If the manufacturer is selling the machine under FOB destination, wouldn’t the m
ID: 2538095 • Letter: I
Question
If the manufacturer is selling the machine under FOB destination, wouldn’t the manufacturer be covering the shipping cost and not the dealer?Terms of Sale ESA. A household appliance dealer buys microwave ovens from a manufacturer and resells them to its customers. a. The manufacturer sets a list or catalogue price of $1,500 for a microwave. The manu- facturer offers its dealers a 30 percent trade discount. b. The manufacturer sells the machine under terms of FOB destination. The cost of shipping is S150. c. The manufacturer offers a sales discount of 2/10, n/30. Sales discounts do not apply to shipping costs What is the net cost of the microwave to the dealer, assuming it is paid for within 10 days of purchase?
Explanation / Answer
NET COST TO DEALER: List price of oven 1500 Less: Trade Discount (30% of $1500) 450 Net sales price 1050 Less: Discount at 2% on net sales price 21 Net cost to the dealer of Oven 1029 Note: As the terms of deal in FOB destination, the freightt cost has to be bear by mannufacture and same has been by himself only. Therefore, this will not be treated in dealer books at all. Nor it will be added in his cost.