Word problem

Question

Lets say Costco price club claims that they sell a 6 pack of Coors Beer at the wholesale price plus an additional 5% off. But with Costco, you also have to pay a yearly membership fee of $60 just to have the privilege of shopping there. The wholesale price of Coors at Costco is $3.50 a six pack. The 5% discount is taken at the register when you pay.

My local grocery is currently running a special on Coors Beer 6 packs where the price is discounted by 10% of the regular price. The regular price is $5.00 a six pack.

Here is the question (After all that you say!): What is the minimum number of 6 packs of Coors per month would I have to buy at Costco to make the membership worthwhile as compared to just getting the 10% at my neighborhood grocery store?

Answer 1

You would want to take the difference between the price of a six pack at grocery store vs. the price at Costco after discounts. (Prices are in dollars per six pack) price Costco = 3.50*0.95 = 3.33 (rounded) price grocery = 5.00*0.90 = = 4.50 difference (delta) = 4.50 - 3.33 = 1.17 So even though the Costco beer is cheaper, in order to recover the membership fee you would have to buy 60.00/1.17 = 51.3 or around 52 six packs. Maybe one per week for a year. So you think Costco is not smart?