Use the information below to answer the question that follows
Mr Awala is a retailer of a single product. he sells at the standard price. He gives a trade discount of 5%, a quantity discount of 3% for a volume above 1000 units and a cash discount of 2/10 net 30. the existing selling price of the product is N100 per units. Mr Bacus purchased 1500 units of the product on credit and promised to pay Mr. Awala in cash in the first 10 days after purchase.
The trade discount receivable by Mr Bacus is
N4,500
N7,500
N10,500
N12,000
Correct answer is B
A cash discount is a discount allowed to the customer, when he/she makes a cash payment of the goods purchased, within the stipulated time. This means Mr. Bacus will receive a 2% discount from Mr. Awala if payment is made within 10 days of purchase.
We are going to calculate the quantity discount and cash discount respectively.
Selling price = 100
Quantity bought on credit = 1500
Total amount owed = 100 x 1500 = 150,000
3% discount for 1500 units
0.03 x 1500 = 45
Quantity discount = 45 x 100 = 4500
Cash discount of 2/10 net 30
= \(\frac{2}{100}\) x 150,000 = 3000
4500 + 3500 = 7500