Marketing Essentials

Marketing Essentials nChapter 16 Using Math in Sales Section 16.3 Purchase Orders and Invoices

SECTION 16.3 Purchase Orders and Invoices What You'll Learn • To calculate and verify extensions on purchase orders and invoices • To use appropriate tables to determine shipping charges

SECTION 16.3 Purchase Orders and Invoices Why It's Important • In this section, you will learn some math applications that are regularly used by buyers and vendors. In many marketing jobs, including sales, you will need to understand the costs and methods of shipping.

SECTION 16.3 Purchase Orders and Invoices Key Terms • purchase order • extension • invoice

SECTION 16.3 Purchase Orders and Invoices Purchase Order • To place an order, most companies prepare a purchase order (PO),a legal contract between the buyer and the supplier. The PO lists all the details of the purchase, including the quantity, price, and description of the products ordered, along with the terms of payment and delivery.

SECTION 16.3 Purchase Orders and Invoices Purchase Order • A purchase order is a legal contract between buyer and seller. How would you determine the extension cost of an item from its unit cost?

SECTION 16.3 Purchase Orders and Invoices Invoices When filling an order based on a PO, a vendor will prepare an invoice which will be includedwith the delivered merchandise. The invoice numbers and amounts (including extensions) are correct when they match the PO and other documents.

SECTION 16.3 Purchase Orders and Invoices Invoice The vendor (seller) prepares an invoice based on the buyer's purchase order. What categories of information does an invoice include that are missing from a purchase order?

SECTION 16.3 Purchase Orders and Invoices Dating Terms • Dating termsstate when a bill must be paid and the discount permitted for paying early. Ordinary dating occurs when the dating terms are based on the invoice date. • Example:2/10, net 30, means a 2 percent discount is allowed if the bill is paid within 10 days, and the bill must be paid within 30 days.

SECTION 16.3 Purchase Orders and Invoices Shipping • Part of the selling arrangement between buyer and seller involves who will pay for delivery and when title (ownership) will change. The terms for delivery are all variations of F.O.B. (free on board). There are four options: • F.O.B. destination • F.O.B. shipping point • F.O.B. factory freight prepaid • F.O.B. destination charges reversed Slide 1 of 4

SECTION 16.3 Purchase Orders and Invoices Shipping F.O.B. Destination The title remains with seller until the goods reach their destination. The seller pays transportation charges and assumes responsibility for the condition of the goods until they arrive at the buyer’s business. Slide 2 of 4

SECTION 16.3 Purchase Orders and Invoices Shipping • F.O.B. Shipping Point The buyer pays the shipping costs and is responsible for losses for damage in transit. • F.O.B. Factory Freight Prepaid The goods become the property of the buyer at the factory. The seller pays for shipping. Slide 3 of 4

SECTION 16.3 Purchase Orders and Invoices Shipping F.O.B. Destination Charges Reversed The merchandise becomes the buyer’s only when goods are received. The buyer pays for transportation, but is not responsible for loss or damage during transit. Slide 4 of 4

ASSESSMENT 16.3 Reviewing Key Terms and Concepts • 1. Who prepares a purchase order? • 2. A customer orders six triple packs of adhesive tape at $1.79 each—6 x $1.79 on your invoice. What term describes this calculation? • 3. What is the meaning of the letters F.O.B. in terms of delivery?

ASSESSMENT 16.3 Thinking Critically • How could using a computer to generate invoices save time?

Marketing Essentials End of Section 16.3

Marketing Essentials