Also, does anyone know how to do question 4a) and b) of the image attached below? It's actually driving me crazy!! I've also attached the answers from the examiner's report.
Thanks in advance
One way of doing it is to look at each individual month, remembering that they pay in advance:
Jul (2011): Original contract payment for Aug, 1200
Aug: Original contract payment for Sep, 1200
Sep: Very first payment on new contract for Oct costing 1200x1.2=1440
Oct: Payment for Nov, 1440
Nov: Payment for Dec, 1440
Dec: Payment for Jan, 1440
Jan (2012): Payment for Feb, 1440
Feb: Payment for Mar, 1440
Mar: Payment for Apr, 1440
Apr: Payment for May, 1440
May, Payment for Jun, 1440
Jun, Payment for Jul, 1440
So we end up with 10 payments of 1440 and 2 payments of 1200 which equates to 16800.
For part b, you can do the exact same method, or you can alternatively think about it like this: The original advertising cost at $1200/month applies to Jul, Aug and Sep 2011, and the new advertising cost of $1440/month applies to October onwards, so we have 3 months of the old 1200, and 9 months of the new 1440 which is 16560. Even though there was a payment for 1440 in September (above), this was a prepayment in advance so the actual expense for the month was still 1200.