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- This topic has 11 replies, 2 voices, and was last updated 9 years ago by John Moffat.

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- November 11, 2014 at 5:57 pm #209169
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

November 12, 2014 at 12:12 pm #209314The 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 🙂

November 12, 2014 at 12:16 pm #209319wow!…. 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!

November 12, 2014 at 1:00 pm #209345No problem 🙂

November 12, 2014 at 2:40 pm #209367first: “net of discount” means prices after discount?

November 12, 2014 at 3:13 pm #209371second: 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

November 12, 2014 at 5:46 pm #209430You are on the right track – what you have written is correct 🙂

November 12, 2014 at 6:05 pm #209439cool.

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…

November 12, 2014 at 6:22 pm #209448pls ignore my last reply…. i forgot the 5% drop in sales…will post new workingin a bit

November 12, 2014 at 6:29 pm #209458Work 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.

November 12, 2014 at 6:36 pm #209464when 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?

November 12, 2014 at 7:01 pm #209478No – work on the gross amount. Deal with the drop in sales – see what the gross amount then is, and only then calculate the discount.

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