The BEV Toy Shop purchased 50 wagons at $45 per wagon less a 40% trade discount
ID: 2584885 • Letter: T
Question
The BEV Toy Shop purchased 50 wagons at $45 per wagon less a 40% trade discount on May 8. The invoice had terms of 3/10, 2/20, N/30. On May 18, the shop sent a check for an amount that gave it a credit for ½ the balance due. On May 31, the remaining balance was paid. The shop expects a profit of 30% of cost and 15% of cost for operating expenses. From May until the end of September, the shop sold 40 wagons at its regular markup. From September through December, the remaining wagons were sold with a 35% markdown price. It is your task to determine the following, remembering to show and label all calculations:
The total cost of the wagons before any discount was taken; the net cost after the trade discount.
The amount of remittance to the nearest cent on May 18.
The amount of remittance to the nearest cent on May 31.
The total cost and individual cost to the nearest cent per wagon after all discounts.
The amount saved by making the two payments.
The breakeven point to the nearest cent for all wagons.
The regular list price per wagon rounded to the nearest cent.
The reduced list price per wagon rounded to the nearest cent.
The total revenue received from the sale of all wagons.
The total amount of operating profit or loss and the percent of cost this amount was (to the nearest tenth percent.
Explanation / Answer
Total cost of Wagons before any discount = 50 wagons multiplied with $45 per wagon = $2250
Net cost after trade discount = Total cost - Trade discount = $2250 - 40% = $1350
Amount of remittance on may 18 = 1/2 of $1350 = $675.
Since the remittance is made within 20 days from the date of sale, 2% discount is available as per the terms which amounts to $13.5.
The amount of remittance = $675 - 13.5 = $661.5 (rounded to the nearest cent)
Amount of remittance on may 31 = $1350 - 675 = 675
Total cost after all discounts = $661.5 +$675 = $1336.5
Individual cost per wagon = $1336.5 divided by 50 wagons = $26.7(rounded to nearest cent)
Amount saved by making the two payments = $1350 - $1336.5 = $13.5
Regular list price per wagon = $45 + 30% = $58.5
Reduced list price per wagon = $45 - 35% = $29.3
Total revenue from the sale of all wagons =40 wagons sold for $58.5 + 10 wagons sold for $29.3 = $2340 + $293 = $2633.
Total amount of operating profit = Total revenue - Total expense = $2633 - $1336.5 = $1296.5.
Percentage of cost = $1296.5 of $$1336.5 = 97%.
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