A d d i s o n - We s l e ys

Business Math Review

Rounding whole numbers Rules for rounding: 1. Identify the position to be rounded. Draw a line under that place. 2. If the digit to the right of the underlined place is 5 or more, increase by 1; if the digit is 4 or less, do not change. 3. Change all digits to the right of the underlined digit to zero. Application problems Follow these steps 1. Read the problem carefully. 2. Work out a plan, using indicator words before starting. 3. Estimate a reasonable answer. 4. Solve the problem. If the answer is reasonable, check; if it is not, start over. Whole numbers and decimals Place Value Chart
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Writing a fraction as a percent First change the fraction to a decimal. Then move the decimal point two places to the right and attach a percent sign (%).
2 .4 5 .4 1.40. 2 40%

Writing a percent as a decimal

Move the decimal point two places to the left and drop the percent sign (%). 50% 1.50.% 2 .5

Writing a fractional percent as a decimal

First change the fraction to a decimal, leaving the percent sign. Then move the decimal point two places to the left and drop the percent sign (%). 1 % = .5% .5% = .005 2

Using the standard format to solve percent problems

Express the problem in the format R * B = P % of is where % of something is something. Notice that of means and is means .

93 276049 85 3 268 94
Whole numbers Types of fractions
Proper: Numerator smaller than demoninator. Improper: Numerator equal to or greater than denominator. Mixed: Whole number and proper fraction.

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Using the percent formula:

To solve for base Use P = B * R P R P B R R = To solve for rate Use P = B * R P B P B R

Decimals

B =

Converting fractions
Mixed to improper: Multiply denominator by whole number and add numerator. Improper to mixed: Divide numerator by denominator and place remainder over denominator.

Drawing a diagram and using the percent formula to solve increase problems Solve for the base when given
the rate (110%) and the part (after increase). 10% 10% increase

Prime numbers

A prime number has only itself and 1 as factors. Some examples: 2, 3, and 7 are prime numbers

Adding and subtracting mixed numbers 1. Find the LCD, then add fractions. 2. Add whole numbers. 3. Write the answer in simplest terms. Multiplying mixed numbers 1. Change mixed numbers to improper fractions. 2. Cancel if possible. 3. Multiply as proper fractions. Dividing mixed numbers Change mixed numbers to
improper fractions. Invert the divisor, cancel if possible, and multiply as proper fractions.

110% (rate) 100%

Last years value = ? (base = 100%) Original

This years value = $121,000 (part = original + increase)

Drawing a diagram and using an equation to solve a decrease problem Solve for the base when given the rate
(90%) and the part (after decrease).
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Writing a decimal as a percent

Move the decimal point two places to the right and attach a percent sign (%). .75 1.75. 2 75%

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10%

10% decrease

Federal withholding tax

Tax is paid on total earnings.

110%

Price paid = $135 (part = 90% reduced price) Original value = ? (base = 100%) (rate)

Single employee with 3 allowances; weekly earnings of $338; find the federal withholding tax. Using wage bracket amount at least $330, but less than $340, withholding is $11. Use the percentage method to find the withholding tax. $338 - ($59.62 * 3) = $159.14 $159.14 - $51 = $108.14 $108.14 * .1 = $10.81

A maintenance fee is usually charged and there is often a per-check charge.

Checking-account service charges

State withholding tax Tax is paid on total earnings. Complements with respect to 1 (100%) The complement is the number that must be added to a given discount to get 1 or 100%. Find the complement with respect to 1 (100%) for each of the following.

Reconciliation of a checking account An account holder must periodically verify checking-account records with those of the bank or financial institution. The bank statement is used for this. Gross earnings with overtime First, find the regular earnings. Then, determine overtime pay at overtime rate. Finally, add regular and overtime earnings.
Gross earnings Earnings at regular rate Earnings at time-and-half rate 40 regular hours at $8.40 per hour. 10 overtime hours at time and a half. Gross earnings = (40 * $8.40) + (10 * $8.40 * 1.5) = $336 + $126 = $462

(a) 10% = 100% or 100% - 10% = 90% 10% + (b) 50% complement = 50% (c) 5% complement = 95% Complements and series discounts The complement of a
discount is the percent paid. Multiply the complements of the series discounts to get the net cost equivalent. Series discount, 10/20/10; find the net cost equivalent. 10/ 20/ 10 p p p .9 * .8 * .9 = .648

Gross earnings for piecework

Gross earnings Pay per item Number of items

Net cost equivalent (percent paid) and the net cost

Multiply the net cost equivalent (percent paid) by the list price to get the net cost. List price, $280; series discount, 10/30/20; find the net cost. 10/ 30/ 20 p p p .9 * .7 * .8 = .504 percent paid .504 * $280 = $141.12

Straight commission
Gross earnings Commission rate Amount of sales Sales of $25,800; commission rate is 5%. .05 * $25,800 = $1290

Variable commission

Commission rate varies at different sales levels. Up to $10,000, 6% $10,001$20,000, 8% $20,001 and up, 9% Find the commission on sales of $32,768. .06 * $10,000 = $600.00 (first $10,000) .08 * $10,000 = $800.00 (next $10,000) .09 * $12,768 = $1149.12 (amount over $20,000) $32,768 $2549.12 total commission

Single discount equivalent to a series discount Often needed to compare one series discount to another, the single-discount equivalent is found by multiplying the complements of the individual discounts to get the net cost equivalent, then subtracting from 1.
1 - Net cost equivalent = Single discount equivalent What single discount equals a 10/20/20 series discount? 10/ 20/ 20 p p p .9 * .8 * .8 = .576 1 - .576 = .424 = 42.4%

The gross earnings are multiplied by the tax rate. When the maximum earnings are reached, no additional FICA is withheld that year. Gross earnings, $458; Social Security tax rate, 6.2%; find the Social Security tax. $458 * .062 = $28.40

FICA; Social Security tax

Medicare Tax The gross earnings are multiplied by the Medicare tax rate. Medicare tax is paid on all earnings.
Gross earnings, $458; Medicare tax rate, 1.45%; find the Medicare tax. $458 * .0145 = $6.64

Finding net cost, using complements of individual discounts Net cost List price complements of individual
discounts List price, $510; series discount, 30/10/5; find the net cost. 30/ 10/ 5 p p p .$510 * .7 * .9 * .95 = $305.24 (rounded)
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Determining number of days and dates

30-Day Months April June September November 31-Day Months All the rest except February with 28 days (29 days in leap year)

Solve for part. % (rate) P = B * R P = $6.00 * .25 P = $1.50 25% 100% C M S $ $? $6.00 (part) (base)

With ordinary dating, count days from the date of the invoice. Remember: 2/ 10, n/ 30 p p p p % days net days

Ordinary dating and cash discounts

Converting markup on cost to markup on selling price

Use the formula % markup on selling price = % markup on cost 100% - % markup on cost 25% 100% + 25% .

Cash discounts with end-of-month dating (EOM or proximo) The final discount date and the net date are counted
from the end of the month. If the invoice is dated the 26th or after, add the entire following month when determining the dates. If not stated, the net date is 20 days beyond the discount date.

Convert 25% markup on cost to markup on selling price. % markup on selling price = =

.25 = .2 = 20% 1.25

Receipt-of-goods dating and cash discounts (ROG)

Time is counted from the date goods are received to determine the final cash discount date and the net payment date. If not stated, the net date is 20 days beyond the discount date.

Converting markup on selling price to markup on cost

Use the formula % markup on cost = % markup on selling price 100% - % markup on selling price 20% 100% - 20%

Extra dating and cash discounts Extra dating adds extra days to the usual cash discount period, so, 3/10-20x means 3/30. If not stated, the net date is 20 days beyond the discount date. Partial payment credit
When only a portion of an invoice amount is paid within the cash discount period, credit will be given for the partial payment. Use the percent formula P B = R where the credit given is the base, the partial payment is the part, and (100% the cash discount) is the rate. Invoice, $400; terms, 2/10, n/30; invoice date, Oct. 10; partial payment of $200 on Oct. 15; find credit given for partial payment and the balance due on the invoice. $200 $200 P B = = = R 100% - 2% .98 Credit = $204.08 (rounded) Balance due = $4002$204.08 = $195.92

Convert 20% markup on selling price to markup on cost. % markup on cost = =

.2 = .25 = 25% .8

Formulas used when working with markdown

Break-even point Cost Operating expenses Operating loss Break-even point Reduced selling price Absolute loss Cost Reduced selling price

Turnover at retail
Use the formula Turnover = Retail sales Average inventory at retail Cost of goods sold Average inventory at cost

Turnover at cost
Use the formula Turnover =

Markup on cost
100% Cost Markup? Selling Price Cost is base. Use the basic percent formula P = B * R 100% (rate) 25% P = B * R P = $160 * .25 P = $40 markup C M S $160 (base) $? (part) $ (base) (part)

Each item is cost coded, and the costs are added to find total inventory.

Specific identification to value inventory

Weighted-average (average cost) method of inventory valuation This method values items in an inventory at the
average cost of buying them.

First-in, first-out (FIFO) method of inventory valuation

First items in are first sold. Inventory is based on cost of last items purchased.

Last-in, first-out (LIFO) method of inventory valuation

The items remaining in inventory are those items that were first purchased.

Markup on selling price

% % 100% C M S $ $? (part) $ (base)

Finding simple interest when time is expressed in years 1. Use formula I = PRT. 2. Express R in decimal form. 3. Express time in years. 4. Substitute values for P, R, and T and multiply.
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A d d i s o n - We s l e ys

Business Math Review

(a) the due date of the original note, (b) the discount of the original note using B = MDT, and (c) the proceeds from the original note using P = M - B. The maturity value (face value) of the note is written on the note itself.

Finding simple interest when time is expressed in months 1. Use formula I = PRT. 2. Express R in decimal form. 3. Express time in years by dividing number of months by 12. 4. Substitute values for P, R, and T and multiply. Finding the maturity value of a loan 1. Find I, using the formula I = PRT. 2. Find the maturity value using the formula M = P + I. Finding the number of days from one date to another using actual number of days in a month Add actual
number of days in each month or partial month from initial date to final date.

2. (a) Find the discount period, which is the time (e.g., number of days) from the sale of the note to the maturity date of the note.
(b) Find the discount, using the formula B = MDT. (c) Find the proceeds using P = M - B.

Finding compound amount and compound interest

Find the number of compounding periods (n) and the interest rate per period (i ). Use the compound interest table to find the interest on $1. Multiply the table value by the principal to obtain the compound amount. Subtract principal from compound amount to obtain the interest.

Finding exact interest

Use the formula I PRT with T =

Number of days of loan 365 Number of days of loan 360

Finding ordinary or bankers interest

Use the formula I PRT with T =

Finding the present value of a future amount

Determine the number of compounding periods (n). Determine the interest per compounding period (i ). Use the values of n and i to determine the table value from the present value table.

Formula for finding principal, rate, or time

I I P = RT P R T I R = PT P I R T

Find present value using Present value Future value Table value. Determine the number of periods in the annuity (n) and the interest rate per annuity period (i ).

Finding the amount of an ordinary annuity

To find the time in days, use the formula I T (in days) = * 360 PR I To find the time in months, T = PR use the formula P I T (in months) = * 12 PR

I R T

Use n and i in the annuity table to find the value of $1 at the term of annuity. Find the value of an annuity using Amount Payment Number from table.

Finding the proceeds of a simple discount note

Calculate bank discount using the formula B + MDT. Then calculate the proceeds or loan amount using the formula P = M - B.

Finding the amount of an annuity due Determine the number of periods in the annuity. Add 1 to the value and use this as the value of n.
Determine the interest rate per annuity period and use the table to find the value of $1 at term of annuity. The value of the annuity is Payment Number from table 1 payment.

Finding the face value of a simple discount note

Use the formula M = P 1 - DT

Finding the proceeds to an individual or firm that discounts a simple interest note 1. If necessary, find
(a) the due date of the original note and (b) the maturity value of the original note (M = P + I, where I = PRT).

Finding the present value of an annuity

Determine the payment per period. Determine the number of periods in the annuity (n). Determine the interest rate per period (i ). Use the values of n and i and find the number in the present value of an annuity table. The present value of an annuity Present value Payment Number from table.

2. (a) Find the discount period, which is the time (e.g., number of days) from the sale of the note to the maturity date of the note.
(b) Find the discount, using the formula B = MDT. (c) Find the proceeds using P = M - B.

Determining the payment into a sinking fund

Determine the number of payments (n). Determine the interest rate per period (i ). Find the value of the payment needed to accumulate $1 from the sinking fund table. Calculate the payment using Payment Future value Number from table.
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Finding the proceeds to an individual or firm that discounts a simple interest note 1. If necessary, find the following:

Reading the stock table

YTD % CHG 26.5 52-WEEK HI LO 15.18 9.35 STOCK (SYM) AdvMktg MKT DIV .04 YLD % .4 PE 20 VOL 100S 997 CLOSE NET 10.81 CHANGE 0.02

Finding monthly payments, total amount paid, and finance charge First, multiply the amount to be financed by
the number from the amortization table or the loan payoff table to find the periodic payment. Then find the total amount repaid by multiplying the periodic payment by the number of payments. Finally, subtract the amount financed from the total amount repaid to obtain the finance charge.

Year-to-Date percent change

52-week high price

52-week low price

Dividend

Dividend yield

Price to Earnings ratio

Volume for day

Close price

Finding the amount of monthly home loan payments and total interest charges over the life of a home loan
Using the number of years and the interest rate, find the amortization value per thousand dollars from the real estate amortization table. Next, multiply the table value by the number of thousands in the principal to obtain the monthly payment. Then find the total amount of the payments and subtract the original amount owed from the total payments to obtain interest paid.

Stock name and abbreviation

Finding the current yield on a stock

current yield, use the formula Current yield =

To determine the

Annual dividend . Closing price

Finding the price to earnings (PE) ratio

To find the PE ratio, use the formula Price per share . PE ratio = Annual net income per share Find the cost of the bond after commission. Find the interest paid on the bond using the coupon rate. Finally, divide the interest by the cost of the bond.

Fair market value and assessed valuation The value of property is multiplied by a given percent to arrive at the assessed valuation. Assessment Rate Market value Assessed valuation Tax rate formula is Tax rate =
Total tax amount needed . Total assessed value

Find the effective yield of a bond

Finding the finance charge on a revolving charge account, using the unpaid balance method Start with the
unpaid balance of the previous month. Then add the finance charge on the unpaid balance. Next, add the finance charge and any purchases. Finally, subtract any payments made.

Adjusted gross income Adjusted gross income includes wages, salaries, tips, dividends, and interest. Subtract IRA contributions and alimony. Taxable income The larger of either the total of itemized deductions or the standard deduction is subtracted from adjusted gross income along with the amount for each personal exemption. Annual fire insurance premium The building and territorial ratings are used to find the premiums per $100 for the building and contents. The two are added. Coinsurance formula Part of the risk of fire is taken by the insured. An 80% coinsurance clause is common. Policy amount Amount of Loss paid by * = loss insurance company 80% of replacement cost Annual life insurance premium There are several types of life policies. Use the table and multiply by the number of $1000s of coverage. Subtract 5 years from the age of females.
Premium Number of thousands Rate per $1000

Finding the finance charge on a revolving charge account, using the average daily balance method

First, find the unpaid balance on each day of the month. Then add up the daily unpaid balances. Next, divide the total of the daily unpaid balances by the number of days in the billing period. Finally, calculate the finance charge by multiplying the average daily balance by the finance charge.

Finding the total installment cost, finance charge, and amount financed
Total Installment Cost Down payment (Amount of each payment number of payments) Finance Charge (interest) Total installment cost Cash price Amount Financed (principal of loan) Cash price Down payment

Straight-line method of depreciation

the same each year. Depreciation =

The depreciation is

Depreciable amount Years of life

Book value is the remaining value at the end of the year.

Book value Cost Accumulated depreciation Cost, $400; scrap value, $100; life of 3 years; find the book value at the end of the year. $400 cost - 100 scrap value $300 depreciation amount $300 = $100 depreciation 3

Finding APR using a table

First, determine the finance charge per $100 of amount financed, using the formula Finance charge * $100 . Amount financed Then read down the left column of the annual percentage rate table to the proper number of payments. Go across to the number closest to the number found above. Read across the top of the column to find the annual percentage rate.

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$400 cost - 100 depreciation $300 book value year 1

Current Assets: Cash and Equivalents Accounts Receivable Inventories Total Current Assets Other Assets Equipment and Truck Total Assets

Current Liabilities: Accounts payable Loans and Notes Payable Total Current Liabilities Other Liabilities: Total Liabilities: Stockholders Equity Total Liabilities and Equity

Double-declining-balance rate

First find the straight-line rate, and then adjust it. For the 200% method, multiply by 2. The life of an asset is 10 years. Find the double-decliningbalance (200%) rate. 10 years = 10% a 1 b straight line 10

2 * 10% = 20% per year

Sum-of-the-years-digits depreciation fraction

Add the years digits together to get the denominator. The numerator is the number of years of life remaining. A shortcut for finding the denominator is n(n + 1) 2

Units-of-production depreciation amount per unit

Depreciation per unit Depreciable amount Units of life

Units-of-production depreciation method

Multiply the number of units (hours) of production by the depreciation per unit (per hour). Depreciation = Depreciation Number of * units (hours) per unit (hour) tax purposes. No 7-year 20-year 39-year

Determining the value of the current ratio 1. Determine the current assets. 2. Find the current liabilities. 3. Divide current assets by current liabilities. Finding the value of the acid-test ratio 1. Determine the liquid assets. 2. Find the current liabilities. 3. Divide liquid assets by liabilities. Determine the ratio of net income after taxes to the average owners equity 1. Find the net income after taxes. 2. Determine the average owners equity for the year using the formula
Average = owners equity a Owners equity + Owners equity b at end at beginning 2

Modified accelerated cost recovery system (MACRS)

Established in 1986 for federal income salvage value. Recovery period are: 3-year 5-year 10-year 15-year 27.5-year 31.5-year

3. Divide the net income by the average owners equity. Constructing a frequency distribution from raw data 1. Construct a table listing each value and the number of times this value occurs. 2. Combine the pieces of data into groups. Constructing a bar graph from a frequency distribution
Draw a bar for each class using the frequency of the class as the height of the bar.

Find the proper rate form the table and then multiply by the cost to find depreciation.

Finding the gross profit and net income 1. Find the net sales. 2. Determine the cost of goods sold. 3. Find gross profit from the formula Gross profit = Net sales + Cost of goods sold 4. Find the operating expenses. 5. Find the net income from the formula Net income = Gross profit + Operating expenses. Preparing a horizontal analysis chart 1. List last years and this years values for each item. 2. Calculate the amount of the increase or decrease of each item. 3. Calculate the percent increase or decrease by dividing the change by last years amount. Constructing a balance sheet List all of the current assets, other assets, current liabilities, and other liabilities on one page. Subtract total liabilities from total assets to find stockholders equity.

Constructing a line graph 1. Plot each year on the horizontal axis. 2. For each year, find the value of sales for that year and plot a point at that value. 3. Connect all points with straight lines. Finding the mean of a set of numbers 1. Add all numbers to obtain the total. 2. Divide the total by the number of pieces of data. Finding the median of a set of numbers 1. Arrange the data in numerical order from lowest to highest. 2. Select the middle value or the average of the two middle values. Finding the mode of a set of values Determine the most
frequently occurring value.