As the Purchasing Agent you need to purchase 50 cases of can

As the Purchasing Agent, you need to purchase 50 cases of canned peaches for next month. Your supplier is doing a special promotion this month on the product, and he informs you that if you agree to purchase a minimum of 70 cases, he can offer you a case at the price of $12.25, instead of the regular price of $16.67. You also have a manufacture’s rebate coupon for $0.50 per case if you purchase the case at the regular price.

Based on the supplier-vendor contract that you have established with the supplier, you know that you can also take advantage of the “Prompt Payment Discount” agreement, and get an additional 5.5% discount if you pay within 5 days.

Remember the customer only NEEDS 50 cases. To correctly answer one of the questions, you will compare 70 cases for the special promotion cost against 50 cases with rebate cost.

1a. What is the total cost if you purchased based on the Special Promotion requirements? Include “Prompt Payment Discount”.

1b. What is the total cost if you purchased based on the Rebate coupon requirements? Include “Prompt Payment Discount”.

1c. Which method offers the best savings?
a. Special Promotion
b. Rebate Coupon

Solution

According to special promotion:

Total cost of 70 cases= 70*12.25=857.5

Including. Discount. Total cost=857.5*94.5/100

=810.33

According to rebate coupon:

Cost of rebate coupon= 0.50

Total cost= 50*(16.67-0.50)

= 50*16.7

=808.5

Including discount total cost= 808.5*94.5/100

= 764.03

So rebate coupon method is better than special promotion.