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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
The least-cost method The process is described as follows: Assign as much as possible to the variable with the least unit cost in the whole tableau. (Ties are broken randomly).
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You are required to provide a report of approx 500 words or less (excluding attachments and references), accompanied by relevant calculations, in MS Word, MS Excel and/or PDF forma
Anthony''s orchard
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Cost comprise impact Some of the policy choices which tend to have the maximum impact on cost comprise: Product performance, configuration, and characteristics Mix and
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Engineering method These methods are based on the use of engineering analysis of technological relationship between inputs and outputs e.g. method studies and time and motion s
Prepare cash budget?
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