This problem deals with TRADE & CASH DISCOUNTS. PLEASE HELP solving some questions. Here is some information in regards to the questions. THANK YOU!
Misuse and abuse of trade discounts infringe on fair trade laws and can cost companies stiff fines and legal fees. One way to avoid misuse is to estblish the same discount for everyone and give rebates based solely on volume. Image Manufacturing, In., uses this policy for equipment sales to companies that develop photographs. For example, one developing machine component, a special hinge, sells for about $3 to a company buying 15,000 pieces per month. In an effort to run more cost-efficient large jobs and capture market share, Image Manufacturing will give an incentive for higher volume. It offers a 5% rebate on orders of 20,000 pieces per month. or 17-18 cents apiece rebate for orders of at least 22,000 pieces per month. The increased volume needed for rebate is determined by market research that tells Image Manufacturing factors such as the volume a customer is capable of ordering per month, the volume and cost of the same part a customer currently buys from other suppliers. The rebate amount is determined by Image Manufacturing's profit margin and the company's ability to acquire sufficient raw materials to produce large volumes without raising production costs. In some industries this is called a bill-back because the buyer receives credit toward the next order rather than a rebate check.
1. Suppose Photo Magic orders 15,000 hinges per month form Image Manufacturing at $3 each, which is about half of what they buy each month from other suppliers. If they move 5,000 pieces per month from another company to Image Manufacturing, what will be their rebate on the total order? What will be the discounted cost per price? What calculations did you use the answers?
2. If Photo magic increases its order to 22,000 pieces per month and negotiates an 18 cent-per-piece trade discount, what will be the rebate? What is the percent of the discount? How did you get the answer?
3. If Photo Magic also receives a 1/2% cash discount (10 days, net 30), calculate the cash discount and total rebate on a 30,000-piece-per-month order, and then find the net price. The cash discount of 1/2% is allowed to be taken on total purchase before the rebate is applied. How did you calculate your answer?
4. Another company currently orders about 6,000 hinges per month from Image Manufacturing at $3 each. Image Manufacturing's marketing manager believes this company is capable of expanding its business to 8,000 pieces per month and recommends a rebate of 17 cents per piece if they so. Rounded to the nearest tenth, what is the rebate percentage? How did you calculate the formulas? Do you think this trade discount violates fair trade laws? Why and why not?
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Rebate 12000
Discount 2.4
1. To calculate the rebate on the total order for Photo Magic, we need to consider the number of hinges they order and the rebate amount for that volume.
Photo Magic orders 15,000 hinges per month from Image Manufacturing at $3 each. If they move 5,000 pieces per month from another company to Image Manufacturing, their total order will be 20,000 hinges.
The rebate offered by Image Manufacturing for orders of 20,000 pieces per month is 5%.
To calculate the rebate, multiply the total number of hinges (20,000) by the rebate percentage (5%):
Rebate = Total Order * Rebate Percentage
= 20,000 * 0.05
= 1,000 hinges
So, Photo Magic will receive a rebate of 1,000 hinges on the total order.
To calculate the discounted cost per piece, subtract the rebate amount from the original cost per piece:
Discounted Cost per Piece = Original Cost per Piece - Rebate per Piece
= $3 - (Rebate Amount / Total Order)
= $3 - (1,000 / 20,000)
= $3 - 0.05
= $2.95
Therefore, the discounted cost per piece for Photo Magic will be $2.95.
2. If Photo Magic increases its order to 22,000 pieces per month and negotiates an 18 cent-per-piece trade discount, we can calculate the rebate and the percentage of the discount.
The trade discount per piece is given as 18 cents. To calculate the rebate, multiply the number of pieces ordered (22,000) by the discount per piece:
Rebate = Number of Pieces Ordered * Discount per Piece
= 22,000 * $0.18
= $3,960
Therefore, the rebate for Photo Magic will be $3,960.
To calculate the percentage of the discount, divide the discount per piece by the original cost per piece and multiply by 100:
Discount Percentage = (Discount per Piece / Original Cost per Piece) * 100
= ($0.18 / $3) * 100
= 6%
So, the discount percentage for Photo Magic is 6%.
3. If Photo Magic receives a 1/2% cash discount (10 days, net 30) on a 30,000-piece-per-month order, we can calculate the cash discount, total rebate, and the net price.
The cash discount percentage is 1/2%. To calculate the cash discount, multiply the total purchase amount by the cash discount percentage:
Cash Discount = Total Purchase Amount * Cash Discount Percentage
= (Number of Pieces Ordered * Cost per Piece) * 0.5%
= (30,000 * $3) * 0.5%
= $450
So, the cash discount for Photo Magic will be $450.
To calculate the total rebate, we need to consider both the volume rebate and the cash discount. In this case, the cash discount is allowed to be taken on the total purchase before the rebate is applied:
Total Rebate = Volume Rebate + Cash Discount
= (Number of Pieces Ordered * Rebate per Piece) + Cash Discount
= (30,000 * Rebate per Piece) + $450
The rebate amount for a 30,000-piece-per-month order is not mentioned in the given information, so we cannot calculate the exact total rebate.
The net price is the total purchase amount minus the total rebate:
Net Price = Total Purchase Amount - Total Rebate
= (Number of Pieces Ordered * Cost per Piece) - Total Rebate
4. To calculate the rebate percentage, divide the rebate amount per piece by the original cost per piece and multiply by 100:
Rebate Percentage = (Rebate per Piece / Original Cost per Piece) * 100
= (0.17 / $3) * 100
= 5.67% (rounded to the nearest tenth)
Whether or not this trade discount violates fair trade laws would depend on the specific laws and regulations governing trade practices in the applicable jurisdiction. Without knowledge of those specific laws, it is not possible to determine if this trade discount violates fair trade laws.