Mr. Wandawanda recently visited a mine in Brazil, and upon his return received a request for quote
Question:
Mr. Wandawanda recently visited a mine in Brazil, and upon his return received a request for quote for mine equipment.
Mr. Wandawanda instructed his export administrator to obtain the necessary cost and to quote the client in USD, CIP Port Santos, Brazil for a full container load of equipment. . The ex-works export price for the units are calculated to be R750 000.00. The product is subject to a quality inspection at a cost of R4 650 for the whole consignment. Payment is to be made based on documents against acceptance (D/A) 60 days from date of shipment. Credit Guarantee will provide credit insurance cover for the invoice value at a premium of 1,5% whilst financing is available at 14,5% per annum. Charges for delivery of the empty container and collection of the full container including transport to the Cape Town terminal have been quoted at R2360 per container. The terminal handling charge and the export cargo dues are R859 and R903 per container, respectively. Freight quoted is USD 2350 + 26%and your freight forwarder will charge a documentation fee of R950, an agency fee of 8,75% of disbursements and a SOLAS weighbridge fee of R750 per container. Other charges to be incurred comprise a bill of lading issue fee of USD35, a carrier release fee of R450 and sundries at R 285. The marine insurance premium for this shipment under your company's open policy will be 3,25% of (CIP + 10%).
Disbursement fee to be calculated on: Delivery/collection of container, Terminal handling charge (THC), Export cargo dues, B/L issue fee, Carrier release feeSOLAS weighbridge, Ocean freight, BAF.
Exchange rates:
Selling: USD 1,00 = ZAR 16,2742
Buying: USD 1,00 = ZAR 15,9113
Mr. Wandawanda recently went on a trade mission to Nigeria. One of the companies he met showed great interest in their product offering. After many negotiations on price, the client is ready to place an order for a full 20ft GP container but requested the payment terms to be open account, 30 days after the bill of lading date. Mr. Wandawanda has been trying to get a foothold into this market for years and believes he should agree with the client's request.
In your opinion, what could be the possible disadvantages for Gerber Electric, should they agree to the buyer's request. (6) Recommend a more suitable method of payment for Mr. Wandawanda to consider.(1)
Discuss your selection in detail in terms of advantages for both Gerber Electric and the buyer. (9) One mark per discussion point.
Financial Accounting A User Perspective
ISBN: 978-0470676608
6th Canadian Edition
Authors: Robert E Hoskin, Maureen R Fizzell, Donald C Cherry