Question

BUSINESS DECISION: THE ULTIMATE TRADE DISCOUNT

A General Motors incentive program designed to reduce inventory of certain low-selling models offers a $6,600 extra dealer incentive for each of these vehicles that the dealer moved into its rental or service fleets.

As the accountant for a dealership with a number of these vehicles left in stock, your manager has asked you to calculate certain invoice figures. The normal trade discount from GM is 13%. If the average sticker price (list price) of these remaining vehicles at your dealership is $29,500, calculate the following.

a. What is the amount of the trade discount, including the incentive?

$

b. What is the trade discount rate? Round to the nearest tenth of a percent.

Do not enter the percent symbol in your answer.

%

c. What is the net price (invoice price) to your dealership?

$

d. If the cars were then sold from the fleets at $1,000 over "invoice" (net price), what is the total percentage savings to the consumer based on the list price? Round to the nearest tenth of a percent.

Do not enter the percent symbol in your answer.

%

e. Although these incentive prices reflect extraordinary discounts to the consumer, what other factors should a consumer consider before purchasing a "discontinued" brand of vehicle?

Answer 1

ANSWER

Extra incentive =$6,600

Normal trade discount =13%

average sticker price =$29,500

a)Trade discount including incentive

=13% *$29,500 +$6,600

=3,835 +$6,600

=$10,435

b)Trade discount rate

=(Trade discount /Sticker price)*100

=($10,435/29,500)*100

=35.373%

c) net price (invoice price)

=Sticker price - Discount

=$29,500 -$10,435

=$19,065

d)consumer based on the list price

=$1,000 +invoice price

=$1,000 +$19,065

=$20,065

Total percentage saving on list price

=(($29,500-$20,065)/$29,500)*100

=(9,435/29,500)*100

=31.983%

_____________________________________________

If you have any query or any Explanation please ask me in the comment box, i am here to helps you.please give me positive rating.

*****************THANK YOU**************