IDIS 240 FINAL EXAM UPDATED ACTUAL Questions and CORRECT Answers
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Course
IDIS 240
Institution
IDIS 240
IDIS 240 FINAL EXAM UPDATED
ACTUAL Questions and CORRECT
Answers
List Price - CORRECT ANSWER- Listed price of a product
Selling Price - CORRECT ANSWER- -=list price - trade discounts
-the amount that appears on the invoice (amount paid by the customer)
-=COGS + Margin or =COGS +Markup
-the amount that appears on the invoice (amount paid by the customer)
-=COGS + Margin or =COGS +Markup
=COGS *(100% + Percent Markup)
=COGS / (100% - Percent Gross Margin)
Net Price - CORRECT ANSWER- ✔✔Selling price - allowable discounts (cash discounts),
customer does not pay the full selling price and a cash discount is announced to pay the bill
asap
Net Sale - CORRECT ANSWER- ✔✔-Actual money received by the distributor after
discounts and adjustments (substitutions, different quality or specifications, damaged
products or returned goods)
-=Net Price - Adjustments
(if no adjustments net sale = net price, if no cash discounts net price = selling price, if no
trade discounts selling price = list price)
Cost of Goods Sold (COGS) - CORRECT ANSWER- ✔✔=Cost of Merchandise + Freight
from Manufacturer
Freight - CORRECT ANSWER- ✔✔-cost to move an item from where it is manufactured to
either the distributors or customers location
,-terms of sale specifies who is responsible for payment
-Large quantities and Least expensive transportation system - manufacturer pays the freight
-Prepay and bill- manufacturer pays the freight but charges for it in the bill
-Free of Board (F.O.B) means (-who pays for transportation, who controls the movement of
shipment)
-F.O.B. Shipping point: The manufacturer puts the merchandise on the truck after which it
becomes the responsibility of the distributor
-F.O.B Destination: The manufacturer would put the merchandise on the truck and pays for it
to be delivered.
Trade Discounts - CORRECT ANSWER- ✔✔-specified in "term of sale"
-Usually offered by the manufacturer owing to fluctuations in the market conditions like the
raw material cost
-Trade discounts 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
-lead discount is 25% (start with this), then subsequent discounts are 10% and then 5%
-EXAMPLE (2000*0.75*0.90*0.95)
Trade Pricing - CORRECT ANSWER- ✔✔-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
-Also known as other names such as "matrix pricing" or just "pricing" // markup
-two drivers to growth of the type (increasing complexity and system capabilities)
Cash Discounts - CORRECT ANSWER- ✔✔-Specified in "term of sale".
-Usually offered by the manufacturer to encourage early payments(no difference between
cash or check or mode of payment)
Special Orders - CORRECT ANSWER- ✔✔-Usual products with some modification in
design, finish, materials or packing
-Cancellation charges are usually included in terms of sale. Conditions are clearly stated as to
who pays for the order if the order is cancelled.
, Minimum Order vs Freight Allowed - CORRECT ANSWER- ✔✔-Minimum Order:
Manufacturer specifies the minimum allowable order as the cost of ordering is high.
Distributors collectively buy material from the manufacturer for small orders of various
customers.
-Freight Allowed: The terms of sale should indicate the amount that must be purchased to
have the manufacturer pay the cost of freight for standard shipment.
Claims - CORRECT ANSWER- ✔✔-Terms of sale should indicate the time limit, address of
contact to claim for billing or shipping errors.
-Damages must be reported clearly specifying the problem before signing the shipment
Returns - CORRECT ANSWER- ✔✔-Terms should include information on how, when and
where items may be returned.
Cash Flow - CORRECT ANSWER- ✔✔-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.
Pricing - CORRECT ANSWER- ✔✔depends upon
-what the manufacturer wants it to be
-greatly influenced by the marketplace
-Supplier analyses the market and decides the price that it is willing to pay for the product to
the manufacturer. Trade discounts are how the distributor is paid for his services to
manufacturer and the customer.
Gross Margin - CORRECT ANSWER- ✔✔-Margin or the difference between what
distributor pays for the product and what he spends. includes direct labor costs
-This is not gross profit and it is just a margin
-=selling price - COGS - Adjustments
Percent Gross Margin (PGM) - CORRECT ANSWER- ✔✔(selling price-COGS)/Selling
Price then multiply by 100
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