You place an order for 540 units of inventory at a unit price of $170. The suppl

ID: 2748668 • Letter: Y

Question

You place an order for 540 units of inventory at a unit price of $170. The supplier offers terms of 2/15, net 60.

a-1 How long do you have to pay before the account is overdue? Days until overdue days

a-2 If you take the full period, how much should you remit? Remittance $

b-1 What is the discount being offered? Discount offered %

b-2 How quickly must you pay to get the discount? Number of days days

b-3 If you do take the discount, how much should you remit? Remittance $

c-1 If you don’t take the discount, how much interest are you paying implicitly? Implicit interest $

c-2 How many days’ credit are you receiving? Days' credit days

a.1 There are 60 days until account is overdue.

a.2 If you take the full period, you must remit: Remittance = 540 x 170 = 91800

b.1 There is a 2 percent discount offered, with a 15-day discount period.

b.2 If you want to take the discount, you have to pay within 15 days.

b.3 If you want to take the discount, you have to pay 91800 x 0.98 = 89964

c.1 The implicit interest is the difference between the two remittance amounts, or: Implicit interest = 91800 – 89964 = 1836

c.2 The number of days’ credit offered is: Days’ credit = 60-15 = 45 days

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