Question

Purchase-Related Transactions A retailer is considering the purchase of 1,000 units of a specific item from either of two suppliers. Their offers are as follows: Supplier One: $34.80 a unit, 1/10, n/30, no charge for freight. Supplier Two: $35.00 a unit, 2/10, n/30, plus freight of $200. Price of Supplier One: $ Price of Supplier Two: $ Which of the two offers, Supplier One or Supplier Two, yields the lower price? Supplier One

Answer 1

Quantity to be purchased = 1,000 units

Supplier One: $34.80 a unit, 1/10, n/30, no charge for freight.

Supplier Two: $35.00 a unit, 2/10, n/30, plus freight of $200.

Price of Supplier One =  Purchase price - Purchase discount

= 1,000 x 34.80 - (1,000 x 34.80 x 1/100)

= 34,800 - 348

= $34,452

Price of Supplier Two = Purchase price - Purchase discount + Freight

= 1,000 x 35 - (1,000 x 35 x 2/100) + 200

= 35,000 - 700 + 200

= $34,500

Supplier One yields the lower price

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