Question

The Speedy Auto Service Center can buy auto parts from Southeast Auto Supply at a series discount of 20/15/5 and from Northwest Auto Supply for 20/10/5. 

a. Which auto parts supplier offers a better deal to Speedy? (Provide the net price for each supplier). 

b. If Speedy orders $32,000 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

net price value calculated by subtracting each discount from 100 % and multiplying them all together in decimal form

Southeast Auto Supply

Net price value = (100% - 20%) *(100%-15%) *(100%-5%) = (0.80*0.85*0.95) = 0.646

Single equivalent discount = 1- 0.646 = 0.354

Northwest Auto Supply

Net price value = (100% - 20%) *(100%-10%) *(100%-15%) = (0.8*0.9*0.85) = 0.612

Single equivalent discount = 1- 0.612 = 0.388

Northwest Auto Supply offers a better deal to Speedy as Single equivalent discount is high when compare with  Southeast Auto Supply.

b)

Southeast Auto Supply total price =   Net price value * list price= 0.646 * 32000 = $20672

Northwest Auto Supply total price = Net price value * list price= 0.612 * 32000 = $19584

Savings = $20672 - $19584 = $1088 per month

= 1088 *12 = $13056 per year

Speedy will save $13056 per year by choosing the lower-priced supplier.