The Artist's Palette purchases its inventory from a number of suppliers and each supplier offers different purchasing discounts.

Question

The Manager of the Artist's Palette, Marty Parma, is currently comparing 2 offers for purchasing modeling clay & supplies. The 1st company offers a chain discount of 20/10/5, the 2nd offers a chain discount of 18/12/17 as long as the total purchases are $300 or more. Assuming Parma purchases $300

1)What is the net price from supplier 1
2) From supplier 2
3) From which supplier would you recommend Parma purchase her modeling clay and supplies?

Answer 1

In order to calculate the net price of a purchase using a discount chain, we begin by calculating the first discount in the chain (purchase price x first discount % in the chain) and subtracting the discount amount we get from the purchase price (we may call the result of this calculation the "first net price in the chain)." 

 

We then calculate the second discount in the chain by multiplying the "first net price in the chain" by the second discount % in the chain and subtracting it from the "first net price in the chain." We continue this process, one step at a time, until we have calculated the last net price in the chain.

 

The last net price in the chain is our solution to the problem, the amount the purchaser will pay the supplier for the item(s) being purchased.

 

 

Thus, the solution to the problem posed in the question asked here is as follows: 

 

supplier 1 -  purchase of $300, chain discount of 20/10/5

 

$300x20%=$60

$300-$60=$240

 

$240x10%=$24

$240-$24=$216

 

$216x5%=$10.80

$216-$10.80=$205.20

 

The net price from supplier 1 is $205.20

 

supplier 2 - purchase of $300, chain discount of 18/12/17

 

$300x18%=$54

$300-$54=$246

 

$246x12%=$29.52

$246-$29.52=216.48

 

$216.48x17%=$36.80

$216.48-$36.80=$179.68

 

The net price from supplier 2 is $179.68

 

We now compare the net price from supplier 1 with the net price from supplier 2 as follows:

 

the net price from supplier 2 ($179.68) < the net price from supplier 1 ($205.20)

 

Because the net price from supplier 2 is less than the net price from supplier 1, I would suggest that Parma purchase her modeling clay and supplies from supplier 2.