Theory question 108
Business CalculationsCommerce 2 (theory)
The following information was extracted from the books of Jinka Enterprises as at 31st August 2015.
15 cartons of sweets at ₦2,000 per carton.
25 cartons of milk at ₦4,000 per carton.
15 cartons of sugar at ₦3,000 per carton.
17 cartons of soap at ₦5,000 per carton.
The following payments were made:
Rent and rates – ₦3,500
Salaries and wages – ₦8,000
Fuel – ₦2,000
Electricity – ₦1,500
A cash discount of 6% and a 10% trade discount was allowed if payment was made within 7 days.
(i) Calculate how much cash was paid for the goods bought if payment was made within 7 days.
(ii) If all the goods were sold at a mark up of 20%, determine the selling price.
(iii) Calculate the value of the net profit made.
Show the model answer
List price: sweets 30,000 + milk 100,000 + sugar 45,000 + soap 85,000 = ₦260,000.
(i) Less 10% trade discount (26,000) = ₦234,000; less 6% cash discount (14,040) = ₦219,960 paid.
(ii) Cost after trade discount ₦234,000 + 20% mark-up (46,800) = selling price ₦280,800.
(iii) Gross profit 46,800 + discount received 14,040 = 60,840; less expenses (3,500 + 8,000 + 2,000 + 1,500 = 15,000); net profit = ₦45,840.
Take trade discount first, then cash discount; the cash discount received is added to gross profit.