Bài giảng môn học Quản trị kinh doanh - Chapter seven: Discounts: trade and cash

Chapter SevenDiscounts: Trade and CashCopyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/IrwinLU 7-1: Trade Discounts—Single and Chain (Includes Discussion of Freight)Calculate single trade discounts with formulas and complements.Explain the freight terms FOB shipping point and FOB destination.Find list price when net price and trade discount rate are known.Calculate chain discounts with the net price equivalent rate and single equivalent discount rate.LU 7-2: Cash Discounts, Credit Terms, and Partial PaymentsList and explain typical discount periods and credit periods that a business may offer.Calculate outstanding balance for partial payments.Learning unit objectivesInvoiceTrade Discount Amount & Net Price FormulasList price x Trade discount rate = Trade discount amount List price -- Trade discount amount = Net Price$5,678 -- 1,419.50 = $4,258.50 $5,678 x 25% = $1,419.50Freight TermsFOB Shipping Point - FOB Destination -FOB San Diego -buyersellerFrom Buyer ProspectiveFrom Seller Prospectivebuyer pays the freight costthe buyer in San Diego pays the freightseller pays the freight costthe seller in New Jersey pays the freightFOB New Jersey -ComplementComplement - The difference between the single discount rate and 100%. The complement is what percentage the buyer will pay.For example, if the trade discount is 25%, the complement is 75% (100% -- 25%).75%TradeDiscountComplement25%Single Trade DiscountThe price of a Macintosh computer is $2,700. The manufacturer offers a 40% trade discount. What are the trade discount amount (TDA) and the net price?TDA = $2,700 x .40 = $1,080Net price = $2,700 -- $1,080 = $1,620Using Complement:$2,700 x .60 = $1,620Calculating List Price When Net Price & Trade Discount Rate Are Known List Price = Net Price . Complement of trade discount rateA Macintosh computer has a $1,620 net price and a 40% trade discount. What is the list price?100% -- 40% = 60%$1,620 .60 = $2,700 list priceExample:Warning: Do not just add up the discounts to calculate the discount! 20 + 15 + 10 = 45% .20 x .15 x .10 = .388 net trade discountChain DiscountsChain discounts are trade discounts in a series of two or more successive discounts. For example: 20/15/10.To find the net price equivalent rate, multiply the complements: 100% 100% 100% - 20 - 15 - 10 .80 x .85 x .90 = .612 net price %Calculating Net Price with a Chain DiscountThe price of office equipment is $15,000. With a chain discount of 20/15/10, what is the net price?$15,000 x .20 $3,000$15,000 -- 3,000 $12,000 x .15 $1,800$12,000 -- 1,800$10,200 x .10 $1,020$10,200 -- 1,020 $9,180Calculating Net Price Using Net Price Equivalent RateThe price of office equipment is $15,000. With a chain discount of 20/15/10, what is the net price?Find the net price equivalent rate by multiplying the complements:.80 x .85 x .90 = .612To find the net price, multiply the net price equivalent rate by the list price:$15,000 x .612 = $9,180Trade discount amount:$15,000 -- $9,180 = $5,820Calculating Trade Discount Amount Using Single Equivalent Discount RateThe price of office equipment is $15,000. With a chain discount of 20/15/10, what is the net price?Find the net price equivalent rate by multiplying the complements:.80 x .85 x .90 = .612To find the single equivalent discount rate, subtract the net price equivalent rate from 1: 1.00 -- .612 = .388Trade discount amount: $15,000 x .388 = $5,820Cash Discounts Credit PeriodTime period sellers give buyers to pay invoices.Mar. 1Mar. 31Time period buyer has to take advantage of cash discount.Mar. 1Mar. 10Discount PeriodA cash discount is for prompt payment. It is not taken on freight, returned goods, sales tax, or trade discounts.InvoiceOrdinary Dating Method2/10, n/30 is read: “two ten, net thirty”Example: $400 invoice dated July 5; terms 2/10, n/30; paid on July 11. $400 x.02 = $8 cash discount$400 -- $8 = $392 paidor$400 x .98 = $392Receipt of Goods (ROG)3/10, n/30 ROG - Cash discount period begins when the buyer receives the goods.Example: $900 invoice dated May 9, received goods July 8; terms 3/10, n/30 ROG; paid on July 20. End of Month (EOM)1/10 EOM -- 1% discount, up until the 10th of the following month. $600 x .01 = $6$600 -- $6 = $594or$600 x .99 = $594Example: $600 invoice dated July 6; terms 1/10 EOM; paid on August 10.End of Month (EOM)2/10 EOM – Considered the “25th rule;” skip a monthNo discount; $800 paid. Example: $800 invoice dated April 29; terms 2/10 EOM; paid on June 18.Partial PaymentMolly McGrady owes $400. Molly’s terms were 2/10, n/30. Within 10 days Molly sent in a payment of $80. How much is her new balance?100% -- 2% = .98$400 -- $81.63 = $318.37$80 .98 = $81.63Step 1. Find the complement of discount rate.(1 -- .02)Step 2. Divide partial payment by the complement (amount credited).Step 3. Subtract Step 2 from the amount owed (outstanding balance).