The Local Dollar Store Received an Invoice for $8500

question 136

Essay

The Local Dollar Store received an invoice for $8500.00 dated January 31, terms 5/10, 2/30, n/90, for a shipment of skis. The Local Dollar Store made two partial payments.
a) How much was paid on February 7 to reduce the unpaid balance to $5000.00?
b) How much was paid on March 1 to reduce the outstanding balance by $1500.00?
c) What was the outstanding balance on the account on March 2?
d) How much did the Local Dollar Store save by taking the advantage of the cash discounts?

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Definitions:

Variable Manufacturing Costs

Costs that fluctuate with the amount of production output, including expenses like raw materials, direct labor, and other costs that change with production volume.

Fixed Overhead

Costs that do not change with the level of production or sales, including expenses such as rent, salaries, and insurance, which are incurred regardless of business activity levels.

Contribution Margin Ratio

The percentage of sales revenue that exceeds variable costs, indicating the portion contributing to fixed costs and profit.

Selling Price

The amount a customer pays to purchase a product or service from a business.