There seems to be some confusion over cost price. In this case, a classical case of confusion occurred. I think it is important as it shows how easy it is to get confused.
What happened is, we released some information on the benefits on our system which among other things showed a series of cost prices.
One item had a wholesale price of $13.20 attracted attention. Its cost price was listed as $11.22 after a 15% discount. Another storekeeper looked at the figure at announced proudly that he was paying only $10.80 with a 10% discount.
Now who is getting the better deal?
At first, you would think the second person as he is paying is $10.80. On second, you would think that the two stories do not make sense as a 15% discount should result in a lower price than a 10%. So maybe the supplier is doing a shifty on the first storekeeper.
However, the answer to all three questions is NO.
The second storekeeper is paying more.
The discounts do make sense.
The supplier is not doing a shifty.
Okay have a think and see if you can figure out what is happening? Answer below, do not look.
What has been forgotten is GST The first storekeeper is paying $11.22 INCL GST add a 15% discount, and you get $13.20. The second is paying $10.80, add GST, and you get $11.88, INCL GST now add a 10% discount, and you will get $13.20.
If you guessed this, I congratulate you.
This example shows how easy it is to mess up pricing. This is why our system uses only EX GST costs.
