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Gift shop encounter

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eblc1388

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The following question appears on a china forum frequented by (or at least would be)programmers and attracted over a hundred responses. At first glance the question looks straight forward but it does not seem to be the case judging from the various answers offered. Here it is:

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According to a gift shop manager, the cost of acquiring a gift for sale, after adding in all his overhead is $18. He is selling it for $21 to make a $3 profit.

One day, a boy went into the shop and bought a gift for $21. He handed the manager a $100 bill for payment. The manager does not have enough change available so he exchanged the $100 bill with next door's keeper for smaller bills and gave the boy $79 back as change.

The boy then left the shop with the gift and the $79 change.

Later his next door keeper reported that the $100 bill from the manager is fake and so the manager had to repay him $100 back from his own cashier.

Question:

How much, in money terms, did the manager lost in this particular transaction?


Answers put forward are $94, $97, $100, $118, $196 and $197.

What's yours?
 
eblc1388 said:
The following question appears on a china forum frequented by (or at least would be)programmers and attracted over a hundred responses. At first glance the question looks straight forward but it does not seem to be the case judging from the various answers offered. Here it is:

------------------------------------------------------------

According to a gift shop manager, the cost of acquiring a gift for sale, after adding in all his overhead is $18. He is selling it for $21 to make a $3 profit.

One day, a boy went into the shop and bought a gift for $21. He handed the manager a $100 bill for payment. The manager does not have enough change available so he exchanged the $100 bill with next door's keeper for smaller bills and gave the boy $79 back as change.

The boy then left the shop with the gift and the $79 change.

Later his next door keeper reported that the $100 bill from the manager is fake and so the manager had to repay him $100 back from his own cashier.

Question:

How much, in money terms, did the manager lost in this particular transaction?

Answers put forward are $94, $97, $100, $118, $196 and $197.

What's yours?

The thief came with a fake $100 worth nothing. The thief left with $79 of real money + a gift worth $18. The actual monetary value lost by the store is $79 + $18 = $97
 
Optikon said:
The thief came with a fake $100 worth nothing. The thief left with $79 of real money + a gift worth $18. The actual monetary value lost by the store is $79 + $18 = $97

I think you forgot to add in the $100 they had to pay back. So $197 isnt it?

What's weird though is that if he didn't have to borrow money, then he would have only lost $97???
EDIT: Wait nvm. THat $100 is cancelled out by the real money he did get so $97.
 
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I would say $200.00. $21 gift + $79 change + $100 repay shop next door. The $21 gift is still a $21 loss, lost the product, sale, and profit.
 
Does everyone agree that if real money is used by the boy, the manager would have GAINED $3, instead of having incurred a loss?
 
eblc1388 said:
Does everyone agree that if real money is used by the boy, the manager would have GAINED $3, instead of having incurred a loss?
If it talks like a duck, and walks like a duck, then it must be a talking duck.
 
HarveyH42 said:
I would say $200.00. $21 gift + $79 change + $100 repay shop next door. The $21 gift is still a $21 loss, lost the product, sale, and profit.

Except the $100 he actually gave is the same as the $21+$79. Once he has paid back for the fake bill, it's as if a normal zero-gain exchange happened for the smaller bills. So that part doesn't matter anymore. THe storekeeper just basically gave out some money to the boy.
 
When two parties exchange thing in a voluntary transaction, it is the worth of the object that is being exchanged. It has nothing to do with the actual cost of the making/buying the object. So if the "considerations" to one party later turns out to be worthless, the "loss" to that party is simply the object's worth.

I'll give two examples:

1. You bought a painting for 1 million dollar and today it worths 8 millions. A con man wrote you a worthless check(cheque) and took the painting away with him. You have just lost 8 million dollars, not 1 million.

2. You bought a lottery ticket for $1 and it has won a price money of $10,000. Unfortunately, you have lost the ticket. How much does you lose, in monetary terms? $10,001.

So I would say that the manager has lost $79 + $21 =$100 in the above case.
 
The $3 profit is NOT money lost. He didnt have that profit to begin with so it is not lost. It just wasnt earned. You need to use $18 dollar figure not the $21
 
Since the original product is priced to cover the overhead of the shopkeeper, there is not enough information given in the problem description to get an accurate answer because there are certainly overhead charges related to dealing with the fake $100 bill that would have never been incurred had the bill been legit.
 
If the gift sells for $21, it's worth $21, that's it's value cost+profit. The boy traded worthless paper for a $100 value, gift + $79. The shopkeeper also had to give the neighbor $100 out of his pocket to cover the worthless paper from the boy, another $100. Still say the shopkeeper is out $200.
 
The $21 figure would be used because the $3 is profit lost. If the boy would have paid with real money, that $3 would have gone in to the till, but becuase the boy paid with fake money, that $3 isn't in the till, therefore it is money lost.
 
Marks256 said:
The $21 figure would be used because the $3 is profit lost. If the boy would have paid with real money, that $3 would have gone in to the till, but becuase the boy paid with fake money, that $3 isn't in the till, therefore it is money lost.
But how do you lose something you never had? Like when a manufacturer checks a batch of products and they are all defective, they write-off the cost it took to produce the items and not the suggested retail price.
 
dknguyen said:
But how do you lose something you never had? Like when a manufacturer checks a batch of products and they are all defective, they write-off the cost it took to produce the items and not the suggested retail price.

The two situations are different. One is product waiting to be sold, the other is a done deal.

As the gift is sold. the manager is entitled to a $3 profit. He got the intended $3 profit no doubt, but in fake bills.

This is different from a product being written off or destroyed while on shelf as you have correctly mentioned that the profit should not be taken into account.
 
So you're telling me that if you sold something on Ebay for $100, but it cost you $5 to make, then you would be steaming mad because you lost $100? Or would you just be dissapointed because you actually lost $5?
 
dknguyen said:
But how do you lose something you never had? Like when a manufacturer checks a batch of products and they are all defective, they write-off the cost it took to produce the items and not the suggested retail price.

Ok. The kid walked off with the gift, right? The gift was worth $21. Now, $18 of that goes right to the manufacture. The $3 doesn't necessarily get pocketed. It is there to pay bills (water, electric, gas, etc), as well as maintenance on the building and advertising. Chances are that the $3 was calculated to help "make ends meet". So, if the store owner didn't get that $3 for that product, then that is $3 that doesn't go towards bills, or repairs. Because that $3 is virtually inexistent, then the owner must come up with that $3 in the long run, which means he lost the $3, as well as the $18 for the product, therefore he lost a total of $21.

So, to bluntly answer your question, the $3 must be compensated for at some point of time, otherwise it will through off the financial stability (not enough to be noticeable, but the $3 is still there)
 
In a retail situation and when someone would steal something (which is exactly what this person did, albeit craftily), it was marked off according to the store's initial cost and not however much we (sometimes ridiculously) marked the item up.

In accounting class we learned that you cannot ever count profit until an item is actually sold. (Which this item never was. It was just craftily stolen.) Otherwise it is impossible to predict the future. You have absolutely no idea just how many would sell. Nearly every store operates by trying to recover from an original net loss by offering goods at a price which the retailer is guessing other people might be willing to pay. In all honesty, a good portion of the time, it is quite a gamble and stores either eventually discount the product (down to no profit) to clear up shelf space for something that might sell or they box the items up and dispose of the goods, effectively giving up on the product for something that might sell better.

Imagine this very likely scenario. The item was stolen. It is entirely possible that the store owner would have never sold a single piece, including the item that was stolen. They would have all eventually gone into the dumpster.

The bottom line is that worth as applied to goods is a meaningless misnomer. Anything is only ever worth what someone else will pay for it. Not may pay for it, but will pay for it. (In the above situation, your painting is worth a net loss of however much you paid for it initially. That is, until someone else pays you any monetary value for it. You then figure profits or losses from there.) Oh. And someone stealing a good cannot be considered a sale.
 
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dknguyen said:
So you're telling me that if you sold something on Ebay for $100, but it cost you $5 to make, then you would be steaming mad because you lost $100? Or would you just be dissapointed because you actually lost $5?

If the winner sent you a fake $100 bill and you have posted the item, then you have just lost $105 + ebay listing fees.

Of course you can comfort yourself saying you have only lost $5. This falls into exactly the same example I quoted earlier of losing a winning lottery ticket. If you lose it before the lottery open, you have lost a few dollars. If you lost it after it has become a winning ticket, you have lost the prize money.

If the item has not been posted, you have lost nothing except eBay listing fee.

Nobody cares how much is the cost of making the item. It can be $1, $5 or $1000.

If the winner have your item with him, then your claim is $100.
 
Except the lottery ticket is a more like a cheque representing the winning money. Not a product with a cost and profit. It's not quite the same thing.
You could have sold a car ing to a sucker for $10,000. You won't get compensated for the $10,000 if it was only worth $1000 to begin with.

I've never seen anyone try to claim what the item was sold for. I've always seen people try and claim what it actually cost them.

eblc1388 said:
If the winner sent you a fake $100 bill and you have posted the item, then you have just lost $105 + ebay listing fees.

Of course you can comfort yourself saying you have only lost $5. This falls into exactly the same example I quoted earlier of losing a winning lottery ticket. If you lose it before the lottery open, you have lost a few dollars. If you lost it after it has become a winning ticket, you have lost the prize money.

If the item has not been posted, you have lost nothing except eBay listing fee.

Nobody cares how much is the cost of making the item. It can be $1, $5 or $1000.

If the winner have your item with him, then your claim is $100.
 
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