IDIS 240 Exam 2 Review
Trade Discounts - ✔️✔️-Specified "term of sale"
-Usually offered by the manufacturer owing to fluctuations in the market conditions like
raw material
-May be extended further to customers by the distributor to meet local, competitive
market conditions
-Usually a discount off of a published list price or other published price
Trade pricing - ✔️✔️-Also known as the other names such as "Matrix pricing" or just
"Pricing"
-Methodology that involves simply negotiating the actual price that will be paid as
opposed to "list-price-trade discounts"
-Factors influencing are the same as those influencing trade discounts
-Two drivers to growth of this type
• Increasing complexity
• System capabilities
Commodity Pricing - ✔️✔️-Products that have very little measureable difference
between suppliers
-Pure commodities are typically refer to raw materials such as copper, gold, chemicals,
etc
Commoditization - ✔️✔️-Difference between products has narrowed over time.
Common among products that have pure commodities as a large portion of the finished
product
-Examples include dimensional lumber, PVC pipe, aluminum and copper wire, etc.
List Price - ✔️✔️Manufacturers sell from a nationally advertised price. As there is a
fluctuation in cost of raw materials or market condition, a discount is offered. But it is
seldom reflected on the list price.
Selling Price - ✔️✔️-The amount that appears on the invoice (amount paid by
customer)
-Selling Price= List Price- Trade Discounts
Net Price - ✔️✔️-Customer doesn't pay the full selling price and a cash Discount is
announced to pay the bill as soon as possible
-Net Price= Selling Price- allowable discounts (cash discounts)
Net Sale - ✔️✔️-Actual money received by the distributor after all adjustments are
made to the net price
, -Net Sale= Net Price- Adjustments
-Downward adjustments mean that the customer pays lesser than that billed on the
original invoice
What reasons are adjustments to net price usually made? - ✔️✔️-Substitutions
-Different quality or specifications than those that are offered
-Damaged or Returned goods by the customer
If no adjustments are made to the net sale? No cash discounts? No trade discounts? -
✔️✔️-Net Sale= Net Price
-Net Sale= Selling Price
-Net Sale= List Price
Cost of Goods Sold (COGS) - ✔️✔️=Cost of Merchandise + Freight from Manufacturer
Freight (FOB) "Free on Board" - ✔️✔️-Cost to move an item from where it is
manufactured to either the distributors location or the customers location
-Terms of Sale specifies who is responsible for payments
-Who pays for transportation
-Who controls the movement of shipment
Manufacturer pays the freight when? - ✔️✔️-Large quantities and least expensive
transportation systems
Prepay and Bill? - ✔️✔️-manufacturer pays the freight but charged for it in the bill
FOB Destination - ✔️✔️-The manufacturer would put the merchandise on the truck and
pays for it to be delivered
If we grow our business by %5 it will affect our EBITDA by? - ✔️✔️6.69%, Least Impact
If we buy better it will affect our EBITDA by? - ✔️✔️15.5%
Reduces Expenses, it will affect our EBITDA by? - ✔️✔️10.66%
Raise prices, it will affect our EBITDA by? - ✔️✔️20.95%, biggest improvement
Example of Debt financing is? - ✔️✔️A Loan
Equity Financing - ✔️✔️Giving ownership of the company for money
Trade Discounts - ✔️✔️-Specified "term of sale"
-Usually offered by the manufacturer owing to fluctuations in the market conditions like
raw material
-May be extended further to customers by the distributor to meet local, competitive
market conditions
-Usually a discount off of a published list price or other published price
Trade pricing - ✔️✔️-Also known as the other names such as "Matrix pricing" or just
"Pricing"
-Methodology that involves simply negotiating the actual price that will be paid as
opposed to "list-price-trade discounts"
-Factors influencing are the same as those influencing trade discounts
-Two drivers to growth of this type
• Increasing complexity
• System capabilities
Commodity Pricing - ✔️✔️-Products that have very little measureable difference
between suppliers
-Pure commodities are typically refer to raw materials such as copper, gold, chemicals,
etc
Commoditization - ✔️✔️-Difference between products has narrowed over time.
Common among products that have pure commodities as a large portion of the finished
product
-Examples include dimensional lumber, PVC pipe, aluminum and copper wire, etc.
List Price - ✔️✔️Manufacturers sell from a nationally advertised price. As there is a
fluctuation in cost of raw materials or market condition, a discount is offered. But it is
seldom reflected on the list price.
Selling Price - ✔️✔️-The amount that appears on the invoice (amount paid by
customer)
-Selling Price= List Price- Trade Discounts
Net Price - ✔️✔️-Customer doesn't pay the full selling price and a cash Discount is
announced to pay the bill as soon as possible
-Net Price= Selling Price- allowable discounts (cash discounts)
Net Sale - ✔️✔️-Actual money received by the distributor after all adjustments are
made to the net price
, -Net Sale= Net Price- Adjustments
-Downward adjustments mean that the customer pays lesser than that billed on the
original invoice
What reasons are adjustments to net price usually made? - ✔️✔️-Substitutions
-Different quality or specifications than those that are offered
-Damaged or Returned goods by the customer
If no adjustments are made to the net sale? No cash discounts? No trade discounts? -
✔️✔️-Net Sale= Net Price
-Net Sale= Selling Price
-Net Sale= List Price
Cost of Goods Sold (COGS) - ✔️✔️=Cost of Merchandise + Freight from Manufacturer
Freight (FOB) "Free on Board" - ✔️✔️-Cost to move an item from where it is
manufactured to either the distributors location or the customers location
-Terms of Sale specifies who is responsible for payments
-Who pays for transportation
-Who controls the movement of shipment
Manufacturer pays the freight when? - ✔️✔️-Large quantities and least expensive
transportation systems
Prepay and Bill? - ✔️✔️-manufacturer pays the freight but charged for it in the bill
FOB Destination - ✔️✔️-The manufacturer would put the merchandise on the truck and
pays for it to be delivered
If we grow our business by %5 it will affect our EBITDA by? - ✔️✔️6.69%, Least Impact
If we buy better it will affect our EBITDA by? - ✔️✔️15.5%
Reduces Expenses, it will affect our EBITDA by? - ✔️✔️10.66%
Raise prices, it will affect our EBITDA by? - ✔️✔️20.95%, biggest improvement
Example of Debt financing is? - ✔️✔️A Loan
Equity Financing - ✔️✔️Giving ownership of the company for money
