Test #3 Accounts Receivable Management
- San Diego State University
- Finance 323
- Test #3 Accounts Receivable Management
Last Modified: 2011-07-15
2/10, n/30 →2/10, net 30
- The customer has 30 days to pay the full invoice amount
- Offered a 2% discount if he pays the invoice within 10 days
N = number of days the payment can be delayed by giving up the cash discount
30 - 10 = 20
- Calculate the contribution of profit
- Calculate the marginal cost of investing in accounts receivable and inventory
- Calculate the marginal cost of the cash discount
- Calculate the marginal cost of bad debts
- Calculate the Benefit
Subtract the two Investment In A/R to get marginal
Add the Marginal Investment in Inventory (Given in problem) to the difference
Subtract the difference to get marginal
- Marginal Cost of investing in accounts receivable and inventory
-Marginal Cost of cash discount
-Marginal Cost of Bad Debts
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