At a certain supplier, a machine of type A costs $20,000 and

[brittanyk1]

From mba.com Practice Test 2:

At a certain supplier, a machine of type A costs $20,000 and a machine of type B costs $50,000. Each machine can be purchased by making a 20 percent down payment and repaying the remainder of the cost and the finance charges over a period of time. If the finance charges are equal to 40 percent of the remainder of the cost, how much less would 2 machines of type A cost than 1 machine of type B under this arrangement?

A. $10,000
B. $11,200
C. $12,000
D. $12,800
E. $13,200 (correct answer)

I've tried this problem a few times and keep getting B. Please explain!! Thanks!

[gokul_nair1984]

Type A:

Cost Price=20,000
Downpayment(DP)=.2*20,000=4000
Remaining amount(RA)=20,000-4000=16,000
Finance Charges(FC)=.4*(Remaining Amount)=.4*16,000=6400

Total Cost for 1 machine of type A= DP+RA+FC=4000+16,000+6400=26,400

Therefore, cost for 2 Machines of Type A= 2*26,400=52,800-----(1)

Similarly for Type B,

CP=50,000
Downpayment(DP)=.2*50,000=10,000
Remaining amount(RA)=50,000-10,000=40,000
Finance Charges(FC)=.4*(Remaining Amount)=.4*40,000=16,000

Total Cost for 1 machine of type B= DP+RA+FC=10,000+40,000+16,000=66,000---(2)

Subtracting, (1) from (2) , we get 66,000-52,800=13,200

This is Option E as per the stem..


Makes Sense?

[RonPurewal]

this is a good summary.

Type A:

Cost Price=20,000
Downpayment(DP)=.2*20,000=4000
Remaining amount(RA)=20,000-4000=16,000
Finance Charges(FC)=.4*(Remaining Amount)=.4*16,000=6400

Total Cost for 1 machine of type A= DP+RA+FC=4000+16,000+6400=26,400

Therefore, cost for 2 Machines of Type A= 2*26,400=52,800-----(1)

Similarly for Type B,

CP=50,000
Downpayment(DP)=.2*50,000=10,000
Remaining amount(RA)=50,000-10,000=40,000
Finance Charges(FC)=.4*(Remaining Amount)=.4*40,000=16,000

Total Cost for 1 machine of type B= DP+RA+FC=10,000+40,000+16,000=66,000---(2)

Subtracting, (1) from (2) , we get 66,000-52,800=13,200

This is Option E as per the stem..


Makes Sense?