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Sir I understood almost all the parts but i have completely have no idea of point 4 , please explain me how to do it .
Currently, the total cost of materials is 1,010,000 in total. The question says that the figures are net of discount, and since the discount would be 5% at that level of purchases, the full cost (before discount) must be 1,010,000 x 100/95 = 1,063,158.
If they stop TD then they will be buying less material, that on the current prices would cost 60,000 (TD) plus 47,500 (the other two) = 107,500. However they again are net of discount, so the full cost of these is 107,500 x 100/95 = 113,158
So…..the full cost of the purchases in future will be 1,063,158 – 113,158 = 950,000.
They will still get a discount, but because the total will be below 1,000,000 they will only in future get a 3% discount.
i understood till here but then whats next , the answer is given 19000 but how ?
we will be taking only discount lost ? why dont we take the material saved to the change in profit calculation ?
please explain sir .
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