Question

Zonker Inc. purchases 500 units of an item at an invoice cost of $30,000. What is the cost per unit? If the goods are shipped f.o.b. shipping point and the freight bill was $1,500, what is the cost per unit if Zonker Inc. pays the freight charges? If these items were bought on 2/10, n/30 terms and the invoice and the freight bill were paid within the 10-day period, what would be the cost per unit?

Answer 1

Situation 1:

Cost per unit = Invoice cost / Number of units purchased

= $30,000 / 500 units

= $60 per unit

Situation 2:

Cost per unit = (Invoice cost + Fright bill) / Number of units purchased

= ($30,000 + $1,500) / 500 units

= $63 per unit

Explanation: Under FOB shipping point, buyer (Zonker Inc.) is responsible for the cost of shipping. Thus, fright bill is added to the total cost of the purchased item.

Situation 3:

Cost per unit = (Invoice cost, less discount + Fright bill) / Number of units purchased

= ($30,000 - ($30,000 × 2%) + $1,500) / 500 units

= ($30,000 - $600 + $1,500) / 500 units

= $61.80 per unit

Explanation: Invoice and freight bill is settled within 10 days. Hence, invoice cost is deducted by 2% for discount. But, discount is not calculated for freight cost, since freight cost has to be paid by the buyer entirely .