Question

Turquoise, Inc. is trying to decide whether to purchase identical inventory from one of the following suppliers: Supplier A Supplier B Cost $ 270 $ 280 Invoice terms 2/10, n/30 3/10, n/30 Shipping terms FOB shipping point FOB destination Shipping cost $ 27 $ 29 Required: Assume the company will pay within the discount period. What is the actual cost of the inventory if purchased from each supplier? (Round your final answers to 2 decimal places.)

Answer 1

Answer:

Actual Cost of Supplier A:  $291.60

Actual Cost of Supplier B: $271.60

Explanation:

Supplier A:

Cost - 270

Shipping FOB shipping point

Purchase Discount = Invoice Price * Discount

For Supplier A, the invoice price is 270 and discount is 2/10 = 2%, so:

Purchase Discount = 270 * 0.02 = $5.4

Cost is:

270 + 27(shipping FOB point) - 5.4 = $291.60

Supplier B:

Cost - 280

Shipping Destination (so 0)

Purchase Discount = Invoice Price * Discount

For Supplier B, the invoice price is 280 and discount is 3%, so:

Purchase Discount = 280 * 0.03 = $8.4

Cost is:

280 - 8.4 = $271.60