Question

If a computer company bought computers for $9,000 and sold them for $20,000, how much would the gross profit be on the entire shipment if the business took advantage of the early cash payment terms of 4/10, n/30 from its supplier?

Answer 1

The gross profit without discounts is $11,000. However, if the company utilizes the 4/10, n/30 cash payment terms, they receive a discount that increases their gross profit to $11,360.

Step-by-step explanation:

If a computer company bought computers for $9,000 and sold them for $20,000, the gross profit on the entire shipment without considering any discounts would be calculated by subtracting the cost from the sales revenue.

Gross Profit = Sales - Cost of Goods Sold (COGS)
Gross Profit = $20,000 - $9,000 = $11,000

However, if the company took advantage of early cash payment terms of 4/10, n/30, this means they can receive a 4% discount if they pay within 10 days. The discount would be 4% of $9,000, which is $360.

New Cost of Goods Sold (COGS) with Discount = Original COGS - Discount
New COGS = $9,000 - $360 = $8,640

Therefore, the new gross profit considering the discount would be:
Gross Profit with Discount = Sales - New COGS
Gross Profit with Discount = $20,000 - $8,640 = $11,360