Mel’s Furniture received an invoice dated September 27for five bedroom sets at $3,000 each. The invoice indicated a trade discount of 5/8/3. The seller of the furniture prepaid the freight of $200. Terms were 2/10 EOM. Assuming Mel pays on November 2, what amount would be paid? (Be sure to include the freight cost.)
To calculate the amount Mel's Furniture would need to pay, we need to consider the cost of the bedroom sets, any applicable trade discounts, freight cost, and the payment terms.
First, let's calculate the cost of the bedroom sets. Mel's Furniture received five sets at $3,000 each, so the total cost would be 5 * $3,000 = $15,000.
Now, we need to apply the trade discount of 5/8/3. Trade discounts are usually expressed as a series of fractions. To calculate the net cost after the trade discount, we need to multiply the original cost by the complement of each fraction.
Complement of 5/8/3 = (1 - 5/8) * (1 - 3/100) = (3/8) * (97/100) = 291/800
Net cost after the trade discount = $15,000 * 291/800 = $5,737.50
Next, we add the prepaid freight cost of $200 to the net cost: $5,737.50 + $200 = $5,937.50
The payment terms indicate that there is a 2% discount if the payment is made within 10 days, End of Month (EOM). Since Mel's Furniture is paying on November 2, they are not eligible for the discount.
Therefore, the amount Mel's Furniture would need to pay is the net cost plus the freight cost: $5,937.50 + $200 = $6,137.50.
Hence, Mel's Furniture would need to pay $6,137.50 in total.