Question

Edwin purchases a machine on 8 September 2023 with a list price of RM8,400. The trade discount

given is 10% while the cash discount terms are 4/15, n/30. He then sells the machine and makes a
gross profit of 25% of the selling price. The operating expenses are 4% of the selling price. Find
the:
i. amount paid by Edwin on 22 September 2023. (4 marks)
ii. selling price (4 marks)
iii. breakeven price (4 marks)
iv. maximum markdown percent that could be given without incurring any loss. (4 marks)
v. net profit obtained by Edwin (4 marks)
END

Answer 1

[AI-generated answer — Bot GPT 3.5]

i. Amount paid by Edwin on 22 September 2023:

List price = RM8,400
Trade discount = 10%
Amount after trade discount = RM8,400 - (10% of RM8,400) = RM8,400 - RM840 = RM7,560

Amount to be paid = Amount after trade discount - (Cash discount of 4% of Amount after trade discount)
= RM7,560 - (4% of RM7,560)
= RM7,560 - RM302.40
= RM7,257.60

Amount paid by Edwin on 22 September 2023 = RM7,257.60

ii. Selling price:

Gross profit = 25% of selling price
Operating expenses = 4% of selling price

Gross profit + Operating expenses = 25% of selling price + 4% of selling price
29% of selling price = Gross profit + Operating expenses
Selling price = (Gross profit + Operating expenses) / 29%

Selling price = (25% + 4%) / 29% = 29% / 29% = 100%

Selling price = RM7,560

iii. Breakeven price:

Breakeven price = Cost price / (1 - Gross profit percentage)
Breakeven price = RM7,560 / (1 - 25%)
Breakeven price = RM7,560 / 0.75
Breakeven price = RM10,080

iv. Maximum markdown percent that could be given without incurring any loss:

Let x be the markdown percent
Selling price after x% markdown = Cost price

(100% - x%) of Selling price = Cost price
(100% - x%) of RM7,560 = RM7,560
0.01x * RM7,560 = RM7,560
x = 1

Therefore, the maximum markdown percent that could be given without incurring any loss is 1%.

v. Net profit obtained by Edwin:

Net profit = Gross profit - Operating expenses
Net profit = 25% - 4%
Net profit = 21%

Net profit = 21% of RM7,560 = RM1,585.60

Therefore, the net profit obtained by Edwin is RM1,585.60.