Business 125
Kaylee's Kids Sports sells soccer balls for $18. They must mark up the balls 32% on selling price to make a profit. Identify each of the figures.
$12.24 <-->Cost $5.76 <-->Markup dollar amount 68% <-->Complement of the markup 100% <-->Selling price **see notes for formulas**
Dora the Explorer DVD's were marked down from $19.99 to $12.99. Match the amounts to the terms.
$19.99 <-->Original selling price (base) $7.00 <-->Markdown dollar amount 35.02% <-->Markdown percent
Florence earns a straight commission of 2% of net sales. This pay period she had net sales of $150,000. She also had a draw of $800. How much is the commission she received on payday?
$2,200 Reason: Commission earned of $3,000 - $800 draw = $2,200 $150,000*.02 = $3000 - $800(draw) = $2200
Lai Xiaodong, a 22-year-old college-educated man, accepted a job at Foxconn Technology (where the iPad was being produced for Apple) in Chengdu, China, for $20 a day at 12 hours a day, 6 days a week. What were Lai's hourly, weekly, and annual gross pay?
$20 / 12 = $1.67 per hour $20 x 6 = $120 per week $120 x 52 (weeks in a year) = $6,240 per year
Hai's Hardware sells snow shovels for $29.99. These are marked up 45% over cost. Match each value with the equation used to find it.
$20.68 <-->$29.99 ÷ 1.45 145% <-->100% + 45% 100% <-->Base (cost) $9.31 <-->$29.99 - 20.68
Baby Gap sells snow pants for $34 after marking them up 18% based on selling price. Match the figure to the term.
$27.88 <-->Cost $6.12 <--> Dollar markup 100% <-->Base $34 <-->Selling price
During January Mary earned $6,500. How much are her FICA taxes?
$497.25 Reason: Since this is the first month of the year, Mary did not exceed the SS wage base. All earnings are taxable for both SS and Medicare. SS tax = $6500*.062 (rate) = $403 Medicare tax = $6500*.0145 = $94.25 FICA Tax = $497.25
Earnings for the year were $5,000. The FUTA rate is 6.2% and the company received a 5% SUTA credit. Match the amounts to the respective terms.
$5,000 - Taxable Earnings (earnings below $7,000 per person per calendar year are taxable for FUTA) 6.2 % - Adjusted FUTA rate 1.2% - Unadjusted FUTA rate $60 - FUTA tax amount ($5,000 x .012 = $60)
On May 1 Vanderbilt Inc., purchased $5,000 in goods with trade discounts of 10/15/12, and terms 2/10, n30. Identify each of the items:
$5,000 <-->list price $1,634 <-->discount amount $3,366 <-->net price .6732 <--->net price equivalent rate .3268 >-->single equivalent discount rate $67.32 <-->cash discount
Trenton Company pays Cody a $4,200 monthly salary plus a 2% commission on sales over $50,000. Cody's sales were $60,000. What was Cody's gross pay?
$60,000 - $50,000 = $10,000 × .02 = $200 + $4,200 = $4,400 gross pay.
Camille had previously earned $109,400 this year. During this pay period she earned an additional $7,500. Match the values with the respective terms (use $110,100 as the current SS base).
$700 <-->Social Security taxable earnings $43.40 <-->Social Security tax $6,800 <-->Social Security exempt earnings $7,500 <-->Medicare taxable earnings $108.75 <-->Medicare tax **see notes how I arrived at the answer**
Social Security , Medicare Rates & Wage base
1.45%<-->Medicare rate 6.2%<-->Social Security rate $128,400 <-->Wage base
Martina borrowed $10,000 for 100 days. At the end of the term, she paid back $11,000. Match the terms (use ordinary interest).
36%<--> Interest Rate $1,000 <-->Interest amount $10,000 <-->Principal 100/360 <-->Time I = P*R*T **see notes for calculation**
Westway Company pays Suzie Chan $2,500 per week. Assume Social Security is 6.2% on $118,500 and 1.45% for Medicare. a. By the end of week 52, how much did Westway deduct for Suzie's Social Security and Medicare for the year? b. What state and federal unemployment taxes does Westway pay on Suzie's yearly salary? The state unemployment rate is 5.1% and the federal unemployment tax is 0.6% on the first $7,000.
A. Social Security: calculate gross pay: $2,500 x 50 = $125,000 She only has to pay 6.2% Social Security tax on the first $118,500 she earned, so we calculate this as: $118,500 x .062 = $7,347 Total social security tax deducted so far this year = $7,347 Medicare: 2,500 x 52 (weeks in a year) = 130,000 $130,000 x .0145 = $1,885 Total medicare tax deducted so far this year = $1885 B.State unemployment rate is 5.1%, so we calculate her deduction as: $7000 x .051 = $357 Federal unemployment rate is .8%, so we calculate this as: $7000 x .006 = $ 42
Pat Maninen earns a gross salary of $4,800 each week. Assume a rate of 6.2% on $118,500 for Social Security and 1.45% for Medicare. a. What are Pat's first week's deductions for Social Security and Medicare? b. Will any of Pat's wages be exempt from Social Security and Medicare for the calendar year?
A. Social Security:$4,800 x 6.2% =$4,800 x .062= $297.60 Social Security Deductions: $297.60 Medicare:$4800 x 1.45% =$4800 x .0145 = 69.60 Medicare Deductions: 69.60 B. Social Security cap is at $118,500 Determine Yearly SS Gross Pay:$4800 x 52 weeks in a year = $249,600 Subtract Yearly gross pay from SS cap $249,600 - $118,500 = $131,100 SS Exemption: $131,100 Medicare has no cap and therefore no exemptions Medicare Exemptions: $0
Assume a company had total wages of $19,000 in a calendar year. No employee earned more than $7,000 during the calendar year. The FUTA tax is .6% (6% minus the company's 5.4% credit for state unemployment tax). How much does the company pay in FUTA tax?
FUTA Tax - Suta Tax = Tax for FUTA 6% - 5.4% = .6%. 006 x $19,000 = $114 FUTA tax due to federal government.
True or false: Manufacturers can get sales information more easily
False
? costs do not change with increases and decreases in sales. ? costs do change with increases and decreases in sales.
Fixed Variable
When 40 hours or less were worked in a week, gross pay is found by multiplying regular _____ worked by ____ per hour.
Hours , Rate
Jacob borrowed $75,000 at 18%. The loan cost $9,000. Match the items to the respective terms (use ordinary interest).
IP / P×R <-->Time formula $75,000 <-->Principal $84,000 <-->Maturity Value 240 <-->Time in Days
? expense is the cost of borrowing money.
Interest
The cost of the loan is the
Interest
The U.S. Rule states that when a partial payment is made, first the ?, is covered, then the balance goes to reduce the loan ?
Interest Principal
Piece Rate Pay
It is thought that paying workers by the piece encourages them to produce more. Gross Pay = Number of Units x Rate Per Unit
Joseph Carlyle produced 1001 units this pay period and earns piece rate on the following differential pay schedule.
Joseph Caryle produced 1001 units Units Produced Amount per unit First 1000-> 1-1000 $..35 Next 1 -> 1001-1500 $.40 Over 1500 $.45 (1000*.35)+(1 *.40) $350 + $.40 = $350.40
To calculate the trade discount amount, multiply the ? price by the trade discount ?.
List Rate
Sonton sold goods to Cost Warehouse using ROG. Terms of the sale are 1/15, n/60. The invoice date is February 2 and the goods were received by the buyer on February 18. Identify the end of the discount period.
March 5 March 5 is the end of the discount period. Add 15 days to the receipt of goods date to find the end of the discount period. Feb 18th + 15days goods received = 33 days - 28 days in February = March 5th
Benson Equipment received an invoice for goods on September 3 with cash terms of 1/10 EOM. They received the goods on September 24. What is the end of the credit period?
October 30 The invoice was dated before the 26th; therefore, the credit period ends on the 30th day of the following month.
pay schedule -piece rate
Pay rate is based on a schedule of units completed. Abby produced 300 dolls Units Produced Amount per unit First 50-> 1-50 $.50 Next 100-> 50-150 $.62 Next 50-> 151-200 $.75 Over 200 $1.25 (50*.50)+(100*.62)+(50*.75)+(100*1.25) $25.00 + $62.00 + $37.50 + $125.00 = 249.50
Manufacturers often use which type of pay as an incentive for workers to produce more?
Piece rate
Match the Simple Interest terms with their respective definitions.
Principal <---->The original amount borrowed. Interest <---->The cost of the loan. Rate <---->The annual percentage growth of the loan. Time <----> The term of the loan. Maturity value<->The amount due at the end of the term.
Formula for finding Principal
Principal = Interest Rate*Time
Holly loaned funds at 12% for 30 days and earned $500 in interest. How much is the principal on this loan (use ordinary interest)? Multiple choice question. $5
Reason: Interest $500 Rate*Time .12 * 30/360 = $50,000
Payroll registers include the following columns of information:
Regular Earnings Overtime Earnings Cumulative Earnings Employee Name Gross Pay
Assume a company has total wages of $20,000 and $4,000 of the wages are exempt from SUTA. What are the company's SUTA and FUTA taxes if the company's SUTA rate is 5.8% due to a poor employment record? The exempt wages (over $7,000 earnings per worker) are not taxed for SUTA or FUTA. So the company owes the following SUTA and FUTA taxes:
SUTA: $20,000 - $4,000 = $16,000 FUTA: $16,000 x .006 = $96
Pricing perishable items is reserved for (short/long) shelf life goods.
Short
Steve borrowed $300 for 2 months at 6%. How much is the interest?
Simple Interest (SI) = Principal (P)*Rate (R)*Time(T) $300*.06*2/12 = $3 Simple Interest
Elizabeth borrowed $5,000 for 9 months at 8%. How much is the maturity value?
Simple Interest (SI) = Principal (P)*Rate (R)*Time(T) $5,000*.08*9/12 = 300 Simple Interest Maturity Value (MV) = Principal (P) + Interest (I) $5,000 + $300 =$5,300 Maturity Value
If the FUTA rate is 6.2% and the SUTA credit is 5.4%, then the adjusted FUTA tax is:
Subtract the SUTA credit from the FUTA rate to get the adjusted FUTA rate.
State Unemployment Tax Act (SUTA)
Tax paid by employer. Rate varies depending on amount of unemployment the company experiences. Differs from state to state.
Grayco buys goods from Martin Wholesalers FOB shipping point. What is the effect of freight on the amount owed?
The cost of the freight increases the amount of the invoice.
Pacific Mercantile sells flannel shirts for $19.99. These are marked up 25% on selling price. What is the dollar amount of the markup?
The dollar amount of the markup is found by multiplying the selling price by the markup percent. $19.99 × .25 = $5.00 or 19.99*25%=$5.00
Debra's Design pays $32 for designer lamps and marks them up 50% on cost. What is the selling price?
The selling price is $32 × 1.5 (100% base+50) = $48. or $32.00+50% = $48
Pacific Mercantile sells flannel shirts for $19.99. These are marked up 25% on selling price. What is the cost of the flannel shirts?
To find the cost multiply the selling price by the complement of the markup percent. $19.99 × .75(100-25) = $14.99 or $19.99 - 25% = $14.99 ***remember the selling price is 100%
Match the type of discount to its definition. Trade Discount Cash Discount
Trade Discount - A reduction off of the original price (not related to early payment). Cash Discount - A reduction off of the original price related to early payment.
True or false: Manufacturers can get cost information more easily than sales information.
True
Selling price - Variable costs =
contribution margin (CM)= $2.00(S) - $.80(VC) CM = $1.20
Percent markup on cost means that the base (100%) is:
cost
The price retailers pay a manufacturer or supplier to bring goods into the store is the
cost price
FICA taxes are (added to/deducted from) Blank Blank gross pay
deducted from
FICA taxes are (added to/deducted from) gross pay
deducted from
Simple interest concepts apply when you are paying ? or ? interest.
interest receiving interest
Principal plus interest is the
maturity value
The profit remaining after subtracting the cost of bringing the goods into the store and the operating expenses from the sale of the goods is the
net profit or net income
The profit remaining after subtracting the cost of bringing the goods into the store and the operating expenses from the sale of the goods is the:
net profit or net income
The regular expenses of doing business such as wages, rent, utilities, insurance, and advertising is also known as the
operating expense or overhead
markdown percentage (off selling price)
original selling price - reduced price over original selling price
The amount that the retailer charges the consumer is the
selling price
When a business marks up their goods based on selling price, the base is:
selling price *Markup based on selling price means that the selling price is the 100%.
Markup
selling price - cost (selling price - cost) / cost x100% If your product cost $50 Selling price $75 The Markup percentage is 50% ($75-$50) / $50 = .50 x100 = 50%
Manufacturers and ? sell to who sell to? the end-user customer.
wholesalers retailers
A series of two or more successive discounts is ?
Chain Discount
Match the terms to the respective definitions Credit period Discount period Cash discount
Credit period - The time period that the seller extends to the buyer in which to pay the amount owed Discount period - The time period that the seller extends to the buyer in which to receive a price reduction for early payment of the amount owed. Cash discount - The reduction in price that the seller extends to the buyer for early payment of the amount owed.
Which of the following transactions would cause the company's checkbook balance to be higher than the bank balance?
Deposit in transit - is known by the customer and not the bank. This would cause the company's checkbook balance to be higher than the bank balance.
Ace Manufacturing has unemployment taxable earnings this period of $20,000. The SUTA and FUTA rates are 5.4% and .8% respectively. The SUTA tax is:
$1,080 Taxable earnings of $20,000 times the SUTA rate of 5.4% = $1,080 SUTA tax
Juan had total sales of $72,000 and returns of $22,000. He earns 3% on the first $50,000 of net sales, 4% on the next $10,000 and 5% on anything over $70,000. What are Juan's commission earnings?
$1,500 Reason: Gross sales - returns times the commission rate. $72,000 - 22,000 = $50,000 × .03 = $1,500.
If you earn $48,000 per year, how much will you receive on a biweekly basis?
$1,846.15 Reason: $48,000 ÷ 26 (biweekly) = $1,846.15.
Rosebud Mbela borrowed $400 at 5% for 28 days. Match the amounts to the terms (use exact interest).
$1.53 <-->Interest $400 <-->Principal 28/365 <-->Time 5% <-->Interest rate $401.53 <-->Maturity value
Maurice owes $12,000 on an 8%, 60-day note (Use 360 days). On day 30, Maurice pays $6,000 on the note. On day 45, he pays an additional $3,000, then pays the balance on day 60.
$10.33 <----->Interest amount at end of loan term. (45 days-60 days = 15 time) $20.27 <------>Interest as of Day 45 (30 days-45 days=15 time) $80 <--------->Interest as of Day 30 $2,979.73 <------->Amount to be applied to Principal on second payment. $3,100.27 <-----Adjusted balance after second payment. $3,110.60 <----->Balance owed at Day 60 $5,920 <---->Amount to be applied to Principal on first payment. $6,080 <----->Adjusted balance after first payment. ***see notes for calculation***
David owed $300. Terms were 1/10, n/30. Within eight days David paid $100. How much actual credit was David granted?
$101.01 Reason: $100 ÷ .99 = $101. Amount Credited
Match the number of annual payments to the pay period. Instructions
Biweekly <------------> 26 Monthly <------------->12 Semimonthly <-------->24 Weekly <-------------->52