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Cost of trade credit: Grunewalds's non discount customers

Grunewald Industries sells on terms of 2/10, net 40. Gross Sales last year were $4,562,500, and accounts receivable averaged $437,500. Half of Grunewald's customers paid on the 10th and took discounts. What are the nominal and effective costs of trade credit to Grunewalds's non discount customers? (Hint: Calculate sales/day based on a 365-day year;then get average receivables of discount customers;then find the DSO for the non discount customers.)

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Gross Sales/Day=4562500/365=12500
Average receivables of discount customers =12500*10*0.5=62500
Note Half of the customers took discounts

Average receivables of ...

Solution Summary

Shows the calculations in step-by-step manner for easy understanding.