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Working with cash discounts on inventory purchases: how much, what interest rate?

You place an order for 1,000 units of inventory at a price of $350 per unit. The supplier offers terms of 2/10, net 30. Answer the following questions about payment.

a. If you take the full period to pay, how much should you remit?

b. How soon must you pay to get the discount?

c. What will be the amount of the discount if you take it?

d. If you don't take the discount, how much interest are you paying implicitly?

Solution Preview

(a) You will not get any discount and you remit = 350 * 1,000 = $350,000.

(b) If you pay within 10 days (tenth ...

Solution Summary

The solution is very understandable as it explains and calculates answers to the problem.