discount period question

Question

Boeing Truck Company received an invoice showing 8 tires at $110.00 each, 12 tires at $160.00 each, and 15 tires at $180.00 each. Shipping terms are FOB shipping point. Freight is $400.00; series discount is 10/5; and a cash discount of 2/10, n/30 is offered. Assuming Boeing paid within the discount period, what did Boeing pay?

Answer 1

Step 1, let's look at the List price purchases, which were:

8 tires x $110/tire + 12 tires x $160/tire + 15 tires x $180/tire = $5,420

 

Step 2, the series discount is the multiple of the individual discounts, so we have (1 - 0.10)(1 - 0.05) = 0.855

 

Step 3, we multiply the List price by the series discount, which is $5,420 x 0.855 = $4,634.10

 

Step 4, then we add the freight charge which is $400 to get $5,034.42

 

Step 5, if paid within 10 days, a 2% discount will apply, which will make the total $5,034.42 x (1 - 0.02) = $5034.42 x 0.98 = $4,933.73

 

The term "net 30 days" means that the bill is due in full within 30 days. No discount beyond the series discount will apply.