The toy buyer had the option of ordering stuffed animals directly from the manufacturer or from a nearby wholesaler. The manufacturer will not ship orders for less than $1,200 total list price. Delivery typically requires five weeks, and freight averages 2.5% of total billed cost. Trade discounts on this merchandise are 40% and 10%; terms are 2/10, n/30. A wholesaler, located in the retailer's area, stocks many of the same stuffed animals. He does not require a minimum order and will deliver at no charge in the area if the order has a billed cost of at least $500. The manufacturer and wholesaler base cost on the same list price; however, the wholesaler sells with trade discounts of 40% and 8% and terms of 1/15. n/30.

Required:
What is the difference in the total net cost (including freight) of merchandise with a total list price of $1, 200 from these two vendors?

difference between supplies = $4.68

Explanation:

cost of merchandise from manufacturer if paid within discount period:

$1,200 x (1 - 40%) = $720

$720 x (1 - 10%) = $648

freight cost = $648 x 2.5% = $16.20

discount for early payment = $648 x 2% = $12.96

total cost = $651.24

cost of merchandise from wholesaler if paid within discount period:

$1,200 x (1 - 40%) = $720

$720 x (1 - 8%) = $662.40

discount for early payment = $648 x 1% = $6.48

total cost = $655.92

difference between supplies = $4.68

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