A retailer is considering the purchase of 500 units of a specific item from either of two suppliers. Their offers are as follows:

A retailer is considering the purchase of 500 units of a specific item from either of two suppliers. Their offers are as follows:

Supplier One: $40 a unit, total of $20,000, 1/10, n/30, no charge for freight.

Supplier Two: $39 a unit, total of $19,500, 2/10, n/30, plus freight of $500.

Which of the two offers, Supplier One or Supplier Two, yields the lower price?

Answer:

The offer of Supplier Two is lower than the offer of Supplier One. Details are as follows: Supplier One Supplier Two List price $20,000 $19,500

Discount(200) (390) Price net of discount $19,800  $19,110 Freight 500 Final price $19,800 $19,610