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Planning Ahead Inventory is an important part of many businesses.

Planning Ahead Inventory is an important part of many businesses. Can you think of problems that might arise from having too much or too little of a product in stock?. Lesson Objective Compute the cash price when the discount is based on ordinary dating. Content Vocabulary. invoice

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Planning Ahead Inventory is an important part of many businesses.

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  1. Planning Ahead Inventory is an important part of many businesses. Can you think of problems that might arise from having too much or too little of a product in stock?

  2. Lesson Objective Compute the cash price when the discount is based on ordinary dating. Content Vocabulary invoice An itemized list of the quantities and costs of items purchased. cash discount A discount granted by a supplier if a bill is paid within a certain number of days, used to encourage prompt payment. ordinary dating Terms of payment on an invoice from a supplier which grants a cash discount if a bill is paid within a certain number of days. • invoice • cash discount • ordinary dating

  3. Example 1 Below is part of an invoice that the Lighting Store received for a shipment of lamps. What is the last day the discount can be taken? What is the last day to pay the invoice? What is the cash discount? What is the cash price of the lamps if the bill is paid within ten days?

  4. Example 1 (cont.)

  5. Example 1 Answer: Step 1 Find the last day a discount can be taken. Date of invoice: June 5 Terms: 2/10, net 30 Discount can be taken until June 15, 10 days from date of invoice.

  6. Example 1 Answer: Step 2 Find the last days to pay the invoice. Terms: 2/10, net 30. The “net 30” means the invoice must be paid by: June 05 + 30 days = June 35 (which doesn’t exist). Obviously you are into July, and because June has 30 days, you subtract 30 days: June 35 – 30 = July 05

  7. Example 1 Answer: Step 3 Find the net price. Net Price ×Cash-Discount Rate $1,026.10 ×2% = $20.522 or $20.52

  8. Example 1 Answer: Step 4 Find the cash price. Net Price – Cash Discount $1,026.10 – $20.52 = $1,005.58

  9. Example 2 In Example 1 the terms are 2/10, net 30 with an invoice amount of $1,0026.10. What is the cash price using the complement of the cash-discount rate?

  10. Example 2 Answer: Step 1 Find the complement of the cash-discount rate. 100% – 2% = 98%

  11. Example 2 Answer: Step 2 Find the cash price. Net Price × Complement of Cash-Discount Rate $1,026.10 × 0.98 = $1,005.578 or $1,005.58

  12. Practice 1 Invoice date: October 4. Terms: 3/10, n/30. Net price: $599.

  13. Practice 1 (cont.) Find: a. the last day to take the discount. b. the last day to pay the invoice. c. the cash discount. d. the cash price.

  14. Practice 1 Answer • October 14 • November 3 • $17.97 • $581.03

  15. Practice 2 Invoice date: October 4 Terms: 3/10, n/30 Net price: $599 Use the complement method to verify the cash price of $581.03.

  16. Practice 2 Answer $599 ×97% = $581.03

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