A dealer buys tooling machines from a manufacturer and resells them to its customers. The manufacturer...

A dealer buys tooling machines from a manufacturer and resells them to its customers. The manufacturer sets a list or catalogue price of $6,000 for a machine. The manufacturer offers its dealers a 20 percent trade discount. The manufacturer sells the machine under terms of FOB shipping point. The cost of shipping is $350. The manufacturer offers a sales discount of 2/10, n/30. The sales discount does not apply to shipping costs. What is the net cost of the machine to the dealer, assuming it is paid for within 10 days of purchase?

Solutions

Expert Solution

Cost of machine = Purchase price + Shippling cost

= {List price × (1 – trade discount)} + Shipping cost

= {6,000 × (1 – 0.20)} + 350

= {6,000 × 0.80} + 350

= 4,800 + 350

= $5,150

Sales discount = Purchase price × 2% rate [since 2/10, n/30]

= 4,800 × 2%

= $96

Net cost = Cost of machine – Sales discount

= 5,150 – 96

= $5,054 (Answer)

ekkarill92 answered 1 year ago

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