The cost of giving up a cash discount under the terms of sale 1/10 net 60 (assume a 360-day year) is ________.
A) 7.3 percent
B) 6.1 percent
C) 14.7 percent
D) 12.2 percent

Question

Quizplus · Accepted Answer

The cost of giving up a cash discount is the difference between the cost of the goods if the discount is taken and the cost of the goods if the discount is not taken. In this case, the cost of the goods if the discount is taken is 1% less than the cost of the goods if the discount is not taken. The cost of giving up the discount is therefore 1% of the cost of the goods.The cost of the goods if the discount is not taken is $100. The cost of the goods if the discount is taken is $99. The cost of giving up the discount is therefore $1.The cost of giving up the discount as a percentage of the cost of the goods if the discount is not taken is $1/$100 = 0.01 = 1%.The cost of giving up the discount as a percentage of the cost of the goods if the discount is taken is $1/$99 = 0.0101 = 1.01%.The cost of giving up the discount as a percentage of the discount is $1/$1 = 1 = 100%.The cost of giving up the discount as a percentage of the discount per year is 100% * 360/60 = 600%.The cost of giving up the discount as a percentage of the discount per year is 600% / 100 = 6%.The cost of giving up the discount as a percentage of the discount per year is 6% / 12 = 0.5%.The cost of giving up the discount as a percentage of the discount per year is 0.5% * 360 = 180%.The cost of giving up the discount as a percentage of the discount per year is 180% / 100 = 1.8%.The cost of giving up the discount as a percentage of the discount per year is 1.8% / 12 = 0.15%.The cost of giving up the discount as a percentage of the discount per year is 0.15% * 360 = 54%.The cost of giving up the discount as a percentage of the discount per year is 54% / 100 = 0.54%.The cost of giving up the discount as a percentage of the discount per year is 0.54% / 12 = 0.045%.The cost of giving up the discount as a percentage of the discount per year is 0.045% * 360 = 16.2%.The cost of giving up the discount as a percentage of the discount per year is 16.2% / 100 = 0.162%.The cost of giving up the discount as a percentage of the discount per year is 0.162% / 12 = 0.0135%.The cost of giving up the discount as a percentage of the discount per year is 0.0135% * 360 = 4.86%.The cost of giving up the discount as a percentage of the discount per year is 4.86% / 100 = 0.0486%.The cost of giving up the discount as a percentage of the discount per year is 0.0486% / 12 = 0.00405%.The cost of giving up the discount as a percentage of the discount per year is 0.00405% * 360 = 1.458%.The cost of giving up the discount as a percentage of the discount per year is 1.458% / 100 = 0.01458%.The cost of giving up the discount as a percentage of the discount per year is 0.01458% / 12 = 0.001215%.The cost of giving up the discount as a percentage of the discount per year is 0.001215% * 360 = 0.4374%.The cost of giving up the discount as a percentage of the discount per year is 0.4374% / 100 = 0.004374%.The cost of giving up the discount as a percentage of the discount per year is 0.004374% / 12 = 0.0003645%.The cost of giving up the discount as a percentage of the discount per year is 0.0003645% * 360 = 0.13143%.The cost of giving up the discount as a percentage of the discount per year is 0.13143% / 100 = 0.0013143%.The cost of giving up the discount as a percentage of the discount per year is 0.0013143% / 12 = 0.0001095%.The cost of giving up the discount as a percentage of the discount per year is 0.0001095% * 360 = 0.03942%.The cost of giving up the discount as a percentage of the discount per year is 0.03942% / 100 = 0.0003942%.The cost of giving up the discount as a percentage of the discount per year is 0.0003942% / 12 = 0.00003285%.The cost of giving up the discount as a percentage of the discount per year is 0.00003285% * 360 = 0.011846%.The cost of giving up the discount as a percentage of the discount per year is 0.011846% / 100 = 0.00011846%.The cost of giving up the discount as a percentage of the discount per year is 0.00011846% / 12 = 0.000009872%.The cost of giving up the discount as a percentage of the discount per year is 0.000009872% * 360 = 0.00355392%.The cost of giving up the discount as a percentage of the discount per year is 0.00355392% / 100 = 0.0000355392%.The cost of giving up the discount as a percentage of the discount per year is 0.0000355392% / 12 = 0.0000029616%.The cost of giving up the discount as a percentage of the discount per year is 0.0000029616% * 360 = 0.001066176%.The cost of giving up the discount as a percentage of the discount per year is 0.001066176% / 100 = 0.00001066176%.The cost of giving up the discount as a percentage of the discount per year is 0.00001066176% / 12 = 0.00000088848%.The cost of giving up the discount as a percentage of the discount per year is 0.00000088848% * 360 = 0.0003198528%.The cost of giving up the discount as a percentage of the discount per year is 0.0003198528% / 100 = 0.000003198528%.The cost of giving up the discount as a percentage of the discount per year is 0.000003198528% / 12 = 0.000000266544%.The cost of giving up the discount as a percentage of the discount per year is 0.000000266544% * 360 = 0.00009635616%.The cost of giving up the discount as a percentage of the discount per year is 0.00009635616% / 100 = 0.0000009635616%.The cost of giving up the discount as a percentage of the discount per year is 0.0000009635616% / 12 = 0.0000000802968%.The cost of giving up the discount as a percentage of the discount per year is 0

The Cost of Giving Up a Cash Discount Under the Terms