1.

A furniture manufacturer has an annual overhead cost of P100 000 plus

20% of the sales in pesos. Labor cost P20 per set and the material costs
P10. He has a maximum capacity of 1 000 sets per month but expects to
produce only 8 000 sets per year. If he could sell all what he expected to
produce, how much is the selling price of each set just to break even?
Given:
Labor = 8 000 (20) = 160 000
Material = 8 000 (10) = 80 000
Annual = 100 000 + 8 000 (0.2)
100 000 + 1
600x Income:
Selling Price =
8 000x Solution:
8 000x = 160 000 +
80 000 + 100 000 + 1 600x 8 000x = 340
000 + 1 600x 6 400x =
340 000 x=P
53.13
2. A foundry produces a pair of eyebolt and nut at a labor cost of P 0.70 a
pair and material cost of P 1.60 a pair. The fixed charges on the business are
P 25 000 a month and the variable cost is P .50 per pair. If the eyebolt and
nut is sold for P 5.50 a pair, how many pairs must be produced each month
for foundry to breakeven? Given:

Labor = 0.70
Material = 1.6
Variable = 0.5
Fixed Charges = 25 000
Income:
Selling Price = 5.50
Solution:
5.5x = 25 000 + (0.7 + 1.6 + 0.5)x
x = 9 260 pairs
3. A part can be made either milling or by broaching. The tooling for milling
machine will cost P 15 to make. The set up time will cost P 20 and the
operating cost for each part will be P 0.50. The tools for broaching will cost P
475, the set up will cost P 6 and the operating cost per part will then be P
0.10. What production volume of the part is necessary to justify using the
broaching machine? Given:

Milling Broaching
Tooling Cost = 15 Tooling = 475
Set up Cost = 20 Set up Cost = 5
Operating Cost = 0.5 Operating
Cost = 0.10 Solution:
15 + 20 + 0.5x = 475 + 5 + 0.10x
x = 1112.5 pcs.
x = 1113 pcs.
4. Company A has fixed expenses of P 8 000 per month and each unit of
product has a variable cost of P 0.02. While company B has fixed expenses
of P 2 000 per month and can produce the same unit of product at P 0.05
variable cost. At what number of units of annual production will company A
have the same overall cost as company B?
Given:
Company A = 8 000 + 0.02x
Company B = 2 000 + 0.05x
Solution:
8 000 + 0.02x = 2 000 + 0.05x
x = 200 000 units
5. In the manufacture of certain product, two processes are available. One
will produce 80 units of the finished product per P 100 worth of raw
materials and will cost P 0.42 per unit of the finished product. The other will
produce 97 units of the finished product per P 100 worth of raw material and
will cost P0.56 per unit of the finished product. What is the breakeven point
in unit value of the finished product below which the low efficiency process
should be used and above which high efficiency should be used?
Given:
1st
process
Expenses = 100 + 80(0.42) = 133.6
Sales = 80x
Profit = 80x 133.6
2nd process
Expenses = 100 + 80(.56) = 148.72
Sales = 87x
Profit = 87x 148.72
Solution:
80x - 133.6 = 87x
148.72 x = 2.16 unit
values
6. The cost of producing a small transistor radio set consists of P 23 for labor
and P 37 for material. The fixed charges in operating the plant is P 100
000 per month. The variable cost is P 1 per set, the radio set can be sold for
P 75 each. Determine how many sets must be produced per month to
breakeven?
Given:
Fixed Charge = 100 000
Labor Cost = 23x
Material Cost = 37x
Variable Cost = 1x
Selling Price = 75x
Solution:
75x = 100 000 + 23x + 37x + 1x
x = 7142.86
x = 1743 sets
7. A plywood manufacturer produces a piece of plywood at a labor cost of P
0.50 and material at P 3.00. The fixed charges on business is P 50 000 a
month and the variable cost is P 0.50 per piece. If one plywood sells for P
6.00 each, how many pieces must be produced each month for the
manufacturer to breakeven?
Given:
Fixed Charges = 50 000
Labor Cost = 0.5x
Material Cost = 3x
Variable Cost = 0.5x
Selling Price = 6x
Solution:
50 000 + 0.5x + 3x + 0.5x =
6x x = 25 000 pcs.
8. An item which can be sold for P 63 per unit wholesale is being produced
with the following cost data: labor cost, P 10 per unit; material cost, P15 per
unit; fixed charges, P 10 000; variable cost, P 8 per unit. What are the
breakeven point sales volume and the breakeven sales volume if one out of
every ten units produced is defective and is rejected with only fully recovery
on material? Given:

Selling Price = 63x

Labor Cost = 10x
Variable Cost = 8x
Material Cost = 15x
Fixed Charges = 10 000
Number of goods = 0.9x
Number of defectives = 0.1x
Material Cost recovered = 15(0.1)x
Solution:
10 000 + (10 + 8 + 15)x -
15(0.1)x = 63(0.9)x 10 000 + 31.5x =
56.7 x = 396.83
x=
397 units
9. The direct labor cost and material cost of a certain product are P 300 and
P 400 per unit, respectively. Fixed charges are P 100 000 per month and
other variable cost are P 100 per unit. If the product is sold at P 1 200 per
unit, how many units must be produced and sold to breakeven?
Given:
Fixed Charge = 100 000
Direct Labor = 300x
Material Cost = 400x
Variable Cost = 100x
Selling Price = 1 200
Solution:
100 000 + (300 + 400 + 100)x = 1 200x
x = 250 units
10. A small shop in Bulacan fabricates thresher for palay producers in the
locality. The shop can produce each thresher at a labor cost of P 1 800. The
cost amount to P 650 per unit. While fixed charges incurred per annum
totals P 69 000. If the portable threshers are sold at P 7 800 per unit, how
many units must be produced and sold per annum to breakeven?
Given:
Fixed Charge = 69 000
Cost Amount = 650x
Labor Cost = 1 800x
Materials = 2 500x
Selling Price = 7 800x
Solution:
69 000 + 650x + 1 800x
+ 2 500x = 7 800x x = 24.2
x = 25 units
11. Ten years ago, a small steam plant of 2 000kW capacity costing P 125
per kW was erected. The life was estimated at 15 years and the salvage
value is 5%. At present, abandoning the old plant in favor of a new diesel
plant is being considered. A market has been found for the old engine and
the boiler equipment at P 15 000. The remainder of the old plant can be
utilized in a new and a valuation of P 8 500. Depreciation has been figured
on straight line basis. What is the difference between the depreciated book
value of the old plant and its sale value? Given:

Co = 2 000(125) = 250 000

Cn = 250 000(0.05) = 12 500
n = 15
x = 10
Solution:
d = 250 000 - 12 500 = 15 833.33
15
D10 = 15 833.33(10) = 158 333.33
Difference = 91 667.7 -
15 000 Difference = P 76
666.70
12. An engineering firm purchased 12 years ago a heavy planter for
P 50 000. As the life of the planter was 20 years, a straight line depreciation
reserve has been provided on that basis. Now the firm wishes to replace the
old planner with a newly designed planner processing several advantages. It
can sell the old planner for P 10 000. The new machine will cost P 70 000.
How much new capital will be required to make the purchase?
Given:
Co = 50
000 n = 20
x=
12
Solution:
d = 50 000 = 2 500
20
D12 = 12(2 500) = 30 000
Total Amount = 30 000 + 10 000 = 40 000
New Capital = 70 000 - 40 000
New Capital = P 30 000
13. An engineer bought an equipment for P 500 000. He spent an additional
amount of P 30 000 for installation and other expenses. The salvage value is
10% of the first cost. If the book value at the end of 5 years will be P
291 500 using straight line method of depreciation, compute the useful life
of the equipment in years.
Given:
Co = 530 000
Cn = 53 000
x=5
Cx = 291 500
Solution:
d = 530 000 - 53 000 = 477 000
n
n D5 = 5(477 000) = 2
385 000 n
n Cx = Co -
Dx 291 500
= 530 000 - 2 385 000
n
n = 2 385 000
238 500
n = 10 years
14. The purchase of a motor for P 6 000 and a generator for P 4 000 will
allow a company to produce its own energy. The configuration can be
assembled for P 500. The service will operate for 1 600 hours per year for
10 years. The maintenance cost is P 300 per year and cost to operate is
P 0.85 per hour for fuel and related cot. Using straight line
depreciation, what is the annual cost for the operation? There is P 400
salvage value for the system at the end of 10 years.
Given:
Co = 10 500
Cn = 400
n = 10 years
Solution:
Annual Operation
1 600(0.85) + 500 = 1
660 d = 10 500 - 400 =
1 010 10
Annual
Operational Cost = 1 010 + 1 660
Annual Operational Cost = P 2 670
15. The initial cost of a paint san mill, including its installation is
P 800 000. The BIR approved life of this machine is 10 years for
depreciation. The estimated salvage value of the mill is P 50 000 and the
cost of dismantling is estimated to be P 15 000. Using straight line
depreciation, what is the annual depreciation charge and what is the book
value of the machine at the end of 6 years?
Given:
Co = 800 000
Cn = 15 000 + 50 000 = 35 000
n = 10
x=6
Solution:
d = 800 000 - 35 000
10
d = P 76 000
D6 = 76 500(6)
= 459 000 C6 = 800
000 - 459 000 C6 = P
341 000
16. A machine costs P 8 000 and an estimated life of 10 years with a
salvage value of P 500. What is the book value after 8 years using straight
line method?
Given:
Co = P 8 000
Cn = P 500
n=8
Solution:
d = 8 000 - 500
10
d = 750
C8 = 8
000 - 750(8) C8 =
P 2 000
17. An asset is purchased for P 500 000. The salvage value in 25 years is
P 100 000. What is the total depreciation in the first three years
using straight line method?
Given:
Co = 500 000
Cn = 100 000
n = 25
Solution:
d = 500 00 - 100 000
25
d = 16 000
D3 = 16 000(3)
D3 = P 48 000
18. A machine has an initial cost of P 50 000 and a salvage value of
P 10 000 after 10 years. What is the book value after 5 years using straight
line method?
Given:
Co = 50 000
Cn = 10 000
n = 10
x=5
Solution:
d = 50 000 - 10 000
10
d = 4 000
C5 = 50 000 - 4 000(5)
C5 =P 30 000
19. The cost of equipment is P 500 00 and the cost of installation is
P 30 000. If the salvage value is 10% of the cost of equipment at the end of
5 years, determine the book value at the end of the fourth year using
straight line method.
Given:
Co = 500 000 + 30 000 = 530 000
Cn = 500 000(0.10) = 50 000
n=5
Solution:
d = 530 000 - 50 000
5
d = 96 000
C4 = 530 000 -
96 000(4) C4 = P 146 000
20. A machine has an initial cost of P 50 000 and a salvage value of
P 10 000 after 10 years. Find the book value after 5 years using straight line
depreciation
Given:
Co = 50 000
Cn = 10 000
n = 10
Solution:
d = 50 000 - 10 000
10
d = 4 000
C5 = 50 000 - 4 000(5)
C5 = P 30 000
21. A P 110 000 chemical plant had an estimated life of 6 years and
projected scrap value of P 10 000. After 3 years of operation, an explosion
made it a total loss. How much money would have to be raised to put up a
new plant costing P 150 000, if a depreciation reserved have been
maintained during its 3 years of operation by sinking fund method?
Given:
Co = 110 000
Cn = 10 000
n=6
x=5
Solution:
d = (110 000 - 10 000)(0.06)
= 14 336.36 (1 + 0.06)6 - 1
D3 = 14
336.36[(1 + 0.06) - 1] = 45 640.92
3
Cx =
150 000 - 25 640.92 Cx =
P 104 359.08
22. A broadcasting corporation purchased equipment for P 53 000 and paid
P 1 500 for freight and delivery charges to the job site. The equipment has
normal life of 10 years with a trade in value of P 5 000 against the purchase
of a new equipment at the end of life. Determine the annual depreciation
cost by sinking fund method. Given:
Co =
54 500 Cn =
5 000
n = 10
I = 10%
Solution:
d = (54 500 - 5 000)(0.06)
(1 + 0.06)10 - 1
d = P 3 775.46
23. A dump trench was bought for P 30 000 six years ago. It will have a
salvage value of P 3 000 four years from now. It is sold now for P 8 000.
What is the sunk cost if the depreciation method used is sinking fund
method at 6%?
Given:
Co = 30 000
Cn = 3 000
n = 10
x=6
n = 10
i = 0.06
Solution:
d = (30 000 - 3 000)(0.06)
(1 + 0.06)10 - 1
d = 2 048.43
D6 = 2 048.43[(1 + 0.06)6 - 1]
0.06
D6 = 14 288
C6 = 50
000 - 14 288 C6 =
15 712
C = 15 712 - 8 000
C = P 7 712
24. A certain newly created machinery cost P 50 000 last 12 years with a
salvage value of P 5 000. Money is worth 5%. If the owner decides to sell it
after using it for 5 years, what should his price be so that he will not lose or
gain financially in the transaction? Use sinking fund method of depreciation.
Given:

Co = 50 000
Cn = 5 000
n = 12
i = 0.05
x=5
Solution:
d = (50 000 - 5 000)(0.05)
(1 + 0.05)12 - 1
d = 2 827.14
D5 = 2 827.14[(1 +
0.05)5 - 1]
0.05 D5 = 15 612,75
C5 = 50
000 - 15 612.75 C5 =
P 34 378.25
25. A certain newly created company installed a 10 000kW electric
generating plat at a cost of P 430 per kW. The amounts of the total cost of
the plant were sold to the public and were to mature in 20 years. The
estimated life of the plant is 15 years. Salvage value is conservatively set at
15% of the first cost, interest on bond is 4% and on sinking fund deposit is
3.5%. What is the sinking fund accumulation after 10 years?
Given:
Co = 100 000(430) = 4 300 000
Cn = 4 300 000(0.05) = 215 000
n = 10
i = 0.035
x = 15
Solution:
d = (4 300 000 - 215 000)
(0.035) (1 +
0.0.035) - 1
15
d = 211
705 D10 =
211 705[(1 + 0.035) - 1]
10

0.035
D10 = P 2 483 595
26. An equipment costs P 10 000 with a salvage value of P 500 at the end of
10 years. Calculate the annual depreciation cost by sinking fund method at
4% interest.
Given:
Co = 10 000
Cn = 500
n = 10
i = 0.04
Solution:
d = (10 000 - 500)(0.04)
(1 + 0.04)10 - 1
d = P 791.26
27. An equipment is purchased at a cost of P 24 000. Calculate, using
sinking fund method, its annual depreciation cost if the salvage cost is P
650 after 12 years. Use i = 5%.
Given:
Co = 24 000
Cn = 650
n = 12
i = 0.05
Solution:
d = (24 000 - 650)(0.05)
(1 + 0.05)12 - 1
d = P 1 466.97
28. A consortium of international telecommunication companies contracted
for the purchase and installation of fiber optic cable linking Manila City and
Cebu City at a total cost of P 960 million. This amount includes freight and
installation charges estimated at 10% of the above total contract price. If
the cable shall be depreciated over a period of 15 years with zero salvage
value and money is worth 6% annum, what is the annual depreciation
charge? Use sinking fund method. Given:
Co =
960 000 000 Cn = 0
n=
15 i=
0.06 Solution:

d = (960 000 000 - 0)(0.06)

(1 + 0.06)15 - 1
d = P 41 244 253.40
29. A certain company is to install a CCTV system within a building. A total
of P 2 450 000 is allotted for the equipment. If the equipment has a salvage
value of P 450 000 after 10 years, with i = 7%, calculate the annual
depreciation using sinking fund method.
Given:
Co = 2 450 000
Cn = 450 000
n = 10
i = 0.07
Solution:
d = (2 450 000 - 450 000)(0.07)
(1 + 0.07)10 - 1
d = P 144 755
30. A company purchased another building for expansion at P 5 450 000. If
the salvage value of the building is said to be P 650 000 after 15 years at
3% interest, calculate the per annum depreciation using sinking fund
method. Given:
Co = 5 450 000
Cn = 650 000
n = 15
i = 0.03
Solution:
d = (5 450 000 - 650 000)
(0.03) (1 + 0.03)15 - 1
d = P 258 079.59
31. The corporation purchased a machine for P 1 million. Freight and
installation charges amounted to 3% of the purchased price. If the machine
shall depreciate over a period of 8 years with salvage value of 12%.
Determine the depreciation charged during the 5th year using sum of the
years digit method.
Given:
Co = 1 000 000 + 1 000 000(0.03) = 1 030 000
Cn = 1 030 000(0.12) = 123 600
n=8
x=5
SYD = 36
Solution:
d = (1 030 000
- 123 600)(4/36) d = P 100
711.11
32. An asset is purchased for P 9 000. Its estimated economic life is 10
years after which will be sold for P 1 000. Find the depreciation on the fourth
year using SYD method.
Given:
Co = 9 000
Cn = 1 000
n = 10
SYD = 55
Solution:
d4 = (9 000 - 1 000)
(7/55) d4 = P 1
018.18
33. A telephone company purchased a microwave radio equipment for P 6
million. Freight and installation charges are announced to be 3% of the
purchased price. If the equipment shall be depreciated over 8 years with a
salvage value 5%, determine the depreciation charge after 5 years using
SYD method.
Given:
Co = 6 000 000 + 6 000 000(0.03) = 6 180 000
Cn = 6 180 000(0.05) = 309 000
n=8
SYD = 36
Solution:
d5 = (6 180 000 -
309 000)(4/36) d5 = P 652 333.33
34. An asset is purchased for P 9 000. Its estimated life is 10 years after
which it will be sold for P 1 000. Find the book value during the first year
using SYD method.
Given:
Co = 9 000
Cn = 1 000
n = 10
SYD = 55
Solution:
d1 = (9 000 - 1 000)
(10/55) d1 = 1 454.54
C1 = 9
000 - 1 454.54 C1 =
P 7 545.45
35. A machine costs P 80 000 and has and estimated salvage value of
P 20 000 at the end of 20 years useful life. Compute the book value of the
machine after two years using SYD method.
Given:
Co = 80 000
Cn = 20 000
n = 20
SYD = 210
Solution:
d1 = (80 000)(20/210) =
5714.29 d2 = (60 000)
(19/210) = 5428.57 D2 = 5
714.29 + 5 428.57 = 11 142.86
C2 = 80 000 11 142.86
C2 = P 68 857.14
36. An asset is purchased for P 20 000. Its estimated life is 10 years after
which will be sold for P 12 000. Find the depreciation for the first year using
SYD method.
Given:
Co = 20 000
Cn = 12 000
n = 10
SYD = 55
Solution:
d1 = (20 000 - 12 000)(10/55)
d1 = P 1 454.54
37. ABC Corporation makes it a policy that for any new equipment
purchased, the annual depreciation cost should not exceed 20% of the first
cost at any time with no salvage value. Determine the length of service life
necessary if the depreciation used is the SYD method.
Solution:
d1 = (Co - 0) (n/SYD)
d1 = Co [2/(n+1)]
but d1 = 0.20Co
0.20Co = Co [2/(n+1)]
n + 1 = 10
n = 9 years
38. An asset is purchased for P 120 000. Its estimated life is 10 years, after
which will be sold for P 12 000. Find the depreciation for the second year
using SYD method.
Given:
Co = 120 000
Cn = 12 000
n = 10
SYD = 55
Solution:
d2 = (120 000 - 12 000)(10/55)
d2 = P 17 672.73
39. A company purchases an asset for P 10 000 and plans to keep it for 20
years. If the salvage value is zero at the end of 20 years, what is the
depreciation in the third year? Use SYD method.
Given:
Co = 10 000
Cn = 0
n = 20
SYD = 210
Solution:
d3 = (10 000 - 0)(18/210)
d3 = P 857.14
40. An equipment is purchased for P 620 000. Its estimated life is 20 years,
after which will be sold for P 120 000. Find the depreciation for the 10th
year using SYD method.
Given:
Co = 620 000
Cn = 120 000
n = 20
SYD = 210
Solution:
d2 = (620 000 - 120 000)
(11/210) d2 = P 26 190.48
41. A radio service panel truck initially costs P 56 000. Its resale value at the
end of the fifth year of the useful life is estimated at P 15 000. By means of
the declining balance method, determine the depreciation charge for the
second year.
Given:
Co = 56 000
Cn = 15 000
n=5
k = 0.232
Solution:
D1 = 56 000(0.232) = 12 992
C1 = 56 000 - 12 992 =
43 008 D2 = 43 008(0.232)
D2 = P 9
977.86
42. A machine having a certain first cost has a life of 10 years and a salvage
value of 6.333% of the first cost at the end of 10 years. If it has a book value
of P 58 914 at the end of 6 years, how much is the first cost of the machine
if the constant percentage of declining value is used in the computation for
its depreciation? Given:
C6 =
90 000 k=
0.25 Solution:

d1 = 90 000(1 - 0.25)1-1 (0.25) = 22 500

d2 = 90 000(1 - 0.25)2-1 (0.25) = 16 875
d3 = 90 000(1 - 0.25)3-1 (0.25) = 12 656.25
d4 = 90 000(1 - 0.25)4-1 (0.25) = 9 492.1875
d5 = 90 000(1 - 0.25)5-1 (0.25) = 7
119.1406 D5 = 68 642.5781
58 914 = Co (1 -
0.2376) 6
Co = P 300 000
43. An earth moving equipment that costs P 90 000 will have an estimated
salvage value of P 18 000 at the end of 8 years. Using double declining
method, compute the book value and total depreciation at the end of 5
years.
Given:
k = 0.25
Co = 90 000
Solution:
d1 = 90 000(1 - 0.25)1-1 (0.25) = 22 500
d2 = 90 000(1 - 0.25)2-1 (0.25) = 16
875 d3 = 90 000(1 - 0.25)3-1 (0.25) = 12
656.25 d4 = 90 000(1 - 0.25)4-1 (0.25)
= 9 492.1875 d5 = 90 000(1 - 0.25)5-1 (0.25)
= 7 119.1406 D5 = 68 642.5781
C5 = 90 000(1 -
0,25) 5
C5 = P 21
357
44. A certain office equipment has a first cost of P 20 000 and a salvage
value of P 1 000 at the end of 10 years. Determine its book value at the end
of 6 years using declining balance method.
Given:
Co = 20 000
Cn = 1 000
n = 10
x=6
k = 0.259
Solution:
D1 = 20 000(0.259) = 5
180 C1 = 20 000 - 5 180 = 14 820 D2 = 14 820(0.259)
= 3 838 C2 = 14 820 - 3 838 = 10 982 D3 = 10
982(0.259) = 2 844 C3 = 10 982 - 2 844 = 8 183 D4 =
8 183(0.259) = 2 108 C4 = 8 138 - 2 108 = 6 030
D5 = 6 030(0.259) = 1 562 C5 = 6 030 - 1 562 = 4
468 D6 = 4 468(0.259) = 1 157 C6 = 4 468 - 1 157
= 3 311 C6 = P 3 311
45. The original cost of a certain machine is P 150 000, has a life of 8 years
with salvage value of P 9 000. How much is the depreciation on the fifth
year if the constant percentage of declining balance value is used?
Given:
Co = 150 000
Cn = 9 000
n=8
x=5
k = 0.2976
Solution:
D5 = 150
000(1 - 0.2976) (0.2976)
5-1
D5 =
P 10 893.62
46. A firm considering the installation of an automatic data processing unit
to handle some of its accounting operations. Machine for that purpose may
be purchased for P 20 000, or maybe leased for P 8 000 for the first year
and P 1 000 less every year now and then until the end of the fourth year. If
the money is worth 15%, is it advisable to rent or buy the machine?
Given:
A = 8 000
i = 0.15
n=4
G = 1 000
Solution:
P1 = 8 000[(1 + 0.15)]4 - 1] = 22
840 (1 + 0.15)4 (0.15)
P2 = 1 000
____(1.15) - 1
4
_ ___ 4___ = 3 786 0.15
(1 + 0.15) (0.15)
4
(1 + 0.15) 4
P=
P1 - P2 = 22 840 - 3 786
p = P 19 054
47. For having been loyal, trustworthy and efficient, the company has
offered a superior a yearly gratuity pay of P 20 000 per 10 years with the
first payment to be made one year after his retirement. The supervisor,
instead, requested that he paid a lump sum on the date of his retirement
less interest that the company would have earned if gratuity is to be paid on
yearly basis. If interest is 15%, what is the equivalent lump sum that he
could get?
Given:
A = 20 000
n = 10 years
i = 0.15
Solution:
P = 20 000[(1 + 0.15)10 - 1]
0.15(1 + 0.15)10
p = P 100 375.37
48. under a factory saving plan, a workman deposits P 25 at the beginning
of each month per year, and the management guarantees accumulation at
6% at compounded monthly. How much stands to the work mans credit at
the end of 4 years?
Given:
In = 10% annually
A = 25
n = 48 months
i = 0.005
Solution:
F = 25[(1 + 0.005)48 + 1 - 1]
0.15
F = P 1 359.21
49. Engr. Jason Buenaventura Nino loan an amount of P 100 000 at a local
commercial bank at 10% compounded annually. How much is his monthly
payment if he is required to pay at the beginning of the first day of the
month a period of 30 years?
Given:
In = 10% annually
P = 100 000
n = 360 months
Solution:
(1 + 0.10) = 1 + __In 12

12
_In_ i =
0.007974 per month 12

100 000 = A[(1 + 0.007974)360 + 1 - 1]

(1.007974)360 (0.007974)
A = P 839.19
50. Find the present worth of all cash disbursement using gradient interest
formula is 15% per annum. Annual cash disbursement increase by P 1 000
every year thereafter, until the end of the fourth year. The first
disbursement amount to P 5 000.
Given:
G = 1 000
i = 0.15
n=4
Solution:
P1 = 1 000 __(1 + 0.15)4 - 1__ _
____4___ = P 3 786 0.15 (1 + 0.15)4
(0.15) (1 + 0.15)4 P2 = 5 000[(1
+ 0.15) - 1] = P 14 275
4

0.15(1 + 0.15)4 P=
3 786 + 14 275 = P 18 061
51. At what interest payable quarterly will payment of P 500 at the
beginning of each 3 months for 7 years discharge a debt pf P 12 500 due
immediately?
Given:
P = 12 500
A = 500
i = _i_
4
n = 28
Solution:
12 500 = 500[(1 +
i) 28-1
- 1] + 500
(1 + i)28-1 i 24 = _(1 + i)23 -
1_ (1
+ 4) i 27
Let i
= 0.0344 24 =
__(1.0086) - 1_____
27
 (0.0086)(1.0086)27
i = 3.44%

52. The maintenance of a room air conditioner is expected to be P 2 000 at

the end of the first year and is expected to increase by P 200 each year for
the following 7 years. Assuming rate of interest is 6%. Compute the
equivalent uniform annual maintenance cost.
Solution:
A = 2 000 + 100 __1__ _ ____8____
0.06 (1.06)8 - 1
A = P 2 319.52
53. A car dealer advertise the sale of a car model for a cash prize of P
280 000. If purchased on installment, the required down payment is 15%
per month. How much will be the required monthly payment?
Given:
DP = 42 000
Balance = 238 000
i = 0.15
Solution:
A = 238 0009).15)(1 + 0.0015)18
(1 + 0.15)18 - 1
A = P 15 185.78
54. If P 100 000 pesos is deposited each year for 9 years. How much annuity
can a person get annually from the bank every year for 8 years starting 1
year after the 9th deposit is made. Cost of money is 14%
Given:
A = 100 000
n1 = 9
n2 = 8
i = 0.14
Solution:
F9 = P17
F9 = 100 000[(1 + 0.14)9 -
1] = 1 608 534.66 0.14
1 608
534.66 = A[(1 + 0.14) - 1]
8

46 389 0.14(1 + 0.14)8

A = P 346 749.156
55. The maintenance of a machine is expected to be P 155 at the end of
first ear and it is expected to increase P 35 each year for the following 7
years. What sum of money should be set aside now to pay the maintenance
for the eighth year period? Assume 6% interest.
Given:
A = 155
G = P 30
i = 0.06
n=8
Solution:
P = 155[(1 + 0.06)8
- 1] + _30_ _(1 + 0.06)8 - 1__ (1 +
0.06) (0.06) 0.06 0.06(1 + 0.06)
8 8
P=
962.52 + 694.46
P = 1 606.98
56. A man inherited a regular endowment of P 100 000 every end of 3
months for n years. However, he may choose to get a single lump sum of
P 3 702 939.8 at the end of 4 years. If the rate of interest was 14%
compounded quarterly. What is the value of n?
Given:
A = 100 000
n = 4n
F9 = 3 702 939.8
In = 14%
i = 0.035
Solution:
P = _3 702 939.8_ = 100
000[(1 + 0.035) - 1]
4n
(1 + 0.035)4(4)
(1 + 0.035)4n (0.035) 0.7474(1
+ 0.035) = (1.035) - 1
4n 4n
1=
1.035 (1 - 0.7474)
4n
 3.9588 = 1.0354n
n = 10 years

57. A man purchased a car with a cash price of P 350 000. He was able to
negotiate with the seller to allow him to pay only a down payment of 20%
and the balance payable in equal 48 end of the month installment at 1.5%
per month. On the day he paid the 20th installment, he decided to pay the
remaining balance. How much is the remaining balance he paid?
Given:
P = 280 000
n = 48 months
i = 0.15
Solution:
P = 280 000 = __A[(1 + 0.015)48 - 1]_
(0.015)(1 +
0.015) 48
A = 8 225 monthly
P20 = 8 225[(1 +
0.015) - 1]
28
0.015(1 + 0.015)28 P20 =
P 186 927.25

58. Maintenance cost of an equipment is P 20 000 for 2 years, P 40 000 at

the end of 4 years and P 80 000 at the end of 8 years. Compute the semi-
annual amount that be set for this equipment. Money worth 10%
compounded annually.
Given:
F1 = 20 000 n=2
F2 = 40 000 n=4
F3 = 80 000 n=8
Solution:
(1 + 0.1)1 = 1 + _In_ 2
2
i=
0.0488 semi-annually
 P =_20 000_ + _40 000_ + _80 000_
(1 + 0.1)2 (1 + 0.1)4 (1 + 0.1)8
P = 16 528.93 + 27 320.54 + 37 320.59
P = 81 170.06
A = 81 170.06[(1 + 0.0488)16
(0.0488)] (1 + 0.0488)16
-1 A = P 7 425.72

59. XYZ Inc. plans to construct an additional building at the end of 10 years
for an estimated cost of P 5 000 000 at, to accumulate this amount it will
have equal year end deposits in a fund earning 13%. However, at the end of
the fifth year, it was decided to have a larger building hat originally to an
estimated cost of P 8 000 000. What should be the annual deposit for the
last 5 years?
Given:
P = 5 000 000
i = 0.13%
n=5
Solution:
 A = 5 000 000(0.13) = P 231
447.78 (1 + 0.13)10 - 1
F1 = 231 447.75[(1
+ 0.13)5 - 1]
0.13 F1 = 1 759
055.10 F2 =
1 759 055.10(1 + 0.13)
F2 = 3 240 941.50
Balance after 10 years
F3 = 8 000 000 3 240 941.50
F3 = 4 759 058.50
A = 4 759 058.50[(1 + 0.13)5 (0.13)]
(1 + 0.13)5 - 1
A = P 734 391.94

60. What is the present worth of a P 500 annuity starting at the end of the
third year and continuing to the end of the fourth year, if the annual interest
rate is 10%?
Given:
A = 500
i = 0.10
Solution:
P1 = 500[(1 + 0.1)2 - 1]
0.1(1 + 0.1)2
 P1 = 867.77
P = __867.77__
(1 + 0.1)2
P = P 717.17

61. A loan of P 5 000 is made for a period of 15 months, at a simple interest

rate of15%, what future amount is due at the end of the loan period?
Given:
P = 5 000
n = 15
i = 0.15
Solution:
F = 5 000 1 + 0.15 15
 12
F = P 5 937.50

62. If you borrowed money from your friend with simple interest of 12%, find
the present worth of P 50 000, which is due at the end of 7 months.
Given:
F = 50 000
i = 0.07
n=7
Solution:
50 000 = P 1 + 0.12 _7_
 12
P = P 46 728.97

63. Mr. J Reyes borrowed money from the bank. He received from the bank
the P 1 842 and promised to repay P 2 000 at the end of 10 months.
Determine the rate of simple interest.
Given:
F = 2 000
P = 1 842
n = 10
Solution:
 2 000 = 1 842 1 + i 10
12
i = 10.29%

64. If you borrowed P 10 00 from a bank with 18% interest per annum, what
is the total amount to be repaid at the end of one year?
Given:
P = 10 000
i = 0.18
Solution:
 F = 10 000(1 + 0.18)
F = P 11 800

65. A man borrowed P 2 000 from a bank and promised to pay the amount
for one year. He received only the amount of P 1 920 after the bank
collected an advanced interest of P 80. What was the rate of discount?
Given:
D = 80
F = 2 000
 Solution:
d = __80__
2 000

66. What will be the future worth of money after 12 months, if the sum of
P 25 000 is invested today at simple interest rate of 1% per year?
Given:
P = 25 000
i = 0.01
 Solution:
F = 25 000(1 +0.01)
F = P 25 250

67. What will be the future worth of money after 12 months, if the sum of
P 25 000 is invested today at simple interest rate of 1% per month?
Given:
P = 25 000
i = 0.01
 Solution:
F = 25 000[(1 + 0.01(12)]``
F = P 28 000

68. P 5 000 is borrowed for 75 days at 16% per annum simple interest. How
much will be due at the end of 75 days?
Given:
P = 5 000
n = 75
 i = 0.16
Solution:
F = 5 000 1 + (0.16) __75__
360
F = P 5 166.67

69. A man borrowed P 20 000 from a local commercial bank which has a
simple interest rate of 16% but the interest is to be deducted from the loan
at the time the money was borrowed and the loan is payable at the end of
one year. How much is the actual rate of interest?
Given:
 F = 20 000
i = 0.16
Solution:
I = 0.16(20 000)
I = 3 200
3 200 = (20 000 - 3 200)(i)(1)
i = 19.05

70. P 4 000 is borrowed for 75 days at 16% per annum simple interest. How
much will be due at the end of 75 days?
Given:
P = 4 000
n = 75
 i = 0.16
Solution:
F = 4 000 1 + 0.16 _75_
360

71. Agnes Abanilla was granted a loan of P 20 000 by her employer CPM
Industrial Fabricator and Construction with an interest of 6% for 180 days on
the principal collected in advance. The corporation would accept a
promissory note for P 20 000 for 180 days. If discounted at once, find the
proceeds of the note.
Given:
i = 0.06
P = 20 000
Solution:
Interest = 0.06(20 000) = 1 200
Proceeds on the note = 20 000 - 1
200 Proceeds on the note = 18 800

72. if you borrowed money from your friend with simple interest of 12%, find
the present worth of P 20 000, which is due at the end of nine months.
Given:
F = 20 000
 n=9
i = 0.12
Solution:
20 000 = P 1 + 0.12 270
360
P = P 18 348.62

73. A man borrowed from a bank under a promissory note that he signed in
the amount of P 25 000 for a period of one year. He receives only the
amount of P 21 915 after the bank collected the advance interest and an
additional of P 85 for notarial and inspection fees. What was the rate of
interest that the bank collected in advance?
Given:
F = 25 000
Solution:
Amount received = 21 915 + 85
Amount received = 22 000
Interest = 25 000 - 22 000
Interest = 3 000
3 000 = 22 000(i)(1)
i = 13.64%

74. Mr. Danilo Conde borrowed money from a bank. He receives from the
bank P 1 340 and promised to pay P 1 500 at the end of 9 months.
Determine rate of simple interest.
 Given:
F = 1 500
P = 1 340
n = 270
Solution:
1 500 = 1 340 1 + i 270
360
0.1194 = 270 i
360
i=
15.92%

75. Annie buys a television set from a merchant who ask P 1 250 at the end
of 60 days. Annie wishes to pay immediately and the merchant offers to
compute the cash price on the assumption that money is worth 8% simple
interest. What is the cash price?
Given:
F = 1 250
n = 60
i = 0.08
Solution:
1 250 = P 1 + 0.08 _60_
360
P = P 1 233.55

76. A man borrowed money from a loan shark. He receives from the loan
shark an amount of P 1 342 and promised to pay P 1 500 at the end of 3
quarters. What is the simple interest rate?
Solution:
Interest = 1 500 - 1 342
Interest = 158
158 = 1 342(i)(3/4)
i = 15.69%

77. What is the ordinary interest on P 1 500.50 for 182 days at 5.2%
Given:
 P = 1 500.50
n = 182
i = 0.052
Solution:
I = (1 500)(0.052)(182/360)
I = P 39.25

78. On her recent birthday, April 22, 2001, Nicole was given by her mother a
certain sum of money as birthday present. She decided to invest the said
amount on 20% exact simple interest. If the account will mature on
Christmas day at an amount of P 10 000, how much did Nicole receive from
her mother on her birthday?
Solution:
Solving for the total number of days:
April 22-30 8
May 31
June 30
July
31 August
31 September
30 October
31 November
30 December 1-
25 _25_
247 10
000 = P 1 + (0.20)(247/260)
P = P 8 807.92
79. Marie has P 20 000 in cash. She received it at 7% from March 1, 2006 to
November 1, 2006 at 7% interest. How much is the interest using the
Bankers Rule?
Solution:
March 2-31 30
April 30
May 31
June 30
July
31 August
31 September
30 October
31 November 1
_1_
245 I = (20 400)
(0.07)(245/360) I=P
971.83
80. The exact simple interest of P 5 000 invested from June 21, 1995 to
December 25, 1995 is P 100. What is the rate of interest?
Solution:
June 21-30 9
July
31 August
31 September
30 October
31 November
30 December 1-
25 _25_
187 100
= 5 000(i)(187/365) i=
3.90%
81. The amount of P 20 000 was deposited in a bank earning an interest
rate of 6.5% per annum. Determine the total amount at the end of 7 years if
the principal and interest were not withdrawn during this period.
Given:
P = 20 000
i = 0.065
n=7
Solution:
F = 20 000(1 + 0.065)7
F = P 31 079.73
82. A loan of P 50 000 is to be paid in 3 years at the amount of P 65 000.
What is the effective rate of money?
Given:
F = P 65 000
P = P 50 000
n = 3 years
Solution:
65 000 = 50 000(1 + i)3
i = 9.14%
83. The amount of P 50 000 was deposited in the bank earning an interest
of 7.5% per annum. Determine the total amount at the end of 5 years, if the
principal and interest were not withdrawn during the period.
Given:
P = 50 000
i = 0.075
n = 5 years
Solution:
F = 50 000(1 + 0.075)5
F = P 71 781.47
84. Find the present worth of a future payment of P 80 000 to be made in 6
years with an interest of 12% compounded annually.
Given:
F = 80 000
n = 6 years
i = 0.12
Solution:
80 000 = P(1 + 0.12)6
P = P 40 530.49
85. What is the effective rate corresponding to 18% compounded daily?
Take 1 year is equal to 360 days.
Given:
n = 360
i = 0.18
Solution:
ER = [1 + (0.18/360)]360 - 1
ER = 19.72%
86. Find the compound amount if P 2 500 is invested at 8% compounded
quarterly for 5 years and 6 months.
Given:
P = 2 500
i = 0.08
n = 5.5(4)
Solution:
F = 2 500[1 + (0.08/4)]5.5(4)
F = P 3 864.95
87. If P 5 000 shall accumulate for 10 years at 8% compounded quarterly,
then what is the compound interest at the end of 10 years?
Given:
P = 5 000
n = 10 years
i = 0.08
Solution:
F = 5 000[1 + (0.08/4)]10(4)
F = 11 040.20
Interest = 11 040.20 - 5
000 Interest = P 6 040.20
88. What is the corresponding effective rate of 18% compounded semi-
quarterly?
Given:
i = 0.18
Solution:
ER = [1 + (0.18/8)]8 - 1
ER = 19.48%
89. Find the present worth of a future payment of P 100 000 to be made in
10 years with an interest of 12% compounded quarterly.
Given:
F = 100 000
n = 10 years
i = 0.12
Solution:
100 000 = P[1 + (0.12/4)10(4)
P = P 30 655.68
90. A student plan to deposit P 1 500 in the bank now and another P 3 000
for the next 2 years. If he plans to withdraw P 5 000 three years from after
his last deposit for the purpose of buying shoes, what will be the amount of
money left in the bank after one year of his withdrawal? Effective annual
interest rate is 10%
Solution:
F1 = 1 500(1 + 0.10)6
F1 = 2 657.34
F2 = 3 000(1 + 0.10)4
F2 = 4 392.30
F3 = 5 000(1 + 0.1)1
F3 = 5 500
P + 5500 = 2
657.34 + 4 392.30 P=P1
549.64
91. What is the present worth of two P 100 payments at the end of the third
year and fourth year? The annual interest rate is 8%.
Given:
F = 100
n = 3 and 4
Solution:
100 = P1 (1 + 0.08)3
P1 = 79. 38
100 = P2 (1 + 0.08)4
P2 = 73.50
Present worth = 79.38 +
73.50 Present worth = P
152.88
92. A firm borrows P 2 000 for 6 years at 8%. At the end of 6 years, it
renews the loan for the amount due plus P 2 000 more for 2 years at 8%.
What is the lump sum due?
Given:
P = 2 000
n = 8 and 2
i = 0.08
Solution:
F1 = 2 000(1 + 0.08)8
F1 = 3 701.86
F2 = 2
000(1 + 0.08) 2
F2 =
2 332.80 F=
3 701.86 + 2 332.80
F = 6 034.66
6 034.66 = P(1 + 0.08)8
P = P 3 260.34
93. A machine has been purchased and installed at a total cost of P 18 000.
The machine will retire at the end of 5 years, at which time it is expected to
have a scrap value of P 2 000 based on current prices. The machine will
then be replaced with an exact duplicate. The company plans to establish a
reserve funds to accumulate the capital needed to replace the machine. If
an average annual rate of inflation of 3% is anticipated, how much capital
must be accumulated?
Solution:
To replace the machine with an exact duplicate 5 years from
now, the company will need the same amount P 18 000. Since there will be
a scrap value of 2 000, the company will need the amount of P 16 000 only.
Without inflation,
Capital to accumulate = 16 000
With inflation,
Capital to accumulate = 16 000(1 + 0.03)5
Capital to accumulate = P 18
548.38
94. in year zero, you invest P 10 000 in a 15% security for 5 years. During
that time, the average annual inflation is 6%. How much, in terms of year
zero pesos will be in the account at maturity?
Given:
P =10 000
i = 0.15
n=5
Solution:
F = 10 000(1 + 0.15)5
F = 20 113.57
At inflation:
20 113.57
= P(1 + 0.06) 5
P = P 15
030.03
95. A company invests P 10 000 today and repaid in 5 years in one lump
sum at 12% compounded annually. How much profit in present day pesos is
realized?
Given:
P = 10 000
i = 0.12
n = 5 years
Solution:
F = 10 000(1 + 0.12)5
F = 17 623.42
Profit = 17 623.42 -
10 000 Profit = P 7
623.42
96. Find the difference between simple interest and compound interest on
savings deposit of P 50 000 at 10% per annum for 3 years.
Given:
P = 50 000
i = 0.10
n=3
Solution:
I = 50 000(0.10)(3)
I = 15 000
Solving for compound
interest: F = 50 000(1 + 0.10)3
F = 66 550
Interest =
66 550 - 50 000 Interest =
16 550
Difference = 16 550 - 15 000
Difference = P 1 550
97. The Philippine Society of Mechanical Engineers is planning to put up its
own building. Two proposals being considered are:
A. The construction of the building now to cost P 400 000.
B. The construction of a smaller building now to cost P 300 000
and at the end of 5 years, an extension to be added to cost P 200 000.
By how much is proposal B more economical than proposal
A if interest rate is 20% and depreciation to be neglected?
Solution:
Proposal A has a present worth of P 400 000.
For proposal B:
Present worth = 300 000 + P
200 000 = P(1 + 0.20)5
P = 80 375.51
Solving for the difference
of present worth of both proposals: Difference = 400 000 - 380
375.71 Difference = P 19 624.49
98. Microsoft CEO, billionaire, Bill Gates willed that a sum of S 25 million be
given to a child but will be held in trust by the childs mother until it
amounts to S 45 million. If the amount is invested and earns 8%
compounded quarterly, when will the child receive the money?
Given:
F = 45
P = 25
n = 0.08
Solution:
45 = 25 1 + 0.08 4n
4
1.8 = (1.02)4n
n = 7,42
years
99. Find the present value of installment payments of P 1 000 now, P 2 000
at the end of the first year, P 3 000 at the end of the second year, P 4 000 at
the end of the third year and P 5 000 at the end of the fourth year, if money
is worth 10% compounded annually.
Given:
P1 = 1 000
P2 = 2 000
P3 = 3 000
P4 = 4 000
P5 = 5 000
i = 0.10
Solution:
P = 1 000
+ 2 000 + 3 000 + 4 000 + 5 000
(1.1) (1.1)2 (1.1)3 (1.1)4
P = P 11 717.85
100. How long will it take money to triple itself if invested at 8%
compounded annually?
Given:
i = 0.08
P=P
F = 3P
Solution:
3P = P (1 + 0.08)n
n = 14.27 years
 Technological Institute of the Philippines
1338 Arlegui St., Quiapo, Manila

College of Engineering and Architecture

Electronics Engineering Department

Problem Set in ME005 - Engineering Economy

Submitted by:
Beronio, Joerrin D.
1011513
 Submitted to:
Engr. Jason B. Nino