Answer :
Answer:
1. The actual cost of the inventory if purchased from supplier A: $218
2. The actual cost of the inventory if purchased from supplier B: $239.6
Explanation:
1. Supplier A cost $200
Credit terms of 1/10, n/30 means that 1% discount for the payment within 10 days and the full amount to be paid within 30 days.
Shipping cost $20. The company will pay within the discount period. Turquoise, Inc. pays and take the discount: 1% x $200 = $2
Actual cost of the inventory = Purchase cost + Shipping cost - Purchase discount = $200 + $20 - $2 = $218
2. Supplier B cost $220
Credit terms of 2/10, n/30 means that 2% discount for the payment within 10 days and the full amount to be paid within 30 days.
Shipping cost $24. The company will pay within the discount period. Turquoise, Inc. pays and take the discount: 2% x $220 = $4.4
Actual cost of the inventory = Purchase cost + Shipping cost - Purchase discount = $220 + $24 - $4.4 = $239.6
The actual cost of Supplier A is $218 while Supplier B is $215.60
The actual cost of inventory is required to be calculated if they are purchased from each supplier.
Given Information
Supplier A Supplier B
Cost $200 $220
Invoice terms 1/10, n/30 2/10, n/30
Shipping terms FOB shipping point FOB destination
Shipping cost $ 20 $ 24
The formulae for Actual Cost is Invoice Cost Net of Discount + Shipping Cost in case of FOB Shipping terms
Supplier A Actual Cost = $200*99% + %20
Supplier A Actual Cost = $198 + $20
Supplier A Actual Cost = $218.00
Supplier B Actual Cost = $220*98%
Supplier B Actual Cost = $215.60
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