Question

Bed Bath and Beyond is a very large company that sells products for the home. One way they maximize their profits is to negotiate trade discounts from wholesalers. Another strategy is to pay invoices early enough to take advantage of cash discounts. The company is able to negotiate favorable terms because they guarantee large orders.

In early September, the Purchasing Manager, Lois Bidder, placed an order with one vendor for products having a combined list price of $27,393. The invoice arrived electronically the next day. It was dated September 4, had terms of 3/15 EOM, and showed a shipping charge of $748.38. SHOW ALL WORK!

1. Find the total amount of the invoice, excluding shipping.                       ______________________

2. What is the final discount date?                                                               ______________________

3. What is the net payment date?                                                                  ______________________

4. Find the amount necessary to pay the invoice on October 11,                 ______________________

including the shipping.

Answer 1

Solution

1.Total amount of invoice excluding shipping

=$27,393(The total amount of invoice is the list price because the supplier given cash discount not trade discount,Cash discount means the discount is given when the customer will pay the amount with in the given credit terms)

2.Final Discount Date

given 3/15 EOM means 3% discount  if paid within15 days from end of the invoice month

Date of invoice=September 4th

Day 1 of Discount period=October 1st

Last Day of discount period=October 15th

Hence the final discount date is 15th October

3.The Net payment date is October 11th(date of payment)

4.Amount of payment=Amount after discount+shipping charges

=((1-0.03)*$27,393)+$748.38

=$27,320