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Sunburst, Inc., a Mexican company, is negotiating a contract with Gemini, Ltd., a Taiwanese company, for the manufacturing of PC mainboards. John Liu is the Production Manager for Gemini and Cynthia Chase is the Purchasing Manager for Sunburst.
Cynthia:   What is your production situation now? Do you have the capacity to provide us with a substantial number of units?
John:   Provided that you give us sufficient notice, we have the production capacity to meet your needs. What sort of quantities are you looking for?
Cynthia:   We are considering an initial quantity in excess of 200,000 units, with additional similar quantities ordered on a quarterly basis.
John:   What did you have in mind regarding specifications?
Cynthia:   We would like units for both P4 and AMD CPUs. About 20% would be for entry-level desktops, 40% would be for business use and the remaining 40% for multimedia use. Supposing we placed an order for 200,000 units for the second quarter of 2004 and follow-up orders of 200,000 units for each of the following three quarters, what unit price could we expect?
John:   As long as we are clear on your specifications and have 30 days before beginning production, we could offer a unit price of NT$1,700.
Cynthia:   If we doubled the number of units in our order, what discount on the unit price could we receive?
John:   Before I answer that, could you tell me what you were thinking about in terms of delivery dates?
Cynthia:   We were thinking about delivery dates of 120 days following our order.
John:   On the condition that we would have such a delivery period, we could offer a 5% discount on the larger order.
Cynthia:   If you could offer an 8% discount, then we could agree to place the larger order.
John:   Supposing we offered a compromise discount of 6.5% on the larger order, would that satisfy you?
Cynthia:   I think we can live with that providing you supply good technical support and documentation in Spanish.
John:   No problem. We can do that.
Cynthia:   OK. It's agreed then.
John:   Thank you.