Question

You have looked at comb and brush set for your notions department. Two vendors have sets that are suitable. You decide to purchase 6 dozen from one of the two vendors. Which one will it be based on most favorable net cost? (1point)

                                       Vendor A                       Vendor B

Cost                               $12.75/dozen                  $10.75/dozen

Seasonal discount           10%                              none

Cash discount                 3/10 net 30                    2/10 net 30

Shipping terms                 75 cents/dozen                 75 cents/dozen     

                           F.O.B. destination           F.O.B. origin

_________________________

Answer 1

Vendor A :

Cost per dozen          = $12.75

Less: Seasonal discount 10% of 12.75 = $1.275

Less: Cash discount 3% assuming paid within 10 days 3% of 12.75    = $0.3825

Add: Shipping costs                                                                                  = $0.75

Final Cost                                                                                                 = $11.8425

Hence, net cost if purchased from Vendor A is $11.8425 per dozen if cash discount is availed by paying within 10 days and if cash discount is not availed, the cost would be $11.8425 + $0.3825 = $12.225 per dozen.

Vendor B :

Cost per dozen          = $10.75

Less: Seasonal discount (Nil)         = 0

Less: Cash discount 3% assuming paid within 10 days 2% of 10.75    = $0.215

Add: Shipping costs                                                                                  = $0.75

Final Cost                                                                                                 = $11.285

Hence, net cost if purchased from Vendor B is $11.285 per dozen if cash discount is availed by paying within 10 days and if cash discount is not availed, the cost would be $11.285 + $0.215 = $11.50 per

Hence, purchases should be made from Vendor B because either payment is made in 10 days or not, net cost in Vendor B's case is most favorable.