As part of a union negotiation agreement, the United Clerical Workers Union conc
ID: 1170272 • Letter: A
Question
As part of a union negotiation agreement, the United Clerical Workers Union conceded to be paid every two weeks instead of every week. A major firm employing hundreds of clerical workers had a weekly payroll of $1,000,000 and the cost of short-term funds was 12 percent. The effect of this concession was to delay clearing time by one week. Due to the concession, the firm a) realized an annual savings of $120,000 b) increased its cash cycle c) decreased its cash turnover d) realized an annual loss of $120,000
Explanation / Answer
Correct answer is option a. realized an annual savings of $120,000
Because of delay in clearing time by one week,firm can save annually,
$10,00,000*12%=1,20,000 by reduced cost in short term fund.
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