You place an order for 320 units of inventory at a unit price of $180. The suppl

ID: 2718985 • Letter: Y

Question

You place an order for 320 units of inventory at a unit price of $180. The supplier offers terms of 3/15, net 30.

a-1 How long do you have to pay before the account is overdue? a-2 If you take the full period, how much should you remit?

b-1 What is the discount being offered? b-2 How quickly must you pay to get the discount? b-3 If you do take the discount, how much should you remit?

c-1 If you don’t take the discount, how much interest are you paying implicitly? c-2 How many days’ credit are you receiving?

a-1)You must on or before 30 days from date of invoice before accounts gets overdue.

a-2)remit amount =$ 320 *180 = $57600

b-1)Discount amount = purchase amount *Rate of discount

= 57600 * .03

= $ 1728

b-2)you must pay within 15 days to avail discount.

b-3)Remit amount = 57600 -1728 = $ 55872

c-1) Interest amount = [1+(Discount rate/(1-Discount rate))] ^365/days after discount period -1

= [1+ .03 /(1-.03) ] ^365/15 - 1

= [1 + .03/.97]^24.333 - 1

= [1+.03093]^24.333 - 1

= [1.03093]^24.333 - 1

= 2.09848-1

= 1.09848 or 109.848%

c-2)30days credit

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