Cost Management

cost analysis

Cost Comparison

1. Choose a specific product or service that you need to purchase - either for you or your employer - and do a cost comparison. This comparison should be written in a very short, easy-to-understand format so we can discuss it here in our classroom.
2. After you compare at least two places where you could purchase this product or service, tell the class from which source you would choose to purchase and give your reasons.
3. You should calculate the percentage saved over the original price and/or the percentage saved by purchasing the product at Store A over Store B.

Choose a car make, model, and year as well as your ZIP code. Use your own car if possible.

1. Using the website look-up the current trade-in value and the current private party value. Answer the following questions:
2. Calculate the cost markup on this particular vehicle.
3. If you were selling this car today using the information provided by your search, which option would you choose and why?
4. If you actually own the car, calculate the depreciation over the time period which you have owned the car (purchase price minus current private party value). What is the average depreciation per year? (Total depreciation/# of years you have owned the car).
5. Using the purchase price as the basis, what is the percentage change in the value of your car?

Trade Discounts

"In theory, the consumer is always expected to pay the list price. Trade discounts are discounts from the list price that determine what a retailer or wholesaler pays. The difference between the net price that the retailer and wholesaler pay and the list price that the consumer pays has to cover the retailer or wholesaler’s expenses and the profits they make. Therefore, the more hands that a product passes through, the greater the difference between the amount that the manufacturer receives and the amount the consumer pays.

In reality, competition causes large-volume retailers to negotiate larger trade discounts, which allow them to offer a product below the list price. Another strategy that they might use is to decrease their amount of profit per item as much as possible to increase sales. Retailers will make a smaller profit on each sale but have more sales. That is why small-volume retailers rely more on strategies like personal attention, convenience, and shopper loyalty to compete with the large-volume retailers." (Cleaves, Hobbs, & Noble, 2012)

Cleaves, C., Hobbs, M. & Noble J. (2012). Business Mathematics. Retrieved from the University of Phoenix eBook Collection database.

1. What are some expenses that the retailer and/or wholesaler might incur?
2. Provide an example of a large-volume retailer and small-volume retailer where you shop. What are the benefits of each type of store? What are items that you prefer to purchase at a small-volume store vs. a large-volume store?