Which of the following best describes the invoice price of a new car?

• A. It is the final price paid by the customer after all discounts.
• B. It is the manufacturer's suggested retail price (MSRP) including all options.
• C. It is the cost of the car to the dealer before any options or add-ons.
• D. It is the price including dealer markups and additional fees.

Answer: (C)

Verified step by step guidance

1. Understand the term 'invoice price' in the context of financial accounting. The invoice price refers to the amount the dealer pays to the manufacturer for the car, excluding any options, add-ons, or dealer markups.
2. Differentiate the invoice price from other pricing terms such as MSRP (Manufacturer's Suggested Retail Price), which is the price recommended by the manufacturer for retail sale, and the final price paid by the customer, which includes discounts, markups, and fees.
3. Recognize that the invoice price is a key concept in understanding the cost structure of a car dealership. It represents the base cost to the dealer before any additional charges or adjustments.
4. Eliminate incorrect options by comparing their definitions to the correct description of the invoice price. For example, the invoice price is not the MSRP, nor is it the final price paid by the customer after discounts.
5. Conclude that the correct description of the invoice price is: 'It is the cost of the car to the dealer before any options or add-ons.' This aligns with the definition of invoice price in financial accounting.