(a) Write the following abbreviations in full: (i) C.O.D; (ii) C.I.F. (iii) F.O.B; (iv) E and O.E. (b) The sale of a consumer good costing #100,000 attracts...
Question 1 Report
(a) Write the following abbreviations in full:
(i) C.O.D; (ii) C.I.F. (iii) F.O.B; (iv) E and O.E.
(b) The sale of a consumer good costing #100,000 attracts a cash discount of 5% and a quantity discount of 5%. You are required to calculate
(1) quantity discount value (ii) cash discount value (iii) net amount of money payable by the customer.
Answer Details
(a) Abbreviations in full
- C.O.D: Cash On Delivery.
- C.I.F: Cost, Insurance and Freight.
- F.O.B: Free On Board.
- E and O.E: Errors and Omissions Excepted.
(b) Discount calculations
The quantity (trade) discount is deducted first, then the cash discount is worked out on the reduced amount.
(i) Quantity discount value
\[ \text{Quantity discount} = 5\% \times 100{,}000 = \frac{5}{100} \times 100{,}000 = 5{,}000 \]
Amount after quantity discount = \(100{,}000 - 5{,}000 = 95{,}000\).
(ii) Cash discount value
\[ \text{Cash discount} = 5\% \times 95{,}000 = \frac{5}{100} \times 95{,}000 = 4{,}750 \]
(iii) Net amount payable by the customer
\[ \text{Net amount} = 95{,}000 - 4{,}750 = 90{,}250 \]
The customer pays #90,250.
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