Question

The Hallmark shop chain buys 3400 boxes of holiday greeting cards directly from the manufacturer. The list price o the cards is $9.90 per box, there is a trade discount of 30/10/20, and a cash discount of 5/10-40x . The Hallmark Shop earns and receives both discounts. The cards were sold as follows: 1080 boxes at $7.90, 1250 boxes at $5.90, 660 boxes at $5.00, 230 boxes at $4.00 and the remaining boxes were unsaleable. To better manage greeting card sales next year, determine each of the following:

a) the net cost of the greeting card after trade and cash discounts

b) the total sales amount received from all the holiday greeting cards

c) The amount of net profit from the sales of the cards

d) The markup as a percentage

e) The equivalent percent of markup on cost to the nearest whole percentage

Answer 1

1. Trade discount is 30/10/20 - This will be calculated as follows :

30% on 9.90 = $2.97

10% on (9.90-2.97) = $0.69

20% on (9.90-2.97-0.69) = $1.25

Total Trade Discount = 2.97+0.69+1.25 = $4.91

List Price after Trade discount : 9.90 - 4.91 = $4.99

Cash discount is 5/10-40x which means 5% discount will be given if payment is made within 10+40= 50 days.

Cash discount : 4.99 * 5% = $0.25

Net cost will be calculated as follows:

List Price		9.90
Trade Discount
30%	2.97
10%	0.69
20%	1.25	4.91
Price after Trade discount		4.99
Cash Discount @ 5%		0.25
Net Cost		4.74

Boxes purchased		3,400
Total Net Cost		$16,116

b) Total Sales Amount Received is as follows

Quantity	Price	Total
1080	7.90	8532
1250	5.90	7375
660	5.00	3300
230	4.00	920
3220		20127

Total amount received from sale of 3220 boxes is $20,127.

c) Amount of Net Profit = 20,127-16,116 = $4,011.

d) Markup as a percentage = 4011/20127*100 = 20%

e) Equivalent percent of markup on cost = 4011/16116*100 = 25%