bv]]] 12. A supplier grants your firm credit terms of 3/10, net 50. What is the
ID: 2652159 • Letter: B
Question
bv]]]
12. A supplier grants your firm credit terms of 3/10, net 50. What is the effective annual rate of the discount if the firm purchases $1,000 worth of merchandise?
29.04 percent
32.04 percent
35.04 percent
34.74 percent
27.54 percent
13.
Cape May Products currently sells 90 units a month at a price of $222 a unit. The firm believes it can increase its sales by an additional 22 units if it switches to a net 30 credit policy. The monthly interest rate is .4 percent and the variable cost per unit is $152. What is the incremental cash inflow from the proposed credit policy switch?
$3,780
$1,540
$2,156
$6,300
$7,840
14.
Preston Milled products currently sells a product with a variable cost per unit of $23.25 and a unit selling price of $41.25. At the present time, the firm only sells on a cash basis with monthly sales of 390 units. The monthly interest rate is 1.1 percent. What is the switch break-even point if the firm switched to a net 30 credit policy? Assume the selling price per unit and the variable costs per unit remain constant.
407 units
403 units
405 units
404 units
400 units
Explanation / Answer
Answer:
In the given case 3% cash discount is given if the due is paid in 10 days instead of 50 days credit period.
It means 3% discount is for (50-10) 40 days advance payment. In other words 40 days interest is 3%.
Hence effective annual rate shall be = (1 + 0.03)^(360/40) -1
= (1.03)^9 -1
= 0.3048
= 30.48%
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.