Question

you are an accounting student at Berkeley College and will not graduate for another year. But because of your excellent grades so far, you have been able to land a job in the purchasing department of a retailer. One of the purchasing agents in your company is negotiating for the receipt of a very large order of uninsured goods from a supplier. The purchasing agent is able to get a better deal on the goods if they are shipped FOB shipping point rather than FOB destination. The agent doesn’t know the difference between these two concepts. He also doesn’t understand why choosing one over the other should make any difference to the company. As a student of accounting at Berkeley College, you know well the difference between these 2 concepts and you know why one would be a better choice over the other in the case of uninsured goods. Please explain these two concepts in this discussion and tell the purchasing agent which shipping method is preferable and why. In addition to your response, please comment to at least one classmate’s post including information from Chapter 6 in your eText.

WHo is the seller or buyer in this particular case pertaining to the purschasing agent?

Answer 1

Who is the buyer or supplier is the agent the buyer or his he the supplier? The purchasing agent is a buyer

FOB destination is an arrangement when customer takes delivery of goods at his place and sales is completed at that point.

FOB shipping point is an arrangement when customer take delivery of goods at the sellers shipping dock itself. It is generally cheaper because of less overheads involved for the seller, however transportation and insurance expenses incurred make it even.

The main difference between FOB shipping point and FOB destination is that the sale is regarded as complete in FOB shipping point at the shipping point itself. Henceforth, responsibility of the goods is of the buyer only. Whereas in FOB destination, sales is recorded as complete at the place of buyers place. Thus, when the goods are uninsured it makes sense to buy FOB shipping point lest any mishap occurs and the goods are damaged, in which case it would be a responsibility of seller.

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