Tuesday, October 4, 2011

Contest #12

Bigby Co. & Figetz Inc. are manufacturing competitors. They each sell their widgets for $45.00 a piece. Bigby's fixed costs are $101,900 a month. Figetz's fixed costs are 21.1% lower than Bigby's. Per widget, Figetz has a variable cost of 25.75% of the sale price. The cost is 3.5 percentage points more than Bigby's variable costs. Last month, Bigby produced and sold 5,123 widgets. Figetz produced and sold 145 more widgets than Bigby.


Who made more profit and what was the % difference from the manufacturer who made the lower profit?

Solution to Contest #11

Adam is an accountant. His client wants him to use this depreciation schedule for a certain asset:

In the first year, the asset is depreciated 20% from its original price. In subsequent years, the asset is depreciated by 8% of its book value.

What is the book value of a $109,000 asset after its fourth year?

The asset is bought for $109,000. In its first year, the depreciation is $109,000 x 0.20 = $21,800. The book value of asset is $109,000 - $21,800 = $87,200.

In the second year, the depreciation is $87,200 x 0.08 = $6,976. The book value of asset is $87,200 - $6,976 = $80,224.

In the third year, the depreciation is $80,224 x 0.08 = $6,418. The book value of asset is $80,224 - $6,418 = $73,806.

In the fourth year, the depreciation is $73,806 x 0.08 = $5,904. The book value of asset is $73,806 - $5,904 = $67,566.

So the correct answer is $67,902.