If the Firm Chooses to Pay on Time but Does

question 51

Multiple Choice

If the firm chooses to pay on time but does not take the discount, what is the effective annual cost of its trade credit? (Assume a 365-day year.)

• A) 17.81%
• B) 19.66%
• C) 23.45%
• D) 27.43%

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Definitions:

Straight Piecework Plan

A compensation system where workers are paid a fixed rate for each unit produced or action performed, regardless of time.

Incentive Pay

Compensation above the base salary offered to employees as a motivation for achieving performance targets.

Piecework Rate Plans

Compensation systems where employees are paid based on the quantity of work produced or tasks completed.

Routine Jobs

Work that involves repetitive tasks following a set procedure or sequence, often with little to no variation in daily activities.