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hi. am doing a question from bpp kit. the question is Stay Clean.
I am unable to understand the Lost Discount calculation in this question.
is there anyway i can get help on it?
its too complicated to type but if needed, i will type
The materials prices in the question are net of discount.
The current total cost of materials is (5000 x 70) + (6000 x 100) + (1200 x 50) = 1010000. From the discount table, this means that they are currently getting a discount of 5%.If they stop TD, then the cost of materials (using the net prices given) would be (5000 x 95% x 70) + (6000 x 95% x 100) = 902500.
However, this would be assuming that they would still be getting a 5% discount because they are the net prices. So the full price (without any discount) would be 100/95 x 902500 = 950,000. So using the net figures would be assuming that they were getting a discount of 950,000 – 902,500 = 47,500 (or, if you prefer, 5% x 950,000).However, with a gross prices of 950,000 they will only be allowed a discount of 3%, which is 3% x 950,000 = 28,500.
So….the discount they are losing is 47,500 – 28,500 = 19,000.
I hope that helps 🙂
wow!…. first, i cant thank u enough for going thru the trouble …. i am very very grateful…
i have to read the answer carefully and will get back to u in a bit…but i wanted to thank u first!
second: am assuming the prices given are after discount
third: i am thinking discount before and after
4th: my total net purchases were 1010. this clearly is above the 960 mark, so there must be a discount of 5%. so, the gross purchases:
X – 5%X=1010, which gives 1063
thus total discount before dropping TD =1063-1010=53
i am going to stop here before i move on … to make sure i am on the right track
cool.
so, at 10105th: now, we drop TD and that leaves us with net purchases of 950 (350+600).
6th: the trick now is to find the gross value of 950.
for argument’s sake, lets assume that gross was 1000. that wd give 5% disc . and voila, 1000-5%1000=950last: the discount at net 1010 was 53 and discount at net of 950 is 50.
lost discount is 3k.
where am i going wrong…
pls ignore my last reply…. i forgot the 5% drop in sales…will post new workingin a bit
Work on the gross prices. After stopping TD the total gross price is only in the 3% range and you can work out the new total discount.
when we drop TD, there will be a stated 5% drop in sales .. this implies that the final net purchase figure will be 902.5 .. (950 – 5%950)
last: the trick now is to calculate the gross amount for 902.5
i am working backwards:
at 960, the discount is 3%,28.8 (3%960), so gross must be less than 960, thus the 3% disc is confirmed.so
X – 3%X=902.5, X=902.5/.97 = 930.412
and the disc = 930.412 – 902.5 = 27.912
we were getting a disc of 53
loss in disc=53-28=25 (rounded)where am i wrong?
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