What is Quotation? Meaning of Quotation ↓
A Quotation is a business offer made by a seller to an interested buyer to sell certain goods at specific prices and on certain terms and conditions.
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It is a reply by the seller to the prospective buyer. Hence, the quotation letter should be prepared carefully by the seller. It should contain information on all points mentioned in the inquiry letter.
The seller should send the best possible quotation so that it induces the buyer to place an order because it is the basis on which the interested buyer decides whether to buy or not.
The quotation must be clear, courteous and concise.
Contents of Quotation ↓
The quotation may contain the following points :-
- Details about quality of goods offered for sale.
- Details about quantity of goods offered for sale.
- Type of quotation.
- Sale price per unit of the commodity.
- Term of payment like Cash or Credit, trade discount, cash discount and other allowances if any.
- Time, mode and place of delivery.
- Details of duties, Octroi, etc., payable.
- Details of packing, labelling, insurance, etc.
- Net price payable.
- E and O.E. (errors and omissions expected)
Kinds / Types of Quotations ↓
Following are the main kinds or types of quotations :-
1. Loco Price Quotation
Loco means 'On the spot'. Therefore, the loco price refers to the cost of goods at the factory or godown of the seller. Once the goods are out of the sellers' factory or warehouse, all the expenses for carrying the goods from the seller's warehouse to the buyer's place are to be borne by the buyer. This is the lowest price quotation.
2. Station Price Quotation
Under this quotation, seller's responsibility is to send the goods to the nearest railway station from his warehouse. It includes the cost of carriage of goods to the station. Since he delivers the goods upto the station, he charges a little higher price. All further expenses on goods such as freight, insurance, etc. have to be borne by the buyer.
3. Free On Rail (FOR) Price Quotation
Free On Rail (FOR) price quotation covers the expenses of carrying the goods to the railway station nearest to seller plus the loading expenses, freight and unloading expenses are to be borne by the buyer.
FOR price quotation = Station price quotation + Loading Charges
4. Cost and Freight (C & F) Price Quotation
Cost and Freight (C & F) price quotation includes the cost of the goods and all the expenses like carriage to the seller's nearest station, dock and loading charges and freight. Expenses like insurance, unloading and cartage to the buyer's place are to be borne by the buyer.
C & F price quotation = FOR price quotation + Railway Freight.
5. Cost Insurance and Freight (CIF) Price Quotation
There is a risk involved in transporting goods and this risk is covered by insurance. Generally, the buyer pays insurance charges but if CIF quotation is mentioned then the seller pays for the insurance charges along with other previous mentioned prices. So, the price includes cost of the goods plus carriage upto seller's nearest station, loading, freight and insurance charges.
CIF price quotation = C & F price quotation + Insurance.
6. Franco Price Quotation
Franco price quotation is the highest price quotation. Inspite of being the highest quotation, buyers prefer this quotation because under this price, the goods are delivered to the buyers at their door-step. The buyer is relieved from the tension of transporting goods from the seller's warehouse to his own warehouse.
Franco price quotation = All expenses upto the buyer's warehouse.
7. Free Alongside Ship (FAS) Price Quotation
Free Alongside Ship (FAS) price quotation includes the cost of the goods and all the expenses to deliver the goods at the dock nearest to the seller. The buyer has to bear the expenses of loading, insurance, freight and the customs duty, etc., in addition to the cost of goods. Though this quotation is used in some countries, it is not in use in India.
FAS price quotation = Loco price quotation + cost of carriage of goods upto the harbour nearest to the seller.
8. Free On Board (FOB) Price Quotation
Free On Board (FOB) price quotation is similar to FOR in inland trade. This is normally used in foreign trade. Under FOB quotation, the seller quotes a price which includes all the expenses incurred untill the goods are actually delivered on board the ship at the port of shipment.
FOB price quotation = cost of goods + expenses upto goods on ship's board.
9. Cash With Order (CWO) Price Quotation
In Cash With Order (CWO) price quotation, the buyer has to send cash along with the order, otherwise, the order may not be executed.
10. Cash On Delivery (COD) Price Quotation
In Cash On Delivery (COD) price quotation, the buyer has to pay cash after receiving the delivery of the goods ordered by him.