/C *100)%
2%=((C-980)/C * 100 ) %
2C=(C-980) * 100
2C/100 = C-980
C/50=C-980
0.02 C -1C=-980
-0.98C=-980
C=980/0.98=1000
5. To convert a fixed asset of cost @ Rs. 25,000 to @ Rs.18250 in 5 years calculate the annual rate of depreciation .
cost =Rs. 25,000
scrap value =Rs. 18250
expected life in a year =5
annual installment = (cost - scrap value )/Expected life in a year
=(25000-18250)/5
=6750/5
=1350
Rate of depreciation=D/(C-SV)
=1350/(25000-18250)
=1350/6750
=0.2
6. Price of a toy is Rs.250 discount offers on this toy @ 20%. Find the amount of discount and discounted price .
selling price of toy= Rs. 250
Discounted Rate =20%
Amount of discount=AD=?
Discounted price =DP=?
Discounted Rate=(AD/SP * 100)%
20%=(AD/250 * 100)%
20= AD/5 *2
100/2=AD
AD=Rs.50
7. Ali is a distributor of a calculator company he booked an order of 25 calculators @ Rs.650 per calculator and agree to allow 12% trade discount. Calculate the value of the invoice.
selling cost of one calculator =650
selling cost of 25 calculators = 25*650=16250
DR=12%=12/100=0.12
DP=SP(1-DR)
=16250*(1-0.12)
=16250*0.88
=14300
8. Define depreciation and methods to calculate depreciation .
Answer is given on page 24 of book .
9 . A trader purchased 5 jeans @ Rs.150 each trade discount is 25% . Further he will get cash discount of 2.5% if he paid the total amount within a week of delivery then calculate the amount which he has to pay .
a) Within a week
selling price of a jeans = 150
selling price of 5 jeans = 5*150
=750
DR1=25%
=25/100
=0.25
DR2=2.5%
=2.5/100
=0.025
Discounted Price=?
according to formula
DP=SP(1-DR1)(1-DR2)
=750(1-0.25)(1-0.025)
=750(0.75)(0.975)
DP =548.4375
b) After the week
selling price of a jeans = 150
selling price of 5 jeans = 5*150 =750
DR=25%
=25/100
=0.25
Discounted Price = ?
According to formula
DP=SP(1-DR)
=750(1-0.25)
=750*0.75
=562.5
10. 35% commission is offered to an agent by a manufacturer to sale his old stock. The commission that agent received is of Rs.28,000 . Calculate the amount received by the manufacturer
let x be the selling cost of stock
Rate of commission=35%
amount received by manufacturer = ?
commission=35% *x
28,000=35% * x
28,000=35/100 * x
28000*100 =35 x
2800000/35=x
x=400000/5=80,000
amount received by manufacturer=80,000-28,000
=52,000