Template case 8-3
1. The Artist’s Palette purchases its inventory from a number of suppliers and each supplier offers different purchasing discounts. The manager of The Artist’s Palette, Marty Parma, is currently comparing two offers for purchasing modeling clay and supplies. The first company offers a chain discount of 20/10/5, and the second company offers a chain discount of 18/12/7 as long as the total purchases are $300 or more. Assuming Parma purchases $300 worth of supplies, a) what is the net price from supplier 1? And b) From supplier 2? And c) From which supplier would you recommend Parma purchase her modeling clay and supplies?
2. What is the net decimal equivalent for supplier 1? For supplier 2?
3. What is the trade discount from supplier 1? From supplier 2?
4. The Artist’s Palette recognizes that students may purchase supplies at the beginning of the term to cover all of their art class needs. Because this could represent a fairly substantial outlay, the Artist’s Palette offers discounts to those students who pay sooner than required. Assume that if students buy more than $250 of art supplies in one visit, they may put it on a student account with terms of 2/10, n/30. If a student purchases $250 of supplies on September 16, what amount is due by September 26? How much would the student save by paying early?
5. Assume that if students buy more than $250 of art supplies in one visit, they may put the charge on a student account with terms of 2/10 EOM. If a student
makes the purchase on September 16, on what day does the 2% discount expire? If the purchase is made on September 26, on what day does the 2% discount expire? If you were an art student, which method would you prefer: 2/10, n/30, or 2/10 EOM?
CASE 9-1
1. What is the markup percentage for a box of ginger tea?
2. If the rice-filled heating pads sell for $7.00, $10.00, and $15.00 for small, medium, and large, respectively, what is the markup percentage on each one?
3. Karen wants to compare using the cost plus method to the percentage markup method. If she sells 2 small rice pads, 4 medium rice pads, 2 large rice pads, and 20 boxes of $3.50 tea in a month, how much profit does she accumulate? What markup percentage based on cost would she have to use to make the same amount of profit on this month’s sales?
4. What prices should Karen charge (using the markup percentage) to obtain the same amount of profit as she did with the cost plus method? Do not include shipping.
