Finance question...10 pts for most helpful answer!?

Question

Nichole has been offered a deal on coffee for her restaurant from one of her suppliers. She normally pays $3 per package of coffee, and has been offered a sale price of $2 per package if she orders 1000 packages. Nichole usually uses approx. 90 packages a month. She would need to purchase a freezer at a cost of $400 to store the extra coffee, but then she would have the freezer for other needs.

Calculate the net savings (if any), for Nichole if she orders 1000 packages of coffee.

(P.S: I have an idea of how to do the calculation but I just feel as though I may be missing something.)

Answer 1

She will initially save $1 per package or $1000, but she will have to spend $400 (cost of freezer).  

In simple terms she will save $600.

Of course this doesn't take into account the time value of money, inflation, or any depreciation she can take by purchasing capital equipment.  But I think you'll be safe with $600 as an answer.

Answer 2

if she ordered the way she normally does..it would cost her $3000.00 for 1000 packages of coffee.

if she were to take the deal and purchase the freezer, it would cost her $2400.00 for 1000 packages of coffee and the freezer.

that leaves a net savings of $600.00 for ordering with the sales price.

Answer 3

save $1 per package or $1000, but she will have to spend $400 (cost of freezer).

$600 as an answer.