Question

9. The Speedy Auto Service Center can buy auto parts from Southeast Auto Supply at a series discount of 30/20/5 and from Northwest Auto Supply for 25/20/15.

a. Which auto parts supplier offers a better deal to Speedy?

b. If Speedy orders $23,000 in parts at list price per month, how much will they save in a month by choosing the lower-priced supplier (versus the alternative)?

Answer 1

a)

Single Equivalent Discount = 1- Net Price Value

By subtracting each discount from 100% and multiplying them all together in decimal form will yield Net Price Value

Southeast Auto Supply

Net Price Value = (100% - 30%) *(100%-20%) *(100%-5%) = (0.70*0.80*0.95) = 0.532

Single equivalent discount = 1- 0.532 = 0.468

Northwest Auto Supply

Net price value = (100% - 25%) *(100%-20%) *(100%-15%) = (0.75*0.80*0.85) = 0.51

Single equivalent discount = 1- 0.51 = 0.49

Northwest Auto Supply offers a better deal to Speedy Auto Service as Single equivalent discount is higher.

b)

Southeast Auto Supply total price =   Net price value * list price= 0.532 * 23000 = 12236

Northwest Auto Supply total price = Net price value * list price= 0.51 * 23000 = 11730

Savings = 12236 - 11730 = $506 per month