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.

Answer 1

a) The Total Cost of the Wagons before any discount was taken = Cost per Wagon x No. of Wagons purchased.

= 45 x 50 = $2,250

The Cost after the Trade Dsicount = Total Cost before any discount - Trade Discount

= 2,250 - (2,250 x 40%) = $1,350

b) The Amount of remittance on May 18 (Given 1/2 credit) :

:- Half of Credit = 1,350 x 1/2 = $675

:- As the Payment is within 10 days, therefore discount of 3% will be given = 3% of 675 = $20.25

Therefore, the amount of remittance on May 18 = 675 - 20.25 = $654.75

c) The amount of remittance on May 31 = Remaining Balance or Credit in the books of Vendor

= 1/2 of 1350 = $675

(Note: No discount will be given as the payment is after 20 days)

d) Total Cost after all discounts = Total Cost - Trade discount - Cash discount for payment on May 18

= 2,250 - (2,250 x 40%) - 20.25

= $1,329.75

Individual cost after all discounts = Total Cost after discount / No. of Wagons purchased

= 1,329.5 / 50 = $26.595

e) The amount saved by making the two payments.

Amount outstanding on18th May= 45-18=27×50=1350

Half of the payment made with 10 days to avail 3% dicount which is 1350/2×3%=20.25

The next payment nade on 31st may do not qualify for dicount. Hence total amount saved is 20.25

f) The breakeven point to the nearest cent for all wagons

Breakeven point isthe total cost incurred.

Wagon cost. 1350 - 20.25 =1329.75

Operating cost = 15% = 199.45

Total cos of 50 wagon = 1529.21 breakeven point

.

h) The regular list price per wagon rounded to the nearest cent.

Regular price is 30% over cost of 1529.21

Or price of 50 wagon = 1529.21×1.30=1989

Price per wagon =1989/50=39.80

I) The reduced list price per wagon rounded to the nearest cent.

Reduced list price = cost per wagon×(1-0.35)

=1529.21/50×0.65

=30.58×0.65=19.87