IDIS 240 Final Exam TAMU UPDATED ACTUAL QUESTIONS AND CORRECT
ANSWERS
MRO maintenance, repair, and operations
Selling price = List Price - Trade Discounts
Net Price = selling price - allowable discounts (cash discounts)
, net sale Actual money received after discounts and adjustments
Cost of Goods Sold (COGS) = Cost of Merchandise + Freight of Manufacturer
FOB Shipping Point Distributor/ Buyer pays for shipping and owns the product in transit
Trade Discounts Specified in term of sale. Offered by manufacturer due to fluctuations in market
conditions-- ex: raw materials cost fluctuations.
FOB Destination Manufacturer pays for shipping and owns the product in transit
Cash Discounts Offered by manufacturer to encourage early payments
Trade Pricing Negotiating the actual price that will be paid as opposed to "list price- trade
discounts"
Special Orders products with some modification in design, finish, materials, or packing
Minimum Order Manufacturer specifies the minimum allowable order
Freight Allowed Amount that must be purchased to have the manufacturer pay for the cost of
freight
Why are adjustments made? substitutions, different quantities/ specifications, damaged or returned goods
Cash Flow Cash in Bank -> Purchased Inventory -> Sold inventory -> Accounts receivable ->
Cash in Bank· Lesser the cash flow cycle, lesser cash is required to finance the
business.
What is the rule of thumb for cash discounts? If possible, always take them and never give them
Gross margin = selling price - COGS - Adjustments
Markup The money that the distributor adds to the cost of goods sold
Percent Gross Margin = ((Selling Price- COGS)/ Selling Price) * 100%
Percent Markup ((Selling Price - COGS)/COGS) * 100%
Operating Expense All costs necessary to provide services
ANSWERS
MRO maintenance, repair, and operations
Selling price = List Price - Trade Discounts
Net Price = selling price - allowable discounts (cash discounts)
, net sale Actual money received after discounts and adjustments
Cost of Goods Sold (COGS) = Cost of Merchandise + Freight of Manufacturer
FOB Shipping Point Distributor/ Buyer pays for shipping and owns the product in transit
Trade Discounts Specified in term of sale. Offered by manufacturer due to fluctuations in market
conditions-- ex: raw materials cost fluctuations.
FOB Destination Manufacturer pays for shipping and owns the product in transit
Cash Discounts Offered by manufacturer to encourage early payments
Trade Pricing Negotiating the actual price that will be paid as opposed to "list price- trade
discounts"
Special Orders products with some modification in design, finish, materials, or packing
Minimum Order Manufacturer specifies the minimum allowable order
Freight Allowed Amount that must be purchased to have the manufacturer pay for the cost of
freight
Why are adjustments made? substitutions, different quantities/ specifications, damaged or returned goods
Cash Flow Cash in Bank -> Purchased Inventory -> Sold inventory -> Accounts receivable ->
Cash in Bank· Lesser the cash flow cycle, lesser cash is required to finance the
business.
What is the rule of thumb for cash discounts? If possible, always take them and never give them
Gross margin = selling price - COGS - Adjustments
Markup The money that the distributor adds to the cost of goods sold
Percent Gross Margin = ((Selling Price- COGS)/ Selling Price) * 100%
Percent Markup ((Selling Price - COGS)/COGS) * 100%
Operating Expense All costs necessary to provide services
