Anticipation

Is an extra discount, given when an invoice

is paid prior to the end of the cash discount
period. Generally 6% is used as annual rate
= ½% per month.
Is an extra discount,given when an invoice
is paid prior to the end of the cash discount
period. Generally 6% is used as annual rate
= ½% per month.
 Anticipation

An invoice for $100 is dated Dec 4 and

carries terms of 2/10-30X. Anticipation is
permitted. If the bill is paid Dec14
Using the cash discount period method
 Anticipation

The cash discount period is 40 days. Since the bill is

paid in 10 days, the anticipation period is 30 days.
Anticipation = ½% for 30 days
Cash discount =2%
Cash discount + anticipation combined = 2% +1/2%
= .02 + .005 = .025
Total discount = $100 x $2.50 = $2.50
Net cost = $100 - $2.50 = $97.50
Amount remitted =$97.50
Problem 1

1. An invoice for $960 dated july 15 has

terms of 2/10-30X, anticipation permitted.
How much should be remitted if paid on
Aug 4th.
Solution 2

Cash discount period = 40 days Since the bill is

paid in 20 days, the anticipation period is 20
days.
Anticipation = ½% (0.5%) for 30 days
therefore for 20 days ? = 0.33%
Cash discount =2%
Cash discount + anticipation combined = 2%
+0.33% = 2.33%
Total discount = $960 x 2.33% = $22.37
Net cost = $960 - $22.37 = $937.63
Amount remitted =$937.63
Problem 2

2. The dress buyer purchases with terms of

8/10 EOM, anticipation permitted. An
invoice for $860 dated Sep 28 is paid on
Oct 12. How much should be remitted?
Solution 2

1. Nov 10 –last date of cash discount

Paid on 12 Oct ,29 days remaining.
0.48% anticipation
total discount = 8% + 0.48%
amt remitted = $787.07
Loading

Is the practice by top management of intentionally

increasing the amount of the invoice to a price to
allow a theoretical greater % of cash discount but
results in paying the net amount that the vendor
quotes.
The vendor will agree to a higher % of cash
discount if the merchant will consent to a
higher billed cost price.
Loading

Because cash discounts provide a ‘profit

cushion’ a retailer may decide to increase
cash discount by loading the invoice.

Loading refers to an increase in the billed

cost that is offset by an increased cash
discount.
Loading

The retailer’s invoice cost is increased to

permit a larger cash discount than what is
typically available at the vendor’s going
rate, but results in paying the same amount
that the vendor quotes. Thus the net cost of
the merchandise is not changed. Loading is
frequently practiced in purchase of
imported merchandise.
Loading

Loading may be done by the vendor, or it may be

a practice used by the store’s accounting office to
carry all inventory at the same rate of discount or
to provide a profit cushion. Some retailers desire
to have all inventory charged to the departments
at the same cash discount rate. When the cash
discount % actually obtained is less than the %
set by the store, the stores accounting office will
“load “ the cost.
loading

The essential objective of loading is to establish a

standardized cash discount %,which in turn
permits the merchant to:-
2. Establish a larger reserve of cash discounts.
3. Seek a higher % of cash discount in the market
place.
4. Analyze net cost prices quoted by several
vendors on similar merchandise offerings.
 Loading

 Loaded cost = net cost

----------------------
100% - Loaded discount%
Loading

A hand bag with quoted cost of $36.00 is sold

with a 3% cash discount. What is the loaded cost
when sold with 8% discount?

Net cost = $36 less 3% = $34.92

Loaded Cost = Net Cost / Complement of
the cash discount
= $34.92 / (100% -8%)
= $34.92 / 92% = $37.96
check the answer: $37.96-8% =$34.92
Problem 1

A manufacturer quotes the cost of an item at

$10, with terms of 3/10 n/30. The buyer
desires an 8% cash discount. What is the
“loaded cost”?
Solution 1

 Net cost of invoice = $10 Billed cost – 3%

cash discount
= $10.00 –(0.03x$10)
= $10.00 -0.30
Net cost = $9.70

Loaded cost = $9.70 Net cost

---------------------------
100% - 8% loaded cost
=$9.70
---------
92%
loaded cost = $ 10.54
Problem 2

The glove buyer wants to buy with an 8% cash

discount. Most of the glove vendors quote 6%
cash discounts. What will be the total cost of the
following order when loaded for an 8%
discount?
Quantity style cost
===============================
5 ½ dozen 1066 $66/dozen
8 3/4dozen 1290 $90/dozen
2 1/3 dozen 1410 $10.50/each
Solution 2

66pcs 363
105pcs 787.5
28pcs 294
======
1444.5
86.68
======
1357.82 / 92% = $1475.90