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Please clarify how the net cost and gross cost concepts are applied for the supplier payments.
In the question, the total material cost is 1,010,000, and the question says that this is net of discount (which from the table in the question must be 5%). So it means that the cost of 1,010,000 must be 95% of the cost before discount.
Stopping TD means losing sales and therefore saving material, as shown in the answer. Since all materials are currently getting a discount of 5%, the answer has calculated the gross cost of the materials lost.
It means that the future gross cost of materials will now be 950,000. From the table this will mean a discount of 3% which means the actual cost in future will be 97% of 950,000 which is 921,500
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