Question 549549: Which deal is favorable to the Seller?
Buy 10 units and get 4 units Free? or Straight 40% cash discount on gross sales? and Why?
landed cost $113 per unit
Selling Price $360 per unit.
Found 2 solutions by Theo, MathTherapy:
Answer by Theo(13342)   (Show Source):
You can put this solution on YOUR website! the seller does better if he offers 4 free for every 10 bought.
here's how it works.
he sells 10 units at 360 apiece for a total revenue of 3600
he has to buy 14 units at 113 apiece for a total cost of 1582
his net revenue for the sale of 10 units is equal to 3600 - 1582 = 2018.
his net revenue per unit sold is equal to 2018/10 = 201.8
if he sells 10 units at a discount of 40% off the retail price then the calculations are as follows:
10 units sold * 360 * .60 give him a total revenue of 2160.
cost for 10 units = 10 * 113 = 1130.
his net revenue for the sale of 10 units is equal to 2160 - 1130 = 1030
his net revenue per unit sold is equal to 1030 / 10 = 103.
why is this so?
let's examine what is happening.
cost for 14 units = 14 * 113 = 1582.
since 14 units have to be bought for every 10 units sold, then the cost per unit sold is equal to 1582 / 10 = 158.2
the revenue per unit sold is 360 so the net revenue per unit sold is 360 - 158.2 = 201.8
that's for option 1:
price is 360 per unit
cost is 158.2 per unit
net revenue is 201.8 per unit.
with option 2 you get the following.
cost per unit is 113.
price per unit is 360 * .6 = 216.
net revenue per unit is 216 - 113 = 103.
option 2 versus option 1 shows the following:
option 1 option 1 option 1 minus option 2
price per unit 360 216 144
cost per unit 158.2 113 45.2
option 1 gives him 144 per unit more in revenue per unit with only 45.2 more in cost per unit.
that's a difference of pretty close to 100 more net revenue per unit.
Answer by MathTherapy(10552)  (Show Source):
You can put this solution on YOUR website!
Which deal is favorable to the Seller?
Buy 10 units and get 4 units Free? or Straight 40% cash discount on gross sales? and Why?
14 units cost 14 * $113, or $1,582
Selling 10 units at $360 per unit nets the seller $3,600, with 4 offered free
This means that the seller makes a profit of $3,600 – 1,582, or $2,018
14 units cost 14 * $113, or $1,582
Selling 14 units at $360 per unit = $5,040, but with a 40% discount ($2,016), the seller nets $5,040 – 2,016, or $3,024
This means that the seller makes a profit of $3,024 – 1,582, or $1,442
Selling 10 units and giving away 4 units is more favorable to the seller as he/she will net $2,018 – 1,442, or $576 more.
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