Suppose a certain car manufacturer's incentive program designed to reduce inventory of certain low-selling models offers a $8,000 extra dealer incentive for each of these vehicles that the dealer moved into its rental or service fleets. 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 this car manufacturer is 16%. If the average sticker price (list price) of these remaining vehicles at your dealership is $26,500, calculate the following. ( a)What is the amount of the trade discount, including the incentive (in $)? $ 12240. (b)What is the trade discount rate (in percent)? Round to the nearest tenth of a percent. 46.2 % (c)What is the net price (invoice price) to your dealership (in $)? $ (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. 14260 % (e)Although these incentive prices reflect extraordinary discounts to the consumer, what other factors should a consumer consider before purchasing a "discontinued" brand of vehicle? (Select all that apply.) A. total number of vehicles manufactured this year B. vehicle will be worth less than comparable models that are not discontinued C. vehicles may be more difficult to resell D.net worth of the car dealership E. availability of parts and service
Suppose a certain car manufacturer's incentive program designed to reduce inventory of certain low-selling models offers a $8,000 extra dealer incentive for each of these vehicles that the dealer moved into its rental or service fleets. 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 this car manufacturer is 16%. If the average sticker price (list price) of these remaining vehicles at your dealership is $26,500, calculate the following. ( a)What is the amount of the trade discount, including the incentive (in $)? $ 12240. (b)What is the trade discount rate (in percent)? Round to the nearest tenth of a percent. 46.2 % (c)What is the net price (invoice price) to your dealership (in $)? $ (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. 14260 % (e)Although these incentive prices reflect extraordinary discounts to the consumer, what other factors should a consumer consider before purchasing a "discontinued" brand of vehicle? (Select all that apply.) A. total number of vehicles manufactured this year B. vehicle will be worth less than comparable models that are not discontinued C. vehicles may be more difficult to resell D.net worth of the car dealership E. availability of parts and service
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Cost-Volume-Profit Analysis
Cost Volume Profit (CVP) analysis is a cost accounting method that analyses the effect of fluctuating cost and volume on the operating profit. Also known as break-even analysis, CVP determines the break-even point for varying volumes of sales and cost structures. This information helps the managers make economic decisions on a short-term basis. CVP analysis is based on many assumptions. Sales price, variable costs, and fixed costs per unit are assumed to be constant. The analysis also assumes that all units produced are sold and costs get impacted due to changes in activities. All costs incurred by the company like administrative, manufacturing, and selling costs are identified as either fixed or variable.
Marginal Costing
Marginal cost is defined as the change in the total cost which takes place when one additional unit of a product is manufactured. The marginal cost is influenced only by the variations which generally occur in the variable costs because the fixed costs remain the same irrespective of the output produced. The concept of marginal cost is used for product pricing when the customers want the lowest possible price for a certain number of orders. There is no accounting entry for marginal cost and it is only used by the management for taking effective decisions.
Question
Suppose a certain car manufacturer's incentive program designed to reduce inventory of certain low-selling models offers a $8,000 extra dealer incentive for each of these vehicles that the dealer moved into its rental or service fleets.
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 this car manufacturer is 16%. If the average sticker price (list price) of these remaining vehicles at your dealership is $26,500, calculate the following.
(
a)What is the amount of the trade discount, including the incentive (in $)?
$ 12240.
(b)What is the trade discount rate (in percent)? Round to the nearest tenth of a percent.
46.2 %
(c)What is the net price (invoice price) to your dealership (in $)?
$
(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.
14260 %
(e)Although these incentive prices reflect extraordinary discounts to the consumer, what other factors should a consumer consider before purchasing a "discontinued" brand of vehicle? (Select all that apply.)
A. total number of vehicles manufactured this year
B. vehicle will be worth less than comparable models that are not discontinued
C. vehicles may be more difficult to resell
D.net worth of the car dealership
E. availability of parts and service
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