MEKDELA AMABA UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF MANAGEMENT

Mathematics for Management (MGMT-2131):

Work-sheet for management second year students (regular)

Note: attempt all the questions and this may help you for your final exam.

Chapter one

1) Suppose the fixed cost (set up cost) for producing product x be birr 2,000. After set up it
costs birr 10 per x produced. If the total cost is represented by y:
a) Write the equation of this relationship in slope intercept form.
b) State the slope of the line and interpret this number.
c) State the y-intercept of the line and interpret this number.
2) A salesman has a fixed base salary of birr 200 per week. In additions, he receives a sales
commission that is 20 percent of his total birr values of sales. State the relationship
between the salesman’s’ total weekly salary and his sales for the week. Answer:
Y=0.2x+200
3) A salesman earns a weekly base salary plus a sales commission of 20% of his total
weekly sales. When his total weekly sales total birr 1000, his total salary for the week is
birr 400. Derive the formula describing the relationship between total salary and sales.
Answer: Y=0.2x+200.
4) If the relationship between total cost and the number of units made is linear, and if cost
increases by birr 7 for each additional unit made, and if the total cost of 10 units is birr
180, find the equation of the relationship between total cost (Y) and number of units
made (x). Answer: 7x+110
5) A sales man has a base salary and, in addition, receives a commission, which is a fixed
percentage of his sales volume. When his weekly sales are birr 1000, his total salary is
birr 400. When his weekly sales are birr 500, his totally salary is 300. Determine his base
salary and his commission percentage and express the relationship between sales and
salary in equation form. Answer: Y=0.2x+200
6) A printer quotes the price of birr 1,400 for printing 100 copies of a report and birr 3000
for printing 500 copies. Assuming a linear relationship, what would be the price for
printing 300 copies? Answer: birr 2,200.
7) Manufacturing company has a fixed cost of 10,000 birr and a unit variable cost of birr 5.
If the company can sell what it produces at a price of birr 10,
a) Write the revenue, cost and profit functions or equations
 b) Find the break-even point in terms of quantity and sales volume and interpret the
result
c) Showing diagrammatically the TR, TC, TP, BEP, TFC and TVC
8) Suppose a retail business sells its commodities at a margin of 25% on all items purchased
and sold. Moreover, the company uses a 5% commission as a selling expense and birr
12,000 as a fixed cost. Find the break even revenue for the retail business after
developing the total cost equation. Answer: Y=0.8x+12,000 and xe=birr 60,000. It is
interpreted as; when the company receives birr 60,000 as a sales revenues, there will be
no loss and no profit.
9) It is estimated that sales in the coming will be birr 6000 and the fixed cost will be birr
1000 and variable costs birr 3,600. Develop the total cost equation, and find the break
even revenue. Answer: Y=0.6x+1000; Xe=birr 2,500.
10) A company sold 80,000 units earning a profit of birr 90,000. The total purchasing cost of
the product is birr 400,000. Moreover, the company incurred a commission expense
(additional cost) of birr 40,000 at 5% rate. (Hint: commission expense is calculated as a
percentage of sales). Develop the total cost equation and find the break-even revenue.
Answer: Y=0.55x+270,000; Xe=birr 600,000.
11) In the first year, “ABOL BUNA “ company had the following experience.
Sales=25,000 units; selling price =birr 100; TVC= birr 1,500,000; and TFC= birr
350,000. Required;
a) Develop revenue, cost and profit function for the company interms of quantity.
b) Find the break-even point in terms of quantity
c) Convert the cost equation in terms of quantity in to a cost equation in terms of
revenue.
d) Find the break even revenue
e) If profit had been birr 500,000what would have been the sales volume (revenue)
and the quantity of sales.
f) What would have been the profit if sales were birr 2,000,000?
12) A retail company plans to work on a margin of 44% of retail price and to incur other
variable costs of 4%. If it expects fixed cost of birr 20,000.
a) Find the equation relating total cost to sales
b) Find the profit if sales are birr 60,000
c) Find the break-even revenue
d) If profit is birr 15,000, what would be the revenue level
e) If the company has only one item at a price of birr 15 per unit, how do you convert the
cost equation in terms of revenue in to a cost equation in terms of quantity.
13) A factory has a fixed cost of birr 150,000 and a unit variable cost of birr 65. If the
company can sell what it produces at a price of birr 85.
a) Write the revenue, cost and profit equations.
b) Find the break-even point in terms of quantity and sales volume.
 c) What would be the company’s cost if it decided to shut down operations for the
next four months.
d) Because of capacity problems, if the company can produce only 6,000 units,
should it shut down? Why or why not?
e) Show diagrammatically the TR, TC and BEP.
14) Assuming that showa supermarket sells its commodities usually at a margin of 27% on all
its purchases and sales. Moreover, the company uses a 6% commission as selling expense
and birr 60,000 as a fixed cost. Assuming a linear relationship between sales and cost:
a) Develop the total cost equation
b) Compute the break-even sales volume in birr
c) If the supermarket targets at birr 100,000 profits, how much should be its sales
volume?
15) A shop owner plans to work on a margin of 38% of retail price and to incure other
variable costs of 6%. If it expects fixed cost of birr 70,000.
a) Develop the equation relating total cost to sales.
b) Compute the breakeven revenue.
c) What would be the profit if sales are birr 40,000.
16) A manufacturing company has a fixed cost of birr 10,000 and a unit variable cost of birr
5. If the company can sell what it produces at a price of birr 10.
a) Write the revenue, cost and profit equations.
b) Find the break-even point in terms of quantity and sales volume.
c) Interpret the results
d) Show diagrammatically the TR, TC, TP,BEP, TFC and TVC.
17) ABC’ company’s cost function for the next four month is C=500,000+5Q.
Required:
a) The break-even dollar volume of sales if the selling price is birr 6 per unit
b) What would be the company’s cost if it decided to shut down operation for the
next four months?
c) If, because of shortage of raw materials, the most the company can produces is
100,000 units, should it shut down? Why or why not?
Chapter two
18) The weights (in pounds) of six people before taking a weight reduction program were
350, 249, 260, 195, 275, and 295. The weights of these same people after the weight
reduction program are 345, 200, 220, 140, 200 and 230 respectively. Summarize this
information in a (6 by 2) matrix.
19) A manufacturing firm which manufactures office furniture finds that it has the following
variable cost in dollars.
Desks chairs tables cabinets
50 20 15 25
30 15 12 15
30 15 8 20
 Assume that an order of 5 desks, 6 chairs, 4 tables, and 12 cabinets has just been
received. What are the total material, labor and overhead costs associated with the
production of ordered items? Answer: Birr 1,710.
20) Two departments of a firm A and B need different amounts of the same product. The
following table gives the amounts of the products needed by the department.

Two suppliers, Abebe and Tefera supply these three products with the unit-selling price
given below:

Abebe Tefera

Steel 300 280

Plastic 150 100

Wood 150 200

Required:
a) Use matrix multiplication to find how much these two orders will cost at the two
suppliers.
b) From which supplier should each department make its purchase? Answer: department A
from Tefera, and Department B from Abebe.
21) Olympus manufacturing company produces two types of boats: one person and two
person models. The company has two plants x and y at different parts of the country. In
both plants, there are two departments fabricating and finishing. A one person boat
requires 4-labour hour in the fabricating department and 1-labour hour in the finishing
department. The two-person boat requires 6-labor hour in the fabricating department and
1.5-labor hour in the finishing department. Suppose the hourly rates of labor cost in the
fabricating and finishing department be birr 8 and birr 6 respectively at plant x and birr 7
and birr 4 at plant y. using matrix algebra, find the labor cost of making one unit of each
product at each of the two plants. Interpret the results.
Answer:
Product
Plant one-person two-person
X 38 57

Y 32 48
22) Asrat Carpet Company has in inventory 1,500 square yards of wool and 1,800 squares
yards of nylon for the manufacture of carpeting. Two grades of carpeting are produced.
Each roll of superior grade carpeting requires 20 square yards of wool and 40 squares
yards of nylon. Each roll of quality grade carpeting requires 30 squares yards of wool and
 30 squares yards of nylon. If Asrat would like to use all the material in inventory, how
many rolls of superior and how many rolls Quality carpeting should be manufactured?
Answer: 15 and 40.
23) Attendance records indicate that 40, 000 people attended the 12th African youth
championship at its opening ceremony at the Addis Ababa stadium. Total ticket receipts
were Br 1, 750,000. Admission prices were Br 37.5 for the second class and Br 62.5 for
the first class. Determine the number of people who attended the opening ceremony at
first class and second class. Answer: 30,000 and 10,000.
24) A manufacturing is costing out one product line which consists of three different models,
A, B and C. these models are assembled from three types of parts, 1, 2 and 3. The
manufacturer would like to produce such quantities of three models as to completely
deplete the inventory of parts of hand, in the final production run. Each model A uses one
unit of part 1, three unit of part 2, and two units of part 3. Each unit of model B uses one
unit of part 1, two units of part 2 and one unit of part 3. Each model C uses two units of
part 1, and three units of part 3. Inventory record show that there are on hand 1,500 units
of part 1, and 1,900 units of each part 2 and 3. How many of each model should the
manufacturer plan to produce? Answer: 100, 800 and 300.
25) A person invests in A, B and C rated bonds. The average yield is 8% on A bonds, 6% on
B bonds and 7% on C bonds. Twice as much is invested in C bonds as B bonds.
Moreover the total annual return for all three types of bonds in birr 2,800. How much is
invested in each type of bonds if the total investment is
A) 37,500 answer: birr 22,500, 5,000 and 10,000
B) 40,000 answer: birr 10,000, 10,000 and 20,000
1) A certain manufacturer produces two types of products, P and Q. each unit of product P
requires in its production 20 units of raw material A and 10 units of raw material B. each unit
of product Q in its production requires 30 units of raw material A and 50 units of raw
material B. there is a limited supply of 1,200 units of raw material A and 950 units of raw
material B. how many units of product P and Q can be produced if we are to exhaust the
supply of raw materials? Answer: 45 and 10.
2) A population of 100,000 consumers makes the following purchases during a particular week.
20,000 purchases brand A, 35,000 purchases brand B and 45,000 purchases neither brand.
From a market study, it is estimated that of those who purchase brand A 80% will purchase it
again next week, 15% will purchase brand B next week and 5% will purchase neither brand.
Of those who purchase B, 85% will purchase it again next week, 12% will purchase brand A
next week and 3% will purchase neither brand. Of those who purchased neither brand, 20%
will purchase brand A next week, 15% will purchase brand B next week and 65% will
purchase neither brand next week. If this purchasing pattern continues, will the market
stabilize? What will the stable distribution be? VA, VB and VC (0.4 0.5 0.1).
3) A city has two suburbs: suburb x and suburb y. Over the past several years, the city has
experienced a population shift from the city to the suburbs, as shown in the table below.
 To the next year

From City (C) Suburb x (X) Suburb y (Y)

one year
City (C) .85 .07 .08

Suburb x (X) .01 .96 .03

Suburb y (Y) .01 .02 .97

In 20xo, the city had a population of 120,000, suburb x had a population of 80,000, and suburb
by had a population of 50,000. Assuming that the population in the metropolitan area remains
constant at 250,000 people,

a) How many people will live in each of the three areas in 20X2?
b) How many people will live in each of the three areas in the long run?
4) A vigorous television advertising campaign is conducted during the football season to
promote a well-known brand X shaving cream. For each of several weeks a survey is made
and it is found that each week 100% of those using brand X continue to use it. It is also found
that of those not using brand X, 20% switch to brand X while the other 80% continue using
another brand.
a) Write the transition matrix, assuming the transition percentages continue hold for
succeeding weeks.
b) If 20% of the people are using brand X at the start of the advertising campaign,
what percentage will be using brand X one week later?
c) What portion of the market will be using brand X area the end of the season,
assuming the transition matrix remains the same? Find the steady-state matrix?
5) A population of 100,000 consumers makes the following purchases during a particular
week: 20,000 consumers make the following purchases during a particular week: 20,000
purchases Brand A, 35,000 Brand purchase B and 45,000 purchase neither brand. From a
market study, it in estimated that of those who purchase Brand A, 80% will purchase it
again next week, 15% will purchase Brand B next week, and 5% will purchase neither brand.
Of those who purchase B, 85% will purchase it again next week, 12% will purchase brand A
next week, and 3% will purchase neither band. Of those who purchased neither brand, 20%
will purchase as A next week, 15% will purchase Brand B next week, and 65% will purchase
neither band next week. If this purchasing pattern continues, will the market stabilize?
What will the stable distribution be? Yes YA Vb Vc = (.4 .5 .1)
6) 4. In a certain college class, 70% of the students who receive an “A” on the current
examination will receive an “A” on the next examination. Moreover, 10% of the students
 who do not receive an “A” on the current examination will receive an “A” on the next
examination. Assuming that this pattern continues, what is the stable matrix?

VA VA1 = (.25 .75)

7) A vigorous television advertising campaign is conducted during the football season to

promote a well-known brand X shaving cream. For each of several weeks, a survey is made
and it is found that each week 100% of those using brand X continue to use it. It is also
found that of those not using brand x, 20% switch to brand X while the other 80% continue
using another band.

a. Write the transition matrix, assuming the transition percentages continue hold for
succeeding weeks.
b. If 20% of the people are using brand X at the start of the advertising campaign, what
percentage will be using brand X one week later? Two weeks later?
c. What portion of the market will be using brand X area the end of the season, assuming the
transition matrix remains the same? Find the Steady-state matrix)
Chapter Three
1) A candy company makes three types of candies: solid center, fruit center and cream
filled. The company packages these of candies in three different assortments. A box of
assortment I contain 4 solid center, 4 fruit center and 12 cream filled candies which is
sold for birr 9.4. A box assortment II contains 12 solid center, 4 fruit center and 4 cream
filled which sold for birr 7.6. a box of assortment III contains 8 solid center 8 fruit center
and 8 cream filled which sold for birr 11. The manufacturing cost for piece of candy are
birr 0.2 for solid center, birr 0.25 for fruit center and birr 0.3 for cream filled. The
company can manufacture 4800 solid center, 4000 fruit center and 5600 cream filled
candies weekly. The company wants to determine the number of boxes to be produced
that maximize the profit
Develop the linear programing model
2) A merchant plans to sell two models of home computers at costs of birr 250 and birr 400
respectively. The birr 250 model yields a profit of birr 45 and the birr 400 model yields a
profit of birr 50. The merchants estimate that the total monthly demand will not exceed
250 units. If the merchant does not want to invest more than 70,000 birr on the computer
inventory, find the number of units of each model that should be stocked in order to
maximize profit. Formulate the LPM and solve it with graphic approach.
3) A small industry produces two items, I and II. It operates at a capacity and makes a profit
of birr 6 and birr 4 on each item I and II respectively. The following table depicts the
hours required to produce each item and the hours available per day.

Activity Item I Item II Hours available

Assembly hours per 2 1 100
item on machine I
 Packing and 1 1 60
inspection hours per
item on machine II

a) Find the number of each item that should be produced per day to maximize profit
b) Find the maximum profit
1) A manufacturing firm produces two products. Each product must undergo an assembly
process and a finishing process. It is then transferred to the warehouse, which has space for
only a limited number of items. The firm has 80 hours available for assembly and 112 hours
for finishing and it can store a maximum of 10 units in the warehouse. Each unit of product 1
has a profit of 30 birr and requires 4 hours to assemble and 14 hours to finish. Each unit of
product 2 has a profit of 70 birr and requires 10 hours to assemble and 8 hours to finish. The
firm wants to determine the quantity of each product to be produce to maximize profit.
Required:
a) Formulate the LPM for this problem.
b) Solve the problem using the graphic approach
2) A diet is to include at least 140 mgs of vitamin A and at least 145 Mgs of vitamin B. These
requirements are to be obtained from two types of foods: Type 1 and Type 2. Type 1 food
contains 10Mgs of vitamin A and 20mgs of vitamin B per pound. Type 2 food contains
30mgs of vitamin A and 15 mgs of vitamin B per pound. If type 1 and 2 foods cost Birr 5 and
Birr 8 per pound respectively, how many pounds of each type should be purchased to satisfy
the requirements at a minimum cost? Answer:

An electronics firm produces three types of switching devices. Each type involves a two-step assembly operation. The
assembly times are shown in the following table:

Assembly time per Unit (in minutes)

Section #1 Section #2
Model A 2.5 3.0
Model B 1.8 1.6
Model C 2.0 2.2

Each workstation has a daily working time of 7.5 hrs. The manager wants to obtain the greatest possible profit
during the next five working days. Model A yields a profit of Birr 8.25 per unit, Model B a profit of Birr 7.50
per unit and Model C a profit of Birr 7.80 per unit. Assume that the firm can sell all it produces during this time,
but it must fill outstanding orders for 20 units of each model type.
a) Formulate the LPM
b) Solve the problem using the graphic approach

Chapter Four
1) Mr. X wanted to buy a leather sofa for his new family room. The cost of the sofa was Birr
10,000. He was short of cash and went to his local bank and borrowed Birr 10,000 for 6
months at an annual interest rate of 12%. Find the total simple interest and the maturity value
or future value of the loan. Answer: simple interest amount=Birr 600 and FV= Birr 10,600.
2) What are the compound amount and compound interest at the end of one year if Birr 10,000 is
borrowed at 8% compound quarterly? Answer: A=Birr 10,824.3216 and I= Birr 824.3216
3) How long will it take if Birr 20,000 is invested at 5% simple interest to double in value?
Answer: 20 years.
4) At what annual interest rate will Birr 6,000 yield 900 Birr in 5 years’ time? Answer: 3%
annual rate.
5) How much money must Mr. Z has to invest today at 6% simple interest if he wants to receive
Birr 3,100 as an amount in 4 years? Answer: 2,500 birr.
6) How long will it take to accumulate Birr 650 if Birr 500 is invested at 10% compound
quarterly? Answer: 10.625 quarter or 2.65625 years.
7) Birr 2000 is deposited in an account. After one year of monthly compounding, the balance in
the account is Birr 2,166. What is the annual percentage rate for this account? Answer: r=8%
8) A person deposits Birr 10,000 in a savings account that pays 6% compounded semi-annually.
Three years later, this person deposits an additional Birr 8,000 in the savings account. Also,
at this time, the interest rates changes to 8% compounded quarterly. How much money is in
the account 5 years after the original Birr 10,000 is deposited? Answer: Birr 23,363.49
ANNUITIES
9) A person deposits Birr 200 a month for four years in to an account that pays 7% compounded
monthly. After the four years, the person leaves the account untouched for an additional six
years. What is the balance after the 10 year period? Answer: A4= 11,041.85 Birr and A10=
Birr 16,784.77
10) A person deposits Birr 500 a year for 10 years in to an account that pays 6% compounded
annually. After 10 years the person transfers the money into another account that pays 8%
compounded quarterly. The money is left in the second account for 8 years. What is the
balance after the 18-year period? Answer: A10= Birr 6590.40 and A18= Birr 12,419.87
11) What monthly deposit will produce a balance of Birr 100,000 after 10 years? Assume that the
annual percentage rate is 6% compounded monthly. What is the total amount deposited over
the 10-year period? Answer: R = Birr 610.21
12) Mrs. X has a saving goal of Birr 25,000 which she would like to reach 10 years from now.
During the first five years she is financially able to deposit only Birr 100 each month into the
savings account. What must her monthly deposits over the last five years be if she is to reach
the goal? The account pays 12% interest compounded monthly.
Answer:
For the first five years
R = 100 A60 = 100 [(1.01)60 - 1]
t = 5years 0.01
m = 12 = 100 (81.6697)
 r = 12% = Birr 8166.97
A60 =?
For the last five years:
The amount at the end of the first 5 years (Birr 8,166.97) serves as single principal and it
earns interest for the next five years.
A = 8,166.97 (1.01)60
= Birr 14,836.90
To determine the periodic payment we subtract 14,836.90 Birr from Birr 25,000 to obtain the
amount of an ordinary annuity for the last five years.

A60 = Birr 25,000 – Birr 14,836.90

= 10,163.10
R2 = 10,163.120 X .01___
60
(1.01) – 1
= Birr 124.44
The proper R is (if normally deposited the same amounts)
R = 25,000 [ .01 ]
120
(1.01) – 1
= Birr 108.68
13) XYZ Company purchased a tract of land under a purchase agreement which requires a
payment of Birr 500,000 plus 5% interest compounded annually at the end of 10 years. The
company plans to setup a sinking fund to accumulate the amount required to settle the land
purchase debt. What should the quarterly deposit into the fund be if the account pays 15%
interest, compounded quarterly? Answer: R = 9,088.80 Birr
14) How much should you deposit in an account paying 6% compounded quarterly in order to be
able to withdraw Birr 1000 every 3 months for the next 3 years? Answer: PVOA= Birr 10,
907.50
15) A business person's debt is payable as follows: Birr 2,000 1 year from now and Birr 5,000 5
years from now. The business person wants to repay the debt as follows: a Birr 1,000
payment now, a Birr 2,000 payment 2 years from now, a Birr 1,000 payment 3 years from
now, and the last payment 4 years from now. If the interest rate is 12% compounded
annually, find the amount of the last payment. Answer:
16) At the time of retirement, a person has Birr 200,000 in an account that pays 12%
compounded monthly. If he decides to withdraw equal monthly payments for 10 years, at the
end of which time the account will have a zero balance, how much should he withdraw each
month? Answer: R= Birr 2,869.42
17) An employee has contributed with her employer to a retirement program for 20 years a
certain amount twice a year. The contribution earns an interest rate of 10% compounded
semiannually. At the date of her retirement the total retirement benefit is Birr 300,000. The
retirement program provides for investment of this amount at an interest rate of 10%
 compounded semiannually. Semi-annual payments will be made for 20 years to the employee
or her family in the event of her death.
A. What semi-annual payment should she make? Answer: R = Birr 2483.45
B. What semi-annual payment should be made for her? Answer: = Birr 17,483.45
C. How much interest will be earned on Birr 300,000 over the 40 years? answer=
Birr 600,000
18) Eden signed a loan for Birr 10,000. The loan is to be repaid with equal yearly payments for
the first three years and equal yearly payments twice as large for the next four years. If the
interest rate is 12% compounded annually, find the yearly payments. Assume each payment
is made at the end of each year. Answer: x = Birr 1,486.84
19) Ato Abebe borrowed Birr 7000. The loan plus the interest is to be repaid in equal quarterly
installments made at the end of each quarter during a 2 year interval. The interest rate is 16%
compounded quarterly.
A. Find the quarterly payment
B. Find the interest accumulated
C. Prepare an amortization schedule
20) Mr. Z has taken out a Birr 60,000, 20 year, 24% mortgage on his home.
A. How much will he pay each month to discharge this mortgage? Answer: R = Birr
1,210.44
B. How much of the first payment is for interest and by how much does it reduce the
balance owed? Answer: I = Birr 1,200
C. How much of the second payment is for interest and by how much does it reduce the
balance owed? Answer: I = Birr 1199.79
21) Andinet and Florence are looking to purchase a home. They found one that they like that
costs Birr 150,000. They can get a 30-year mortgage at 9% and plan to make a down
payment of 20% of the selling price.
A. What will be their monthly mortgage payment?
B. When Andinet and Florence go to the bank, they are offered an annual percent rate of
6% if they take a 15-year loan rather than one for 30 years. Andinet and Florence are
skeptical because they can't afford to make twice the payment calculated for 30 years.
In actual fact, how much would their payment be if they repaid the mortgage in 15
years?
22) Andinet is 25 years old and wants to be a millionaire by the time he is 50. He is planning to
put aside a sum of money at the end of each year sufficient to accumulate a million Birr in 25
years using an interest rate of 10%. How much must he put aside?