Question

A retailer received an invoice for the purchase of twenty rackets at RM140 each. He was given trade discounts of 15% and 5%. The cash discount terms on the invoice were 3/10, n/30. (a) Determine the single trade discount rate that is equivalent to the chain discounts. (b) Calculate the amount of payment if it is made one week after the date of invoice

Answer 1

Answer:

Step 1;

• Retailers and wholesalers want to know the one single discount rate that equates to a series of trade discounts. This is known as the single equivalent discount.
• The single equivalent discount is a single trade discount that equates to all the discounts in a series or chain.
• An explanation is given below in step 2 :

Step 2;

• Equivalent Discount = $(A + B) - (A*B)\over 100$ where A = First Discount, B= First Discount.
• First Discount= 15%
•  First Discount= 5%
• Equivalent Discount = $(15 + 5) - (15*5)\over 100$ =19.25%.
• The discount rate will be 19.25%.

Calculation of the amount of payment if it is made one week after the date of the invoice

•  Invoice for the purchase of twenty rackets at RM140 each.
• Amount of payment after one week = RM140 -RM 140*3% =RM 135.80.