Levin Furniture Buys A Living Room Set With A \$4,000 List Price And A 55% Trade Discount. Freight (FOB Shipping Point) Of \$50 Is Not Part Of The List Price. What Is The Delivered Price (including Freight) Of The Living Room Set, Assuming A
Understanding the Components of the Price
When purchasing a living room set, it's essential to understand the different components that make up the final price. In this scenario, Levin Furniture buys a living room set with a list price of $4,000 and a 55% trade discount. Additionally, there is a freight cost of $50, which is not included in the list price. To determine the delivered price, we need to calculate the net price after the trade discount and then add the freight cost.
Calculating the Net Price
The list price of the living room set is $4,000. To calculate the net price after the trade discount, we need to apply the discount percentage to the list price.
- List Price: $4,000
- Trade Discount: 55%
- Discount Amount: $4,000 * 0.55 = $2,200
- Net Price: $4,000 - $2,200 = $1,800
Understanding Freight Costs
Freight costs are typically not included in the list price of a product. In this scenario, the freight cost is $50, which is FOB (Free on Board) shipping point. This means that the seller is responsible for loading the goods onto the shipping vehicle, and the buyer is responsible for the cost of transportation from the shipping point to the final destination.
Calculating the Delivered Price
To calculate the delivered price, we need to add the freight cost to the net price.
- Net Price: $1,800
- Freight Cost: $50
- Delivered Price: $1,800 + $50 = $1,850
Conclusion
In conclusion, the delivered price of the living room set, including freight, is $1,850. This is the final price that Levin Furniture will pay for the living room set, taking into account the trade discount and freight costs.
Key Takeaways
- The list price of the living room set is $4,000.
- The trade discount is 55%, which reduces the list price to $1,800.
- The freight cost is $50, which is not included in the list price.
- The delivered price is the net price plus the freight cost, which is $1,850.
Real-World Applications
Understanding the different components of a price is essential in business, particularly when it comes to purchasing and selling goods. By calculating the net price and adding freight costs, businesses can ensure that they are getting the best possible deal on their purchases. Additionally, understanding the different types of pricing, such as list price, net price, and delivered price, can help businesses make informed decisions about their pricing strategies.
Common Pricing Terms
- List Price: The original price of a product, also known as the sticker price.
- Net Price: The price of a product after discounts or other price reductions have been applied.
- Delivered Price: The final price of a product, including all costs such as freight and taxes.
- FOB (Free on Board) Shipping Point: A pricing term that indicates the seller is responsible for loading the goods onto the shipping vehicle, and the buyer is responsible for the cost of transportation from the shipping point to the final destination.
Pricing Strategies
Businesses use various pricing strategies to maximize their profits and stay competitive in the market. Some common pricing strategies include:
- Cost-plus pricing: This involves adding a markup to the cost of a product to determine the selling price.
- Value-based pricing: This involves setting a price based on the perceived value of a product to the customer.
- Competitive pricing: This involves setting a price that is competitive with other similar products in the market.
Conclusion
Frequently Asked Questions About Delivered Price
Q: What is the delivered price of a product?
A: The delivered price of a product is the final price that a customer pays for a product, including all costs such as freight, taxes, and other charges.
Q: How is the delivered price calculated?
A: The delivered price is calculated by adding the freight cost to the net price of the product. The net price is the price of the product after discounts or other price reductions have been applied.
Q: What is the difference between list price and delivered price?
A: The list price is the original price of a product, also known as the sticker price. The delivered price is the final price that a customer pays for a product, including all costs such as freight, taxes, and other charges.
Q: What is FOB (Free on Board) shipping point?
A: FOB (Free on Board) shipping point is a pricing term that indicates the seller is responsible for loading the goods onto the shipping vehicle, and the buyer is responsible for the cost of transportation from the shipping point to the final destination.
Q: How does freight cost affect the delivered price?
A: Freight cost is added to the net price of a product to determine the delivered price. The freight cost is typically not included in the list price of a product.
Q: What is the importance of understanding delivered price?
A: Understanding delivered price is essential in business, particularly when it comes to purchasing and selling goods. It helps businesses to make informed decisions about their pricing strategies and to ensure that they are getting the best possible deal on their purchases.
Q: Can you provide an example of how to calculate delivered price?
A: Let's say a company buys a product with a list price of $1,000 and a freight cost of $50. If the company applies a 20% discount to the list price, the net price would be $800. To calculate the delivered price, we would add the freight cost to the net price: $800 + $50 = $850.
Q: What are some common pricing terms that are related to delivered price?
A: Some common pricing terms that are related to delivered price include:
- List Price: The original price of a product, also known as the sticker price.
- Net Price: The price of a product after discounts or other price reductions have been applied.
- Delivered Price: The final price that a customer pays for a product, including all costs such as freight, taxes, and other charges.
- FOB (Free on Board) Shipping Point: A pricing term that indicates the seller is responsible for loading the goods onto the shipping vehicle, and the buyer is responsible for the cost of transportation from the shipping point to the final destination.
Q: How can businesses use delivered price to their advantage?
A: Businesses can use delivered price to their advantage by:
- Negotiating with suppliers: Businesses can negotiate with suppliers to get the best possible deal on their purchases.
- Setting competitive prices: Businesses can set prices that are competitive with other similar products in the market.
- Providing value to customers: Businesses can provide value to customers by offering products at a price that is lower than the delivered price.
Conclusion
In conclusion, delivered price is an essential concept in business that involves understanding the different components of a price, including the list price, trade discount, and freight costs. By applying the trade discount to the list price and adding the freight cost, we can determine the delivered price. This is an essential concept in business, particularly when it comes to purchasing and selling goods.