The Speedy Auto Service Center can buy auto parts from Southeast Auto Supply at a series discount of 20/15/5 and from Northwest Auto Supply for 25/10/8.

A. Which auto parts supplier offers a better deal to Speedy?

b. If Speedy orders $15,000 in parts at list price per month, how much will they save in a year by choosing the lower-priced supplier?

Answer:

a) Single equivalent discount = 1- net price value

net price value calculated by subtracting each discount from 100 % and multiplying them all together in decimal form

Southeast Auto Supply

Net price value = (100% - 20%) *(100%-15%) *(100%-5%) = (0.80*0.85*0.95) = 0.646

Single equivalent discount = 1- 0.646 = 0.354

Northwest Auto Supply

Net price value = (100% - 25%) *(100%-10%) *(100%-8%) = (0.75*0.9*0.92) = 0.621

Single equivalent discount = 1- 0.621 = 0.379

Northwest Auto Supply offers a better deal to Speedy as Single equivalent discount is high when compare with  Southeast Auto Supply

b)

Southeast Auto Supply total price =   Net price value * list price= 0.646 * 15000 = $9690

Northwest Auto Supply total price = Net price value * list price= 0.621*15000 = $9315

Savings = 9690 - 9315 = $375 per month

= 375*12 = $4500 per year

Speedy will save $4500 per year by choosing the lower-priced supplier