Question

1. Determine the cost of a leather backpack that retails for $149 and has a 54.2% markup?

2. A buyer received an invoice for $600. The invoice is dated September 19 and has terms of 8/10 EOM. The invoice is paid on October 10.

a) How much should be remitted? (I DO NOT need answer for this part)

b) If the merchandise is shipped FOB New York(Buyer's location), charges reversed, with transportation charges of $12.75, how much should be remitted? (I WANT TO KNOW HOW TO DO PART B)

Answer 1

1.

Retai price = $149

markup percent = 54.2%

Formula to calculate retail price is (cost x 154.2%) = 149

Markup is 54.2% so adding 54.2 with 100 is 154.2% on cost

Let cost be X

Retail Price = (X x 154.2%)= 149

Thus X =( 149 x 100) / 154.2 = 14900 / 154.2 = $96.63 (rounded of to two decimal places)

Therefore Cost of leather backpack is $96.63

Cross checking this cost for retail price = (96.63 x 154.2) / 100 = 14900.346 / 100 = $149(rounded value)

2. PART B (as the student is asking to answer only part b)

Reverse charge is applicable on transport charges if the FOB terms is at buyers or onsignees location.thus According internation freight rules, if the recipient or buyer is a GST-registered, he has tio pay tax on transport or freight charges based on the bracket of GST applicable. For example, If the product falls under 5% GST bracket, then freight charges to be paid is 5%.Depending on the GST bracket, the transport charges are levied at the same rate of GST bracket.So  let us assume that in the question the product falls under 5% GST, then amount to be remitted is 12.5 + (12.5 x 5%) =12.5 +0.63=$13.13

The buyer at FOB destination may either directly pay GST to the seller along with transportation charges or pay only the transport charges to the seller and deposit GST directly to government.