Tangshan Mining was extended credit terms of 3/15 net 30. The cost of giving up the cash discount, assuming payment would be made on the last day of the credit period, would be ________.

Question

Quizplus · Accepted Answer

The cost of giving up the cash discount is the difference between the cost of the goods if the cash discount is taken and the cost of the goods if the cash discount is not taken. In this case, the cost of the goods if the cash discount is taken is $100 - 3% = $97. The cost of the goods if the cash discount is not taken is $100. The difference between these two costs is $3, which is the cost of giving up the cash discount. The cost of giving up the cash discount as a percentage of the cost of the goods if the cash discount is taken is $3 / $97 * 100% = 3.09%. The cost of giving up the cash discount as a percentage of the cost of the goods if the cash discount is not taken is $3 / $100 * 100% = 3%.

Tangshan Mining Was Extended Credit Terms of 3/15 Net 30