You place an order for 1, 200 units of Good X at a unit price of $49. The suppli

Question

You place an order for 1, 200 units of Good X at a unit price of $49. The supplier offers terms of 1/15, net 50. (Enter your answer as directed, but do not round intermediate calculations.) Requirement 1: How long do you have to pay before the account is overdue? If you take the full period, how much should you remit? What is the discount being offered? (Enter your answer as a percentage.) How quickly must you pay to get the discount? If you do take the discount, how much should you remit? If you don't take the discount, how much interest are you paying implicitly?

Explanation / Answer

1/15, net 50 means that if you pay the amount within 15 days, you will get a discount of 1%, else the amount needs to be paid within 50 days.

Requirement 1:

a) You have 50 days to pay before the account is overdue.

b) $49 x 1200 = $58,800

Requirement 2:

a) 1%

b) within 15 days

c) ($49 x 1,200) x .99 = $58,212

Requirement 3:

a) Interest cost = (360 x Credit Discount) /(Credit Period - Discount Period)
=> (360 x 0.01) / (50-15) = 10.29%
Interest amount = $58,800 - $58,212 = $588

b) 50 days credit

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