Evaluating Cash Discounts The sales representative of Paper Corporation has just left your office. Although you have done business with Paper Corporation for many years, you think it might be better to purchase supplies from Discount Office Supplies. You normally purchase $80,000 of supplies per month from Paper Corporation, but Discount Office Supplies has offered identical merchandise for $78,000.

A small inconvenience will be associated with purchasing from Discount Office Supplies in that a cashier’s check for the full amount of the purchase must be given to the delivery person when the goods are received. Paper Corporation permits payment on a 2/10, net 30 basis.

a. Which supplier should be used? Explain.

b. Would your decision change if Paper Corporation offered terms of 3/10, net 20? Explain.