A General Motors incentive program designed to reduce inventory of certain low-selling models offers a $7,000 extra dealer incentive for each of these vehicles

Question

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 18%. If the average sticker price (list price) of these remaining vehicles at your dealership is $23,500, 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.
%

Answer 1

Average Sticker Price is $23,500

GM Discount $18%

$7,000 additional incentive for each slow selling vehicle

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

$23,500 x .18 = $4,230 + $7,000 = $11,230

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

Do not enter the percent symbol in your answer.

$11,230 / $23,500 = .477 rounded to .48

48%

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

$23,500-$11,230 = $12,270

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.

= $12,270 = $1,000 = $13,270 / $23,500 = .56 or 56%