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Bumek [7]
3 years ago
12

If the total debt ratio is 36%, and the allowable mortgage debt ratio is 28%, which of the following debt ratios would a loan ap

plicant qualify for if:
a. The loan applicant's gross monthly income is $2,500, with a mortgage payment of $600
b. A car payment of $250, and minimum monthly credit card payment of $75
Business
1 answer:
schepotkina [342]3 years ago
6 0

Answer:

The loan applicant would qualify for the mortgage debt ratio in option a because his mortgage debt ratio is 24% and the allowable mortgage debt ratio is 28%.

Explanation:

First, you have to calculate the debt ratio in each case. It is calculated by dividing the total debt by the income.

a. Debt= $600

Income= $2,500

Mortgage debt ratio=600/2,500= 0.24→24%

b.  Debt=$600+$250+$75=$925

Income=$2,500

Total Debt ratio=925/2,500= 0.37→37%

The loan applicant would qualify for the mortgage debt ratio because his mortgage debt ratio is 24% and the allowable mortgage debt ratio is 28%. The loan applicant would not qualify for the total debt ratio because his ratio is 37% and the allowable total debt ratio is 36%.

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Answer:

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The total cost method includes all the costs in arriving at the unit cost before adding the desired profit to arrive at the selling price of a product.

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It is unlike the product cost-plus and variable cost-plus approaches to product pricing.  For the product cost-plus approach, only the costs of production is taken into consideration for arriving at the selling price.  In that case, the costs of direct materials and labor, and factory overheads would be considered, while variable and fixed selling and administrative costs are excluded.   The unit cost would have been $250.

The variable cost-plus approach considers only the variable elements of costs to arrive at the selling price.  These include the direct materials and labor costs, and variable element of the factory overhead and selling and administrative expenses.  The unit cost would have been $240 as stated in the question.

These different cost-plus pricing approaches are more suitable for some industries than others.  No matter the choice made, it must be noted that they result in different selling prices and can affect the competitiveness of a company.

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