Cash discount, Managerial Accounting

Assignment Help:

Cash discount is given to buyers to bring them to make prompt payment. The credit terms identify the percentage discount and the period throughout which it is obtainable. Liberal cash discount policy implies that either the discount percentage is raised or the discount period is raise. This leads to improved sales, reduce in average collection period and increase in cost.  The consequence of this on net profit can be estimate through the equation 3.

 ?NP = [? S (1 - V ) - ?DIS ] (1 - t ) +  k?I

Here I = Savings in receivables investment

 ? DIS = Increase in discount cost

? I = S0/360 (ACPn - ACP0) - V (ACPn)( ?S/360)

? DIS = Pn (S0 +?S) dn - P0S0d0

Here Pn    =    Proportion of discount sales after liberalizing the discount terms.

S0    =    Sales before liberalizing the discount terms

? S = raise in sales

dn   =   New discount percentage

P0   =   Proportion of discount sales before liberalizing the   discount terms

d0    =   Old discount percentage


Related Discussions:- Cash discount

Research and writing assignment, Write a response to your boss, the control...

Write a response to your boss, the controller. The response should be 2-5 pages in length (double-space). Your response to the controller should include, but not be limited to, t

Standerd costing, Ask queThe standard cost of chemical mixture ~ PQ’ is as ...

Ask queThe standard cost of chemical mixture ~ PQ’ is as follows: 40% of material P @ Rs. 400 per kg. 60% of material Q @ Rs. 600 per kg. A standard loss of 10% is normally anticip

What are the disadvantages of budgetary control, What are the Disadvantages...

What are the Disadvantages of budgetary control 1) Uncertain future: the budgets are prepared for the future period. Despite best estimates made for the predictions may not

Explain the shut down cost, Explain the Shut down cost A cost which wi...

Explain the Shut down cost A cost which will be still be required to be incurred even though a plant is closed or shut down for a temporary period. Ffor example the cost of

Define inputted cost, Determine the Inputted cost It is hypothetical c...

Determine the Inputted cost It is hypothetical cost required to be considered to make costs comparable. It is the owner of the factory charges rent of the factory to the cost

Stock turnover ratio, opening stock 19000 closing stock 21000 sales 200000 ...

opening stock 19000 closing stock 21000 sales 200000 gross profit 25% on sales calculate stock turnover ratio

Multiple products, differentiate between multiple product , selling cots an...

differentiate between multiple product , selling cots and margin management

FINAL ACCOUNTS- FINANCIAL STATEMENTS, Yolande Tzar came to Northern Ireland...

Yolande Tzar came to Northern Ireland from Poland five years ago to study at university. After graduating she worked as a sales manager for a local company and saved her wages to b

Gross working capital, Financial decisions are depends on specific consider...

Financial decisions are depends on specific considerations the major being the cash flows, liquidity and cost. Short-term working capital decisions or financial decisions are diffe

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd