Tony purchases a machine on 8 September 2019 with a list price of RM 8400. The trade discount
given is 10% while the cash discount terms are 4/15, n/30. He then sells the machine and makes
a gross profit of 25% of the selling price. The operating expenses are 4% of the selling price.
Find the:
a) Amount paid by Tony on 22 September 2019.
b) Selling price.
c) Breakeven price.
d) Maximum markdown rate that could be offered without incurring any loss.
e) Net profit or loss if the retail price is RM 7620
We do not do your homework for you. Although it might take more effort to do the work on your own, you will profit more from your effort. We will be happy to evaluate your work though.
To solve this problem, we need to analyze each part separately. Let's go step by step:
a) To find the amount paid by Tony on 22 September 2019, we need to calculate the trade discount, the cash discount, and then subtract them from the list price.
Trade discount:
The trade discount is given as 10% of the list price. To calculate the trade discount, multiply the list price by 10%:
Trade discount = List price * Trade discount rate = RM 8400 * 10% = RM 840
Cash discount:
The cash discount terms are 4/15, n/30. This means that Tony can get a 4% discount if he pays within 15 days, otherwise he has to pay the full amount within 30 days.
To find the cash discount, multiply the amount after trade discount by the cash discount rate:
Cash discount = (List price - Trade discount) * Cash discount rate = (RM 8400 - RM 840) * 4% = RM 326.40
Amount paid by Tony on 22 September 2019:
The amount paid by Tony will be the list price minus the trade discount and the cash discount:
Amount paid = List price - Trade discount - Cash discount = RM 8400 - RM 840 - RM 326.40 = RM 7233.60
b) To find the selling price, we need to calculate the gross profit and add it to the cost price.
Gross profit:
The gross profit is given as 25% of the selling price. To calculate the gross profit, we need to reverse the percentage, so the cost price is 100% - 25% = 75% of the selling price.
Cost price:
The cost price is the amount paid by Tony on 22 September 2019.
Cost price = Amount paid = RM 7233.60
Selling price:
To find the selling price, divide the cost price by 75% (0.75) to get 100% (selling price):
Selling price = Cost price / 0.75 = RM 7233.60 / 0.75 = RM 9644.80
c) To find the breakeven price, we need to consider the operating expenses, which are 4% of the selling price.
Operating expenses:
The operating expenses are given as 4% of the selling price.
Operating expenses = Selling price * Operating expenses rate = RM 9644.80 * 4% = RM 385.79
Breakeven price:
The breakeven price is the selling price plus the operating expenses:
Breakeven price = Selling price + Operating expenses = RM 9644.80 + RM 385.79 = RM 10,030.59
d) The maximum markdown rate that could be offered without incurring any loss is calculated by adding the operating expenses rate to the gross profit rate.
Maximum markdown rate:
Maximum markdown rate = Gross profit rate + Operating expenses rate = 25% + 4% = 29%
e) To calculate the net profit or loss if the retail price is RM 7620, we need to find the cost price and subtract it from the retail price.
Cost price:
The cost price is the amount paid by Tony on 22 September 2019.
Cost price = Amount paid = RM 7233.60
Net profit or loss:
Net profit or loss = Retail price - Cost price = RM 7620 - RM 7233.60 = RM 386.40
Therefore, if the retail price is RM 7620, the net profit will be RM 386.40.