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October 5th, 2016, 10:09 PM   #1
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Question Please Help with Cost,Volumn,Profit and Trade Discount

Hello everyone,

I have tried to solve the questions below, but I'm not sure if they are correct. Please help. Thank you.
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1/ The Scarlet Letter bookstore has \$85 000 of sales, variable costs of \$36 550, and fixed costs of \$27 360. What would its sales have to be to break even?

Variable cost/total revenue 36550/85000 = 0.43
1.00X = 27360 + 0.43X
X=48000

2/ Rover's Friends provides dog washing services. For each dog, supplies cost \$3 and wages are \$5. To provide this service, a special room and equipment are needed, at a cost of \$300 per month. Rover's Friends maintains an average of 30 dogs washed each month. What must Rover's Friends charge as a price for the dog washing service to break even?

Variable cost = 3 + 5 = 8, fixed cost = 300.
(SP*30) = 30 + (8*30)
30SP=540
SP=18

3/ The Peel Trading Company received an invoice dated September 20 for \$16000 less 25% and 20%, terms 5/10, 2/30, n/60. Peel made a payment on September 30 to reduce the debt to \$5000 and a payment on October 20 to reduce the debt by \$3000. (a) What amount must Peel remit to pay the balance of the debt at the end of the credit period? (b) What is the total amount paid by Peel?

(a) 16000(1-0.25)(1-0.20) = 9600

(b) 9600-5000 = 4600
4600(1-0.05) = 4370 paid
9600-4600=5000 balance

5000-3000= 2000 balance
3000(1-0.02)= 2940 paid
The total amount paid by Peel was 4370 + 2940 = 7310

4/ Using a markup of 35% of cost, a store priced a book at \$8.91. (a) What was the cost of the book? (b) What is the markup as a percent of selling price?

(a) Selling price = cost + markup, cost = C
8.91 = C + 0.35C
8.91 = 1.35C
C=6.6

(b) 6.6(0.35) = 2.31
2.31/8.91 = 25.9%

Last edited by skipjack; October 6th, 2016 at 03:06 AM.
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October 6th, 2016, 03:30 AM   #2
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(1) You should state your assumption that variable costs are a fixed percentage of sales.

I would write 1.00X = \$27360 + 0.43X (where X is sales amount needed to break even),
so X = \$48000.

(2) As above, I would suggest putting in the dollar symbols where appropriate.
You have a typing error: "(SP*30) = 30 + (8*30)" should be "(SP*30) = 300 + (8*30)".

(4) I would suggest writing \$6.60, and stating that your final answer of 25.9% has been rounded to 3 significant figures.
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