What is the mathematical distinction between compounding and discounting? Budget

Question

What is the mathematical distinction between compounding and discounting?

Budgeted Unit sales 01 2017 Q2 2017 Q3 2017 04 2017 Q1 2018 12,000 37,000 15,000 25,000 13,000 Budgeted Selling Price per unit 32 All sales are credit sales gnore Uncollectible Accounts. They are minimal Percentage of Sales collected in the quarter of the sale Percentage of Sales collected in the subsequent quarter 75% 25% Quarter ending finished goods inventory as a percent of next quarter's unit sales Yards of raw material required for each unit Cost per yard of raw material Quarter ending raw materials inventory as a percent of next quarter's production needs Estimated ending raw materials inventory on December 31, 2017 (in yards) Percent of purchases paid for in the quarter of the purchase Percent of purchases paid for in the quarter following the purchase 15% 3.5 3.00 10% 5,000 70% 30% Direct labor hourly rate Direct labor hours required to finish each unit of finished goods Direct labor hours are paid in the quarter incurred 18.00 0.25 Budgeted variable manufacturing overhead per direct labor-hour Quarterly fixed manufacturing overhead (including depreciation expense on equipment) Quarterly depreciation on equipment The number of direct labor hours is used as the allocation base for the budgeted plantwide overhead rate 3.00 $ 150,000 20,000

Explanation / Answer

PV = FV/(1+r)^n

PV - Present value

FV - Future value

r - Interest rate

n - no. of periods

In this equation (1+r)^n is the compounding factor, which is used to determine the future value.

Discounting factor = 1/(1+r)^n, which is used to determine the present value.

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