Show me the solution please, thank you! ABC is deciding to give a cash discount of 1% if the customers pay on the tenth day. It originally offers a credit term of n/30. Without the cash discount, credit sales would be P6,750,000 with an average age of 27 days. With the cash discount, credit sales are forecasted to increase by 15%, collections within the discount period is 40% and the average age will be 22 days. The variable cost rate is 60% while the effective interes
Show me the solution please, thank you! ABC is deciding to give a cash discount of 1% if the customers pay on the tenth day. It originally offers a credit term of n/30. Without the cash discount, credit sales would be P6,750,000 with an average age of 27 days. With the cash discount, credit sales are forecasted to increase by 15%, collections within the discount period is 40% and the average age will be 22 days. The variable cost rate is 60% while the effective interes
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Show me the solution please, thank you!
ABC is deciding to give a cash discount of 1% if the customers pay on the tenth day. It originally offers a credit term of n/30. Without the cash discount, credit sales would be P6,750,000 with an average age of 27 days. With the cash discount, credit sales are forecasted to increase by 15%, collections within the discount period is 40% and the average age will be 22 days. The variable cost rate is 60% while the effective interest rate that ABC uses for forecasting is 8%.
Using a 360-day year, how much is the net benefit or (cost) of the new policy?
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